After extensive speculation, the federal government is hinting at the removal of the oil and gas emissions cap. However, certain conditions are attached to this decision.
The latest budget, released on Tuesday, did not explicitly state the elimination of the controversial Trudeau-era proposal. Instead, it outlined specific requirements for its potential removal. The budget emphasized that implementing effective carbon pricing, enhancing methane regulations, and deploying carbon capture and storage at a significant scale could render the oil and gas emissions cap unnecessary as it would have minimal impact on reducing emissions.
This conclusion was presented in “Canada’s Climate Competitiveness Strategy” introduced in the 2025 budget by the Carney government. Finance Minister François-Philippe Champagne highlighted this new approach to the emissions cap at a press conference before presenting the budget.
The strategy reaffirmed the intention of Prime Minister Mark Carney’s new Liberal government to continue with some of the previous administration’s climate policies, including clean electricity regulations, finalizing methane regulations, and clean fuel regulations. However, the budget did not provide a commitment to proceeding with Canada’s 2035 electric vehicle sales mandate, stating that further details would be announced in the upcoming weeks.
The strategy emphasized the importance of industrial carbon pricing, acknowledging provinces like Ontario, Saskatchewan, and Alberta for meeting the federal benchmark with their existing systems. The government aims to raise the carbon price applicable to these systems to $170 per tonne by 2030 and is seeking a “pan-Canadian agreement” to achieve net-zero emissions by 2050.
Conservative Leader Pierre Poilievre criticized the proposed industrial carbon price hike as a tax, expressing concerns about its impact on various sectors. Alberta Premier Danielle Smith refrained from passing judgment on the federal government’s conditional decision to withdraw the emissions cap, citing ongoing negotiations with the federal government.
The strategy advocates for driving investments in emissions reductions rather than imposing prohibitions. Natural Resources Canada is set to establish a critical minerals sovereign fund with $2 billion over five years to support equity stakes in mines, offtake agreements, and loan guarantees.
Furthermore, the government plans to update its “greenwashing legislation” to combat false environmental claims effectively. Other measures in the budget include the creation of a Youth Climate Corps and changes to the tax system to benefit low-carbon liquefied natural gas facilities, with the aim of enhancing Canada’s competitiveness in comparison to the U.S.
Green Party Leader Elizabeth May criticized these measures as fossil fuel subsidies and stated opposition unless amendments are made to the budget.