Budget 2025 represents a shift in how Canada approaches climate policy. If you’ve been following our work over the past few years, you’ve probably heard us say something along the lines of “climate policy is industrial policy”. Let’s dissect that, because it’s not just a slogan, it’s a fundamental reframing of what’s at stake.
Last year, over two trillion dollars were invested in the energy transition globally. The global energy transition will continue, and it is happening now. While the exact pace will remain uncertain, it is clear we have a competitiveness imperative. What does that mean? As the world moves towards a new set of energy technologies and systems, we need to build the industrial capacity for this transition, or else become passive buyers. That’s the imperative.
Clearly, what matters is not a set of abstract emission-reduction targets. Climate competitiveness means securing a strong place in the global value chains emerging around clean technologies.
That means a strong battery and EV supply chain, with backward linkages all the way to the mines.
It means a lot of cheap, clean power that all industries can draw on as an input.
It means a mass-timber-to-prefab supply chain that scales homegrown firms.
It means achieving more geopolitical resilience through investments in critical minerals and our dual-use manufacturing base.
Canada’s advantage will lie in mastering the electro-technologies of the future at home—powering our economy while exporting solutions abroad. This means linking climate policy directly to productivity and competitiveness. Investments in clean power, manufacturing, and skills training aren’t just environmental, they’re nation-building.
This is an exciting budget in a variety of ways: It backs Canada’s minerals prowess and its manufacturing base. It seeks to rebuild the relationship between science, technology and commercializing homegrown opportunities in key areas like defence.
The seeds of a strong industrial policy are all there, with broad, economy-wide incentives that reward productivity and innovation, combined with targeted interventions to bolster sovereignty and trade diversification.
As Sahir Khan, executive vice president of the Institute of Fiscal Studies and Democracy, told the CBC, “everybody in the G7 would gladly trade positions with Canada” right now—fiscal space, a big resource endowment, and an industrial base. This budget represents a chance to deploy some of that advantage now, and then invest even more in the areas that succeed.
But it will require focused, coordinated action to align the work of the new Build Canada Homes, the Defence Investment Agency, the Major Projects Office, and the Critical Minerals Sovereign Fund with existing strategic assets, especially the Canada Growth Fund, the Canada Infrastructure Bank, and Export Development Canada.
The climate competitiveness strategy, defence industrial strategy, housing strategy, and the trade diversification strategy—and don’t forget the electric vehicle strategy, which was not fully addressed in the budget and which we will be waiting another month to see—are all interconnected. But with multiple origin points for those strategies, and even more delivery vehicles, the challenge will be ensuring that the whole adds up to more than the sum of its parts.
The foundation is solid, and the ambition is real. Canada has the fiscal capacity, the resource endowment, and the industrial base that most countries can only dream of. The tools in this budget—from expanded tax credits to critical minerals funds to a long-term carbon pricing trajectory—give us what we need to compete and win in the clean economy.
Now it’s about execution. If we can align these strategies effectively and move decisively on major projects, Canada won’t just participate in the global energy transition—we’ll help lead it, building prosperity and resilience for generations to come.
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Moe Kabbara is the President of the Transition Accelerator.
Bentley Allan is Vice President of Future Economy at the Transition Accelerator and an Associate Professor of Political Science at Johns Hopkins University.