Ottawa's budget for the fiscal year ending next March sets a new target to cut emissions by 2030 to 36% below 2005 levels, more ambitious than its previous 30% goal. Canada has a net zero emissions target of 2050.
An even more ambitious 2030 target will be set "in the coming days", the budget says, probably when Prime Minister Justin Trudeau attends a virtual leaders summit on climate starting on Thursday. It will be hosted by U.S. President Joe Biden, who has put new focus on fighting climate change.
Trudeau has said he wants to "build back better" after the pandemic, but critics have said Canada, the world's fourth-largest oil producer, may lag the United States if more action is not taken.
"In 2021, job growth means green growth," Finance Minister Chrystia Freeland said in a speech to lawmakers.
Canada has a carbon pricing scheme but has failed to meet past climate pledges, which have met resistance from politicians who say the targets threaten the oil industry's future.
In a bid to get the energy sector to pivot toward lower emissions, the budget offers tax credits for capital invested in carbon capture utilization and storage projects, and for hydrogen production, though it said the rate of the incentive would be determined in coming months.
Ottawa will also issue its first green bonds this year to fund projects aimed at fighting climate change. Some C$5 billion will be issued, or about 2% of total government bond issuance during the current fiscal year.
The budget includes C$17.6 billion ($14.1 billion) to support what the government calls a "green recovery".
That includes investments in companies that specialize in green technologies, as well as a 50% reduction in income tax rates for businesses that manufacture zero-emission technologies, and a C$5 billion top-up to a fund used to invest in and attract green tech companies, including zero-emissions carmakers.
"There are definitely jobs to be found by focusing on technologies like carbon capture, electric vehicles, and clean tech generally," said Trevin Stratton, chief economist at the Canadian Chamber of Commerce.
The carbon reduction plan will also offer interest-free loans to homeowners of up to C$40,000 to improve energy efficiency.
($1 = 1.2526 Canadian dollars)
(Reporting by Steve Scherer; Editing by Amran Abocar and David Gregorio)
By Steve Scherer