Canada’s Liberal government plans to form a C$2 billion ($1.4bn) sovereign fund for critical minerals, earmark hundreds of millions in mining industry spending and widen exploration tax credits to a dozen other minerals, according to the federal budget presented on Tuesday.
The spending document, which forecasts a C$78.3 billion deficit for the fiscal year to March 31, includes plans to replace the industrial emissions cap. It also proposes incentives that may reduce the tax on capital spending — such as buildings for a critical minerals’ processor — to 0.4%, according to an analysis by CBC.
“Budget 2025 confirms the federal government’s unwavering commitment to the Critical Minerals Strategy released three years ago,” Mining Association of Canada CEO Pierre Gratton said in a statement. “These measures, taken together, send a powerful signal to the mining industry, global investors and Canada’s allies that Canada is very serious about improving the competitiveness of Canada’s mining industry.”
The budget, which has yet to be approved in Parliament, contains C$280 billion in capital investment spending and plans to cut 40,000 public sector jobs by fiscal 2028-29 to help pay for it. The budget deficit would fall to C$56.6 billion by 2029-30.
Prime Minister Mark Carney’s government has a minority of seats in Parliament and needs three votes from opposition lawmakers to pass the budget. Opposition parties such as the Conservatives, the Bloc Quebecois and the leftist New Democratic Party could try to vote down the budget to cause an election, though their appetite for a second national vote this year is unclear.
New funds
The sovereign fund will make equity investments, provide loan guarantees and enter into offtake agreements for eligible projects and companies, budget documents show. Natural Resources Canada will receive C$50 million over five years to help set up the fund.
Another new investment vehicle, the First and Last Mile Fund, will focus on getting near-term critical minerals projects into production. About C$372 million will be provided to Natural Resources Canada for the fund over four years, starting in 2026-27.
The new fund would absorb the Critical Minerals Infrastructure Fund and “leverage its existing funding envelope” to provide up to C$1.5 billion in support through 2029-30, budget documents show.
Another budget line, titled Climate Competitiveness Strategy, contains C$585 million over four years to support critical minerals projects. But the details weren’t immediately clear.
Also, Natural Resources Canada and the department of Innovation, Science and Economic Development are getting C$443 million over five years to support processing technologies, joint investments with allies in Canadian projects and stockpiling of critical minerals to strengthen Canadian and allied national security.
Exploration tax credit
Ottawa also wants to expand eligibility for the Critical Mineral Exploration Tax Credit (CMETC) to include 12 new minerals necessary for defence, semiconductors, energy and clean technologies. They are: bismuth, cesium, chromium, fluorspar, germanium, indium, manganese, molybdenum, niobium, tantalum, tin and tungsten.
The expansion of the CMETC applies to certain exploration expenditures for those minerals and works in tandem with Canada’s flow-through share structure, which channels funds from high-net-worth investors to junior miners.
Emissions price
Carney’s government also wants to replace the industrial emissions cap, and plans to nearly eliminate taxes that can apply to some mining company capital spending.
The emissions cap needs to be replaced by an industrial emissions price set by Ottawa in consultation with the provinces and territories, according to the budget. The goal is still to achieve a net-zero emissions goal by 2050, the government said.
The infrastructure spending tax incentives compares with a 12% tax in the United States as Canada tries to recoup some 30,000 manufacturing jobs lost to south of the border, the CBC news network said.
“Today’s budget promises to usher in a new era in mining investment,” the MAC’s Gratton said, “creating high paying jobs, boosting exports, creating major opportunities for Indigenous Canadians and protecting Canadian sovereignty for years to come.
“We urge the government to implement these proposals expeditiously.”
