The heartbeat of Freeland’s budget is green tech subsidies

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There were a few things Chrystia Freeland had to do in her 2023 budget and one thing she really wanted to do.

That one thing the Finance Minister really wanted to do was to pour billions into green-technology subsidies. And she did: The investment tax credits will amount to $80-billion over the next decade. And there will be other things, too.

Oh how Ms. Freeland waxed poetic about industrial strategy in her budget speech. This was the thing that made the Finance Minister’s heart flutter, declaring that Canada must “either meet this historic moment, this remarkable opportunity before us, or we will be left behind as the world’s democracies build the clean economy of the 21st century.”

But then there were those things that Ms. Freeland had to do, politically speaking. These were where the government did just enough for immediate Liberal politics, and described them in words that were less Churchillian and more like ad copy.

The Finance Minister had to tell Canadians that she would help them cope with inflation, so she extended an expanded GST credit for another six months, but cynically marketed it as a “grocery rebate.” No new thing so a new name.

Ms. Freeland had to budget additional money for health care, because Prime Minister Justin Trudeau told provincial premiers last month that Ottawa would spend an additional $22.7-billion over the next five years – roughly the amount the Liberals promised in their 2021 election campaign.

And political necessity meant the Liberal government would need to protect their deal for the NDP’s parliamentary backing, so they put billions into a dental-care plan, though cost estimates are ballooning.

And Ms. Freeland had to pay lip service to the notion of fiscal restraint because a recession may be coming and the deficit isn’t shrinking on its own. So she raised some taxes on the wealthy and promised to find nearly $13-billion over the next five years with vague plans to cut spending on consultants and control costs that might or might not actually come to pass.

But green-technology incentives and grand industrial strategy – that was something Ms. Freeland did with feeling.

Of course, there was outside pressure: It was a response to the Biden administration’s Inflation Reduction Act, which is intended to lure industrial investment to the United States – and threatens to draw it away from Canada. But Ms. Freeland’s budget speech embraced that whole strategy with both arms, at least rhetorically.

This is the thing the Liberals wanted to do in this budget that goes beyond responding to inflation, or this spring’s confidence votes.

This is the economic policy they want to last past this budget. Green-economy transformation was one of the things Ms. Freeland did in her first budget, in 2021. It’s still where the Liberals want to go. But it’s bigger because of the IRA.

Ms. Freeland spared no hyperbole in selling it. She said the strategy would transform Canada’s industry for a low-carbon future, reroute supply chains away from authoritarian countries, and pave the way for big projects. And she promised it would create good careers for “everyone, everywhere.” That’s one heck of a promise.

Of course this policy isn’t going to do all that. Some experts doubt it will go far enough to compete with U.S. incentives. But it is big.

The budget projected it would include more than $18-billion in investment tax credits for industry over the next five years, but a senior finance official noted that the credits are offered for a decade, and the total cost of them is expected to be over $80-billion.

That means the funds for green-tech industrial will be taking up a much bigger part of the federal budget six, or seven, or eight years from now – unless a future government cancels them. Already, Ottawa has committed unspecified billions to attract a Volkswagen plant to Ontario. And the budget signals there are additional incentives and financing mechanisms still to be worked out.

That is the big economic and political choice the Liberals wanted to make in this budget. It launches a decade-long industrial strategy, and a political debate. Would Conservatives cancel it in mid-stream, and kibosh the subsidies for carbon capture in the oil patch, or hydrogen production, or battery plants?

Most of the budget, including talk of fiscal restraint, were things Ms. Freeland had to say. But the big theme of green-tech incentives was where she wanted to go.