Takeaways

• A new audit by Canada’s environment commissioner says Ottawa’s clean energy tax credits and emission reduction incentives have failed to deliver measurable results.
• Billions earmarked for carbon capture and green technologies remain largely unspent, with weak oversight and limited impact data.
• The report warns that overlapping incentives and policy uncertainty could undermine private investment in Canada’s transition to a low-carbon economy.

As the federal government under Prime Minister Mark Carney pushes forward with billions more in clean energy incentives and carbon capture tax credits, Canada’s environment watchdog has raised serious concerns about the effectiveness of these programs.

In a new audit released last Thursday, Environment Commissioner Jerry DeMarco said that Ottawa’s tax credits and investment incentives aimed at cutting emissions have been rolled out too slowly, with far less participation than expected and no clear evidence of emission reductions.

The audit reviewed nine measures under Canada’s 2030 Emissions Reduction Plan, including five clean economy investment tax credits, a corporate tax cut for zero-emission technology manufacturers, the Canada Growth Fund, and green bonds. Collectively, these initiatives represent a projected $123 billion cost to taxpayers.

Read More: Carbon Capture Market Forecast: Policy Shifts Fuel Global Growth

DeMarco’s findings suggest that despite the massive investment, there is little data showing the impact on emissions. “It’s disappointing to see that there isn’t a strong emphasis by the government on estimating the expecting emissions from each tax credit, and as well estimating the value for money for Canadians in these large-scale subsidies,” he said.

The audit highlighted that uptake of the programs was far lower than the Department of Finance’s initial projections. For instance, fewer than 30 corporations had claimed the zero-emission manufacturing tax cut since 2022, just 25% of the expected $61 million uptake.

Likewise, for the five clean economy tax credits, Finance Canada had projected claims of $5.2 billion by March 2025, later revising the estimate to $9.2 billion. However, by July 2025, only the Clean Technology Investment Tax Credit had any payouts, totaling just $22 million.

Although companies can still file retroactive claims, DeMarco cautioned that such low participation underlines how slowly Ottawa’s climate funding is translating into real-world projects.

Critics were quick to pounce on the findings. Patrick Bonin, climate critic for the Bloc Québécois, accused the government of losing focus on its 2030 goals. “They’re not even pretending to want to meet the 2030 climate target anymore,” he said.

The report also raised concerns about the government’s investment incentives for oil and gas, particularly around carbon capture, utilization, and storage (CCUS) and low-carbon hydrogen. DeMarco noted that these depend heavily on Ottawa’s industrial carbon pricing system and Clean Fuel Regulations, both of which face uncertain futures.

That uncertainty, the report warned, threatens the financial viability of private investment in clean technologies. The recent federal budget promised to strengthen the carbon pricing system but offered no details on how this would be achieved.

Further, of the $2.7 billion already committed through the Canada Growth Fund, about $1.7 billion went to just two oil and gas projects. Both are eligible for additional tax credits, raising the risk of “double-dipping” and potentially allowing companies to benefit from multiple funding streams without cutting emissions.

Also Read: NCCS: Carbon Tax Discounts Support Net-Zero Plans, Not Continued Emissions

DeMarco also criticized the government for failing to publish a full list of fossil fuel subsidies, which had been promised by December 2024, and for not completing a peer review study on those subsidies that began in 2018. Canada’s participation stalled after Argentina, its partner in the review, backed out in 2023 under a new administration.

DeMarco concluded that without stronger data tracking, transparency, and clear emissions outcomes, Ottawa’s tax credits could become costly missed opportunities rather than catalysts for real climate progress.

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Source: The ENERGY MIX