Trudeau and Freeland up the ante on a clean economy

Justin Trudeau's basic argument is that Canada and the world face both historic challenges and unique opportunities — and the Liberals are better suited than the Conservatives to overcoming those challenges and seizing those opportunities.

Mind you, the two parties don't entirely agree on which issues are most deserving of attention right now. But there is no bigger challenge than climate change and the transition to a low-carbon future it requires. And Tuesday's federal budget — described by the Canadian Climate Institute as "the most consequential budget in recent history for accelerating clean growth in Canada" — could be a pivotal piece of the Liberal response.

The actual consequences of this budget will take years to measure. But in response to political and economic pressure, Trudeau's Liberals have at least significantly upped the ante.

"In our minds, there is probably no more pressing issue of economic policy than accelerating Canada's transition to a low carbon economy," a senior finance official told reporters during a briefing on Tuesday. "We cannot, as a country, afford to be left behind."

The obvious impetus for all of this is the Inflation Reduction Act recently passed in the United States. Though it was couched in terms of affordability, the American legislation was actually a massive package of subsidies for clean energy and technology.

Comparisons with President Joe Biden's signature legislation are somewhat unfair — the United States has to lean heavily on subsidies because there is no chance of Congress passing any kind of carbon-pricing policy. But the Trudeau government could not afford to ignore it.

"In what is the most significant economic transformation since the Industrial Revolution, our friends and partners around the world — chief among them the United States — are investing heavily to build clean economies and the net-zero industries of tomorrow," Finance Minister Chrystia Freeland said Tuesday.

"Today, and in the years to come, 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."

Freeland's third budget as finance minister offers $16.4 billion in tax credits for clean tech manufacturing, clean electricity and hydrogen over the next five years, adding to the $6.7 billion in supports for clean tech investment announced last fall. Freeland also has agreed to add $500 million to the $4.1 billion in support announced last year for carbon capture, utilization and storage.

Beyond those subsidies, the government has committed billions toward a handful of potentially lucrative funds, including $15 billion for the Canada Growth Fund, $8 billion for a "net zero accelerator" and $20 billion through the Canada Infrastructure Bank.

WATCH: Provinces need to be at the table as Canada competes with U.S., Freeland says

The Liberals also are moving to shore up the federal carbon price. Under a mechanism called "contracts for difference," companies that receive funding through the Canada Growth Fund would be eligible for compensation if the industrial carbon price fails to rise as scheduled.

In other words, if some future government pauses or outright repeals the price, it would come at a direct cost to the government.

The "backbone" of the plan, the senior official said, is funding for clean electricity — billions of dollars that will go toward cleaning and expanding Canada's grid.