May 8, 2006

Federal budget's environment measures focus on public transit, infrastructure

Support for public transit and water and sewage infrastructure were the environmental highlights of the May 2 federal budget presented by Finance Minister Jim Flaherty. Waiting in the wings is a new made-in-Canada climate change plan, to which the Conservative government will allocate $2 billion over the next five years-funds redirected from programs that have been discontinued or are ending.

Noting the contribution of public transit to easing traffic congestion in urban areas and reducing carbon dioxide and other emissions, the 2006 budget provides $1.3 billion for public transit capital investments. The government intends to accelerate investments in public transit infrastructure by making $400 million available to provinces and territories. To date, nine agreements have been finalized with provinces and territories regarding this funding, with the balance to be concluded in coming months.

Additional support in this area will come from a $900-million, one-time payment to provinces and territories, to be paid into a third-party Public Transit Capital Trust, contingent on sufficient funds being available from the 2005-06 surplus in excess of $2 billion. This is intended to be used for public transit infrastructure projects such as rapid transit systems, buses, high-occupancy vehicle lanes and bicycle lanes. Pending confirmation of the government's financial results for 2005-06, expected this fall, funding will be allocated nationally over three years and distributed to provinces and territories on an equal per capita basis.

The environmental effectiveness of public transit is directly proportional to its level of use. Accordingly, the budget is providing incentives for individuals to leave their cars at home in favour of increased transit use.

The government has proposed a 15.5% tax credit for the cost of transit passes (monthly or longer in duration), starting July 1, 2006. A person who buys an $80 pass each month will save up to $150 in taxes over the year. All transit users, including commuters, students and seniors, will qualify.

This will provide a total benefit of $370 million to Canadians who use this environmentally friendly mode of transport ($150 million in 2006-07 and $220 million in 2007-08). The transit pass credit will be funded from the reallocation of existing resources earmarked for climate change programs.

The government notes that this measure's effectiveness will depend on continued efforts by transit authorities to increase ridership by providing quality service and keeping fares low.

The 2006 budget has also reaffirmed the government's commitment to maintain and significantly expand its level of infrastructure investment. Federal support for provincial, territorial and municipal infrastructure will rise to new levels, totalling $16.5 billion over the next four years.

Recognizing the importance of the Canada Strategic Infrastructure Fund (CSIF) in supporting projects such as water and sewage treatment, flood mitigation, highways and urban transit, the budget renews this program and allocates an additional $2 billion, which will allow the government to fund new projects. The CSIF investments are made in co-operation with the provinces and territories, municipalities and the private sector.

Another $2.2 billion will be provided over five years for the renewed Municipal Rural Infrastructure Fund (MRIF), through which the federal government helps municipalities across Canada undertake infrastructure improvement projects. Many of these projects involve improvements to water and wastewater distribution and treatment infrastructure. The added support will allow this fund to support further improvements to municipal infrastructure, such as the Evergreen Commons at the Don Valley Brick Works in Toronto.

Canada's pulp and paper industry will benefit from an accelerated capital cost allowance (CCA) for forestry bioenergy. This accelerated CCA currently applies to investments in energy generation equipment that uses renewable energy or uses fossil fuel efficiently.

The budget proposes to implement a previously-announced incentive for cogeneration systems in the pulp and paper industry that produce both thermal energy and electricity using black liquor, a biomass residue from the pulping process. This measure will encourage additional investment in technology that reduces emissions of greenhouse gases and air pollutants, while helping to improve the international competitiveness of Canadian mills.

Another budget measure would exempt donations of ecologically sensitive land under the Ecogift program from capital gains tax, effective immediately. This program encourages Canadian landowners to donate ecologically sensitive land, or easements and covenants on such land, to conservation charities to ensure its preservation in perpetuity. The current incentive for individuals making an ecogift consists of a charitable donations credit and a reduced inclusion rate on capital gains associated with the donation. Exempting these land donations from capital gains tax altogether is aimed at encouraging more Canadians to make ecogifts.

The 2006 budget also provides an additional $100 million per year for research and development, including $17 million per year for the Natural Sciences and Engineering Research Council of Canada (NSERC), which supports many environment-related R&D projects. Other allocations include $400 million over two years to combat the pine beetle infestation, strengthen the long-term competitiveness of the forestry sector and support worker adjustment; and $19 million per year to Public Safety and Emergency Preparedness Canada to enhance national capacity to deal with catastrophes and emergencies.

More information is available on the Department of Finance Web site,

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