Canada's "Investment Budget" Explained - Budget 2025 Infrastructure Perspectives

In the 2025 Federal Budget ("Budget 2025"), released on November 4, 2025, the federal government unveiled a sweeping refocus of Canadian fiscal policy towards building Canada's capital investment stock to support long term economic development. Budget 2025 is framed as an "investment budget" for Canada that contains a "plan to build the major infrastructure, homes and industries that grow our economy and create lasting prosperity." To achieve its goals, Budget 2025 introduces new major capital expenditure plans and expands upon existing infrastructure investment programs, which are supported by new legislation and other policy initiatives. In total, $115.2 billion over the next five years is planned for federal infrastructure investment, which the federal government anticipates will enable over $1 trillion in total investment (when accounting for private investment sources).

In this article we discuss the key infrastructure-related threads running though Budget 2025, including sector specific initiatives, government investment mechanisms and legislation and other policy implementation tools.

Trade and Transportation

A significant focus of Budget 2025 is trade and the necessary supporting transportation infrastructure as the Canadian government seeks to diversify Canada's trading relationships. Two of the key trade and transportation related items in Budget 2025 are the Arctic Infrastructure Fund and the Trade Diversification Corridors Fund.

Arctic Infrastructure Fund

$1 billion over four years (starting in 2025-26) is allocated to dual-use transportation projects in Canada's north, including airports, seaports, all-season roads and highways. In addition to facilitating economic growth, these projects are expected to help strengthen Canada's sovereignty in the Arctic and contribute to Canada's contributions to North American defence. This funding includes over $67 million dedicated to Indigenous consultation and streamlining regulatory processes in the north.

Trade Diversification Corridors Fund

As part of the government's Trade Diversification Strategy, which seeks to double Canada's oversees exports over the next ten years, Budget 2025 introduces a Trade Diversification Corridors Fund of $10 billion over seven years (starting in 2025-26) to invest in trade-related infrastructure. Included on in the list of potential recipients of funding are new port, railway and airport projects which seek to improve Canada's access to overseas markets. Such trade-focused spending dovetails with the federal government's efforts to expand Canada's relationships with its overseas trading partners.

Housing and Built Environment

In recognition of Canada's housing and community infrastructure deficit, spending on the spaces humans inhabit is one of the biggest infrastructure spending categories in Budget 2025. Build Canada Homes, a new federal agency with an initial investment of $13 billion, is discussed further below in the Federal Agencies section.

Build Communities Strong Fund

To be administered by Housing, Infrastructure and Communities Canada, the Build Communities Strong Fund of $51 billion over ten years (starting in 2026-27) repurposes resources from the Canada Housing Infrastructure Fund and is comprised of three streams – the Provincial and Territorial Stream, the Direct Delivery Stream and the Community Stream, which are discussed in further detail below:

• The Provincial and Territorial Stream, comprised of $17.2 billion over ten years (starting in 2026-27), focuses on housing-enabling infrastructure (such as roads and water lines), healthcare (such as hospitals), and education (including post-secondary institutions). Forming part of this $17.2 billion stream is a dedicated Healthcare Infrastructure Fund of $5 billion over three years (starting in 2026-27) to focus on ensuring health infrastructure such as hospitals, emergency rooms, urgent care centers and medicals schools reflect the country's healthcare needs.
• The Direct Delivery Stream will deliver $6 billion over ten years (starting in 2026-27) to regionally significant projects, large building retrofits, climate adaptation and community infrastructure. To access funding under this stream, proponents of regionally significant projects will be required to have private funding (including financing from the Canada Infrastructure Bank) to be eligible.
• The Community Stream, which is a rebranded version of the existing Canada Community-Building Fund, will provide $27.8 billion over ten years (starting in 2026-27) and $3 billion per year for ongoing support to local infrastructure projects.

Indigenous Infrastructure:

To support the development of domestic infrastructure in Indigenous communities, $2.3 billion over three years (starting in 2026-27) is dedicated to the First Nations Water and Wastewater Enhanced Program to maintain progress on roughly 800 active domestic infrastructure projects, including those addressing water advisories. Budget 2025 also confirmed that $2.8 billion is being allocated to urban, rural and northern Indigenous housing, which the federal government will deliver through partnerships with Indigenous groups.

Energy and Climate

Budget 2025 states that Canada's new Climate Competitiveness Strategy will bundle industrial carbon pricing, streamlined regulation and significant tax incentives to accelerate investment and reduce emissions. A key pillar of the Climate Competitiveness Strategy are the previously announced and partially enacted Clean Economy Investment Tax Credits, which have been expanded in Budget 2025. For a detailed discussion regarding the latest updates to the Clean Economy Tax Credits, please see McCarthy Tétrault's 2025 Canadian Federal Budget Commentary – Tax Initiatives.

In Budget 2025, multiple investments in energy projects were announced, including the following:

• $2 billion from the Canada Growth Fund was earmarked for an investment into the Darlington New Nuclear Project with the goal of making Canada the first G7 country with a commercially operational small modular reactor. The Darington New Nuclear Project is one of the first five major projects to be referred to the Major Projects Office (discussed further in the Federal Agencies section below) for expedited permitting and development.
• $372 million over two years (starting in 2026-27) to Natural Resources Canada to establish a Biofuels Production Incentive to support domestic biofuels producers.

Further, new legislation proposed in Budget 2025 would require the public registry of national-interest projects to be advanced by the Major Projects Office (as discussed below) to include information about the extent to which each project would contribute to clean growth and meeting Canada's climate change goals. Budget 2025 also proposes to introduce legislation to increase the maximum duration for natural gas export licences to 50 years from 40 years

Federal agencies

To steward the Canadian government's infrastructure programs, two new previously announced federal agencies were discussed further in Budget 2025.

Build Canada Homes

A new federal government agency with an initial investment of $13 billion over five years on a cash basis, Build Canada Homes was launched in September 2025 to help double the pace of homebuilding in Canada to increase the housing stock through a primary focus on non-market housing. In collaboration with other levels of government, the federal government is aiming to arrange for low-cost financing for builders, incentivize purpose-built rental construction, reduce regulations and red tape, and upskill the workforce. Build Canada Homes will "leverage public lands, offer flexible financial incentives, attract private capital, facilitate large portfolio projects, and support manufacturers to deliver housing at scale." Budget 2025 proposes legislation to appropriate up to $11.5 billion on a cash basis to defray costs related to Build Canada Homes and up to $1.515 billion on a cash basis to capitalize Canada Lands Company Ltd. to facilitate residential construction on federal lands.

Major Projects Office

Announced and launched earlier in 2025, the Major Projects Office ("MPO") is a "single window" for project proponents, focused on identifying major projects of national importance to streamline their regulatory approval. Budget 2025 also confirms that the MPO's mandate includes coordinating and structuring financing for major projects from provincial and territorial partners, the private sector and the federal government (including through the CIB, Canada Growth Fund and the Canada Indigenous Loan Guarantee Corporation). The government estimates over $40 billion is capital is ready to be deployed under existing authorities. Budget 2025 allocates $213.8 million over five years (starting in 2025-26) for to support the MPO's mandate. Funding will also support the Indigenous Advisory Council. Legislation proposed in Budget 2025 would provide the MPO with enhanced independence and flexibility.

Current projects being advanced by the MPO are:

• LNG Canada Phase 2 (Kitimat, British Columbia), a major LNG export facility on Canada's Pacific coast
• Darlington New Nuclear Power Plant (Bowmanville, Ontario), an innovative nuclear plant using commercial-scale small modular reactor technology
• ContrecSur Terminal Container Project (ContrecSur, Quebec), a major port expansion 40km downstream of Montréal on the St. Lawrence river.
• McIlvenna Bay Foran Copper Mine Project (East-Central Saskatchewan), a large copper mine
• Red Chris Mine Expansion (Northwest British Columbia), a major gold and copper mine

The federal government is also considering the following projects for referral to the MPO, with an announcement expected by the end of November 2025:

• Wind West Atlantic Energy (Nova Scotia), which could harness over 60GW of wind energy potential over Canada's Atlantic coast
• Pathways Plus (Alberta), a carbon capture and storage network and pipeline which will reduce oil sands emissions and facilitating low-carbon exports of Alberta oil
• Port of Churchill Plus (Manitoba), upgrades to Port of Churchill including new roads, railways, energy corridor)
• Alto High-Speed Rail (Toronto to Quebec City), Canada's first high-speed railway through one of the country's most densely populated areas.

It is expected that on November 13, 2025 the Prime Minister will announce additional projects to be referred to the MPO for consideration.

Crown Corporations

Budget 2025 makes clear that the federal government intends to throw its weight behind infrastructure projects and major projects of national importance, including by leveraging existing crown corporations towards this end. We discuss these initiatives below.

Canada Infrastructure Bank

In Budget 2025, the government previewed an intention to amend the Canada Infrastructure Bank ("CIB")'s statutory mandate to increase its capital capacity from $35 billion to $45 billion and to allow the CIB to invest in any of the nation-building projects that are referred to the Major Projects Office (so long as they fall within the bank's legal mandate). This means projects in sectors previously outside the CIB's focus, such as defence and purely private sector projects, may be eligible for CIB loans if they are deemed nation-building. The bank's mandate will be further broadened to allow for investment in infrastructure related to artificial intelligence. CIB's target for investments in Indigenous infrastructure is also being increased from $1 billion to $3 billion, dovetailing with the previously announced expansion of the Indigenous Loan Guarantee Program, administered by the Canada Indigenous Loan Guarantee Corporation, from $5 billion to $10 billion.

Strategic Financing Framework

Budget 2025 states that the government will provide guidance to Crown corporations on major project financing through a new strategic financing framework that will "advance a unified and coordinated approach to financing across the government's Crown corporations, departments, and agencies." Further, the CIB, Export Development Canada, Canada Growth Fund and the Canada Indigenous Loan Guarantee Corporation will be directed to work alongside the MPO to coordinate federal funds for major nation-building projects. Although more remains to be seen of this strategy, it is clear that the government intends to throw its weight behind advancing major projects of national importance.

Procurement

To support Canadian industry, Budget 2025 discusses the government's Buy Canadian Policy. Through the Buy Canadian Policy, the federal government's procurement of goods and services will be reoriented to channel taxpayer money towards Canadian industry. Federal procurement will be required to focus on Canadian suppliers or, where no Canadian suppliers are available, to include Canadian content or be sources from trusted partners. The Buy Canadian Policy will extend to Crown corporations, including VIA Rail and Alto (responsible for the Toronto-Quebec City High-Speed Rail Network). Budget 2025 allocates $98.2 million over five years (starting in 2026-27) and $9.8 million ongoing to Public Services and Procurement Canada to support the implementation of the new Buy Canadian Policy, as well as $7.7 over three years (starting in 2026-27) to the Treasury Board Secretariat.

Tax Incentives

In addition to expanding the Clean Economy Investment Tax Credits (discussed in the Energy and Climate section above), Budget 2025 includes tax incentives to promote investment and innovation in Canada. Among other things, Budget 2025 proposes the following measures aimed at "supercharging growth":

• a suite of enhanced tax incentives, referred to as the "productivity super-deduction", which includes measures reinstating the accelerated investment incentive and introducing immediate expensing for the cost of eligible manufacturing or processing buildings, including the cost of eligible additions or alterations made to such buildings;
• enhancements to the scientific research and experimental development (SR&ED) tax incentive program; and
• reinstatement of accelerated capital cost allowances for LNG equipment (from 8% to 30%) and related buildings (from 6% to 10%), but only for low-carbon LNG facilities.

For a discussion of these tax measures and others in Budget 2025, please see McCarthy Tétrault's 2025 Canadian Federal Budget Commentary – Tax Initiatives.

Conclusion

Budget 2025 represents an epochal shift in the Canadian government's domestic investment posture. As the federal government continues to roll out its broader investment strategy, a focus on infrastructure is expected to endure as new funding, agencies and mandates ensure momentum is maintained for years to come. McCarthy Tétrault will continue to monitor the implementation of legislation and policies as the government executes its "investment budget" for Canada. Please contact a member of the McCarthy Tétrault Infrastructure Group for more details on infrastructure initiatives and programs.

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