How does the Canadian government support economic development?

The federal government supports Canadian economic development through tax incentives, research funding, infrastructure investment, regulation, trade promotion, and direct support to firms. Major federal departments and agencies include Innovation, Science and Economic Development Canada (ISED), the Department of Finance, Natural Resources Canada, Agriculture and Agri-Food Canada, the Treasury Board Secretariat, Global Affairs Canada, Employment and Social Development Canada, and Canadian Heritage. Federal spending in 2024-2025 is about $497 billion.

Crown corporations deliver large parts of the economic-development mandate. The Business Development Bank of Canada (BDC) provides loans, advisory services, and venture capital to small and medium businesses. Export Development Canada (EDC) supports Canadian exporters with financing and insurance. The Canada Infrastructure Bank (CIB) co-invests in revenue-generating infrastructure projects. The Canada Small Business Financing Program guarantees loans from chartered banks. Atlantic Canada Opportunities Agency (ACOA), Canada Economic Development for Quebec Regions (CED-Q), Federal Economic Development Agency for Northern Ontario (FedNor), Federal Economic Development Agency for Southern Ontario (FedDev Ontario), Western Diversification (WD), and the Canadian Northern Economic Development Agency (CanNor) deliver regional programs.

Tax incentives for innovation include the Scientific Research and Experimental Development (SR&ED) tax credit (about $4 billion a year), the Strategic Innovation Fund's SR&ED Plus stream, and accelerated capital cost allowance for clean technology and manufacturing. Federal investment tax credits introduced in 2023 to 2024 include the Carbon Capture, Utilization and Storage Investment Tax Credit, the Clean Hydrogen Tax Credit, the Clean Technology Tax Credit, the Clean Electricity Tax Credit, and the Critical Minerals Exploration Tax Credit.

Major recent commitments include the federal-provincial electric-vehicle and battery investments (Stellantis-LG in Windsor, Volkswagen in St. Thomas, Northvolt in Quebec, Honda in Alliston), the Canadian Sovereign AI Compute Strategy ($2 billion in 2024), the Indo-Pacific Strategy ($2.3 billion), the Critical Minerals Strategy ($3.8 billion), and the Net Zero Accelerator under the Strategic Innovation Fund. Federal procurement is increasingly used as a policy tool through Indigenous Procurement (the 5 per cent target by 2025), Buy Canadian provisions, and green procurement standards.