What Does Canada's 2023 Budget Signal for the Future of Fresh Water, Adaptation, and Natural Infrastructure on the Prairies?

Canada's 2023 Budget, released earlier this year, proved to be historic—with unprecedented investments for fresh water and the clean energy transition. The federal budget outlines the current government's planned spending and anticipated revenue for the upcoming fiscal year, an expression of their policy agenda and priorities. As the Budget Implementation Act 2023 passed the House of Commons in June, we wanted to dig deeper to understand what this budget means for three pressing issues on the Canadian Prairies: fresh water, climate change adaptation, and natural infrastructure. 

With a daunting array of challenges across the Prairies, including chronic underinvestment in water infrastructure, climate change, and fragmented governance across watersheds, what might communities in Manitoba, Saskatchewan, and Alberta expect in the coming months based on budget priorities?

What does Budget 2023 mean for freshwater across the Prairies? 

The Prairies include over 80% of Canada's farmland and a mix of urban and rural communities, as well as First Nations and Métis communities, that face mounting water issues in the context of a limited and variable freshwater supply. Canada's Budget 2023 is one of the more significant freshwater budgets released in decades, with investments totalling almost CAD 800 million toward freshwater protection, including

• CAD 85.1 million (over 5 years) to establish the Canada Water Agency, headquartered in Winnipeg, with an annual operating budget of CAD 21 million;
• CAD 22.6 million (over 3 years) to support the better coordination of efforts around freshwater protection, although few details are currently available; and 
• CAD 650 million (over 10 years) via the Freshwater Action Plan to safeguard water in specified Canadian watersheds, including the Great Lakes, Lake Winnipeg, and Lake of the Woods.

Perhaps the biggest news for water across the Prairies is the establishment of the Canada Water Agency in Winnipeg, which will be a central coordinator to support the collaborative management of fresh water among federal departments, provinces, territories, and Indigenous communities. We expect full details by the end of 2023, although the Canada Water Agency should draw from the popular Prairie Farm Rehabilitation Administration. Ideally, the Canada Water Agency will help to address a range of issues, from floods and droughts to harmful algal blooms and drinking water advisories. Basing the Canada Water Agency in Winnipeg, already home to world-renowned freshwater research organizations, including IISD’s headquarters and the Lake Winnipeg Foundation, ensures that Prairie voices inform the agency's development while bringing jobs to Manitoba.

Another exciting commitment to fresh water is the investment in Canadian watersheds via the Freshwater Action Plan. Of the total CAD 650 million, 65% of the funds (CAD 420 million) are committed to preserving and restoring the Great Lakes, likely in response to the United States' considerable investment of USD 3.8 billion (CAD 5.1 billion) via the Great Lakes Restoration Initiative since 2010. Within the same time frame, Canada trails in investment, with an allocation of CAD 44.84 million. While promising for the Great Lakes, the remaining CAD 230 million of the Freshwater Action Plan will be cleaved among seven watersheds, including Lake Winnipeg, although the specific allocation for each watershed has not been released. The Lake Winnipeg Basin Program already understands the issues that stress the health of the lake, including excess nutrients, algal blooms, invasive species, and warmer water temperatures. The distribution of the remaining funds will ultimately influence how programs and Prairie communities within the Lake Winnipeg basin can support land use and water management to reduce nutrient loads, support Indigenous Peoples in reclaiming and restoring their relationship with water, and monitor watershed health to enable adaptive management.

What is slated for climate change adaptation?

In November 2022, CAD 1.6 billion (over 5 years) was announced to implement Canada's first-ever National Adaptation Strategy, with the final version released in June 2023. The National Adaptation Strategy is a roadmap to help the country prepare for and deal with the impacts of climate change. This amount has been framed as a "downpayment" for adaptation. Although Budget 2023 did not allocate additional funding specific to the National Adaptation Strategy, other commitments support adaptation by bolstering flood resilience, including

• CAD 31.7 million (over 3 years) to develop the long-awaited low-cost flood insurance program for households at high risk of flooding and without access to appropriate insurance;
• CAD 15.3 million (over 3 years) to create a publicly accessible online portal for information about flood risk exposure; and 
• CAD 48.1 million (over 5 years) to identify high-risk flood areas and modernize the Disaster Financial Assistance Arrangements program.
   

Budget 2023 shows a strong commitment to clean electricity and an effort to achieve economy-wide net-zero emissions by 2050, likely motivated by the United States’ Inflation Reduction Act. The U.S. Inflation Reduction Act commits an estimated USD 369 billion in tax credits and increased spending on renewable energy from 2023 to 2033. Budget 2023 commits approximately CAD 20 billion over 5 years toward the energy transition, where the majority of incentives are related to investment tax credits to encourage the construction of alternative energy projects, including critical minerals, hydrogen, nuclear, and zero-emission vehicles sectors, to reduce greenhouse gas emissions.

While investments in clean energy and upgrades to electrical infrastructure are necessary for climate mitigation, we cannot lose sight of the need for meaningful investment in climate adaptation. Budget 2023 commits considerably more to mitigation and the clean energy transition—CAD 20 billion over 5 years—than climate resilience and adaptation, which is allocated CAD 95 million. That sum would be devoted predominantly to flooding, a common occurrence across the Prairies. Canadians regularly face more severe weather disasters and need greater support to prepare for these events, both in spending and in the speed of program delivery. To help safeguard the health and livelihoods of Canadians in the face of climate challenges, we will need more than a "downpayment"—and will need to ensure funds are distributed in a way that reaches rural and underserved communities.  

During the Convention on Biological Diversity's (CBD) 15th Conference of the Parties (COP 15) in December 2022, Canada announced it would commit up to CAD 800 million to support four major Indigenous-led conservation initiatives in British Columbia, Nunavut, Northwest Territories, and Ontario. While there are no Indigenous Conserved and Protected Areas currently established in the southern region of the Prairies to date (where the bulk of the population lives), this could present an opportunity for future budgets based on Indigenous priorities and leadership. With careful consideration and collaboration, this investment can be an opportunity to support reconciliation and the United Nations Declaration on the Rights of Indigenous Peoples while increasing resilience to climate change.

What about natural infrastructure?

Across the Prairies, the depreciation of water-related grey infrastructure outpaced investment by nearly CAD 3 billion (21.9%) between 2017 and 2021. Grey infrastructure includes human-made structures like dams, pipes, and water treatment facilities, often (but not exclusively) constructed from concrete or steel, and is typically intended to provide specific infrastructure outcomes, such as water supply storage.

The anticipated impacts of climate change, combined with ongoing ecosystem degradation, will strain the capacity of existing grey infrastructure to provide urban and rural Prairie communities with reliable, clean water in the face of mounting climate risks. Natural infrastructure includes conserved or restored ecosystems, or even nature-based engineered features, that meet infrastructure needs while also providing additional benefits like recreation, wildlife habitats, and carbon sequestration. Natural infrastructure is recognized as sorely needed to fill the growing infrastructure gap in the Prairies, simultaneously improving water management and increasing adaptation.

The Canadian federal government currently offers several programs that can support water infrastructure and natural infrastructure, like the Natural Infrastructure Fund, Nature Smart Climate Solutions Fund, and Indigenous Guardians. The ability to implement natural infrastructure projects varies based on factors like funding, capacity, awareness, policy, and more. A series of interviews with key experts in the region for IISD's recent State of Play of Natural Infrastructure on the Canadian Prairies revealed that Prairie communities need more support to develop resilient water infrastructure systems, particularly as costs rise. More support for the upfront development of projects can increase local uptake, particularly in rural or underserved communities that may lack the capacity for "shovel-ready" projects. Ideally, some of the CAD 1.6 billion investment announced to support the National Adaptation Strategy to deliver climate toolkits and services to increase climate-resilient practices, including natural infrastructure, will be prioritized for the communities where additional resources are badly needed. 

The Investing in Canada Infrastructure Program (ICIP) is a longstanding bilateral funding agreement between Infrastructure Canada and the provinces and territories that supports infrastructure upgrades, including water infrastructure. With a CAD 33.5 billion investment since 2015 (outside of Budget 2023), the program is set to expire at the end of the fiscal year (March 2024). Details are not yet known about ICIP's future, although an update is planned for later this year. The forthcoming roadmap for federal infrastructure, the National Infrastructure Assessment, will include natural infrastructure for the first time and could provide guidance for a funding program similar to ICIP. Meanwhile, the Green Municipal Fund, administered by the Federation of Canadian Municipalities, will continue to help local governments with community-based adaptation and infrastructure, supported by a recent boost of CAD 530 million via the National Adaptation Strategy funding (also outside of Budget 2023).

Building momentum

These unprecedented announcements signal positive momentum for fresh water, adaptation, and natural infrastructure at the federal level, and provincial efforts like Manitoba's new Water Management Strategy further strengthen shared efforts.

However, Budget 2023 lacks anything like the United States' Inflation Reduction Act and Nature-Based Solutions Roadmap, with their ambitious recommendations to scale up nature-based solutions—an umbrella term that also includes natural infrastructure—across the United States to address climate change, nature loss, and inequity. According to that roadmap, "nature-based solutions are woefully underused and urgently needed," so it aims to address the implementation deficit by focusing on policy, funding, workforce training, research, and the use of nature-based solutions in federal facilities.

Across the Prairies in Canada, we see a similar implementation challenge. While there is a patchwork of natural infrastructure projects across the Prairies, such as naturalized stormwater ponds and efforts by municipal governments to create natural asset inventories, these are often isolated and small in scale or driven by major cities with more capacity. A more coordinated and cross-scale effort—perhaps supported by a made-in-Canada roadmap—could speed up the adoption of natural infrastructure, while ensuring policies, funding programs, and personnel are in place to support local communities and their infrastructure priorities.