As the world transitions to low greenhouse gas (GHG) emission sources of energy, the focus has shifted to developing responsible and reliable resources to power economies. Canada, with its vast critical mineral reserves, has emerged as a global leader in mining potential, attracting significant attention from international companies in the sector. The federal government has also expressed support for the growth of Canada’s critical mineral resources and value chains.
Despite this potential, Canada faces several challenges in critical minerals development. These include environmental impacts, Indigenous rights concerns, and complex, time-consuming regulatory processes. Over the past decade, these issues have hindered investment in Canadian resources, which is a trend that needs to be addressed for Canada to capitalize on this generational opportunity.
A growing list of critical minerals in Canada
Critical minerals are essential for producing a wide range of technologies and products, and are seen as vital to national and economic security. In 2021, Canada identified 31 critical minerals and by 2024, three additional minerals were added to the list.
The Canadian Critical Minerals Strategy (2022) aims to increase the supply of responsibly sourced critical minerals while supporting the development of domestic and global value chains for the green and digital economy. The Strategy also emphasizes the risks associated with Canada’s dependence on mineral imports and the geopolitical concentration of international sources of these minerals.
To encourage domestic development, the Strategy identifies specific regions within Canada with potential for near-term exploration and development. Additionally, it focuses on six strategic areas: driving exploration, supporting research and development, and accelerating responsible project development.
Federal government funding programs for critical mineral projects
To stimulate critical mineral projects, the federal government has launched several targeted programs, including the Critical Minerals Infrastructure Fund (CMIF), the Critical Minerals Research, Development, and Demonstration Program (CMRDD) and the Critical Minerals Geoscience and Data Initiative (CMGDI), among others.
- CMIF is designed to support infrastructure development for critical minerals. The first tranche of funding is focused on shovel-ready projects, while the second tranche provides grants to support Indigenous engagement in infrastructure development.
- CMRDD allocated over $35 million to 30 research projects between 2022 and 2024, with an additional $22 million designated for pilot and demonstration projects testing new processing technologies for materials used in batteries and permanent magnets.
- CMGDI provides funding for projects that increase the availability of data on critical minerals resources in Canada.
- SIF offers up to $1.5 billion in funding for projects related to the manufacturing, processing, and recycling of critical minerals.
Tax incentives and credits
Alongside these funding programs, Canada has introduced tax incentives to support the critical minerals sector. The Clean Technology Manufacturing Investment Tax Credit (CTM) was enacted in June 2024 and offers a refundable tax credit of 30% for investments in eligible critical minerals extraction, processing, and recycling operations. This credit is available through 2031, with a phased reduction starting in 2034.
Additionally, Canada maintains the flow-through share regime for mining companies and has introduced a Critical Mineral Exploration Investment Tax Credit (CMEITC), offering a 30% non-refundable tax credit to individual investors in critical mineral exploration.
The case for domestic critical mineral production
Canada’s 34 critical minerals, including cobalt, nickel and rare earth elements, are essential for green energy technologies. Many of these minerals are currently sourced from countries with poor human rights and environmental records, making Canada’s mineral wealth both a strategic and ethical advantage.
In light of Canada’s energy transition goals and climate change commitments, developing critical minerals domestically is not just beneficial but essential. However, significant investment in these projects will require reforms to Canada’s permitting processes to accelerate new mine developments.
Regulatory barriers and the path forward
While the federal government has expressed the need for a more efficient regulatory system, lengthy delays due to permitting processes remain a significant barrier to attracting investment in critical minerals development. The Environmental Impact Assessment (EIA) process is particularly problematic. The Canadian government has committed to reducing the time required for federal assessments, with a target of five years or less for federal assessments and two years for non-federally designated projects. However, current legislation under the Impact Assessment Act (IAA) still includes provisions that create delays, such as the federal government’s discretion to designate projects for federal review and the lack of clarity regarding assessment criteria.
Regional assessments, such as the one in northern Ontario’s Ring of Fire area, aimed at streamlining the process for critical minerals projects, have also proven inefficient. Despite being initiated in 2020, the final terms for the regional assessment have not been established, and individual mining projects still require separate assessments under both federal and provincial regimes.
The mission ahead
The Canadian government recognizes the critical minerals opportunity, and it has taken steps to support the sector through funding and tax incentives. However, to fully realize Canada’s potential and become a leader in this vital sector, significant reforms are needed to streamline the permitting process.
Until such reforms are implemented, proponents of critical minerals projects can mitigate regulatory risks by engaging early with Indigenous communities and local stakeholders. Identifying and addressing key environmental concerns, such as water quality, air emissions, and impacts on species at risk, is crucial to reducing opposition and ensuring smoother project approval processes.
The hope is that permitting reforms will come by 2025, but in the meantime, advocates should continue to push for these changes while positioning themselves to move quickly once the process is simplified.
