Quarterly Financial Report, quarter ended June 30, 2026

Statement outlining results, risks and significant changes in operations, personnel and programs

Introduction

This first quarterly report has been prepared by management as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by the Treasury Board (TB). This quarterly report should be read in conjunction with the 2026-27 Main Estimates.

This quarterly report has not been subject to an external audit or review.

Authority, mandate and program activities

Environment and Climate Change Canada (ECCC) leads and supports a wide range of environmental issues, including taking action on clean growth and climate change, pollution, conserving nature, and predicting weather and environmental conditions. The Department addresses these issues through various actions and initiatives including leading Canada’s efforts to transition to a net-zero economy and strengthening resilience to climate change, protecting more of our lands and waters, strengthening protection and recovery for species at risk and their habitats, and providing environmental and weather information to Canadians. To achieve its mandate, the Department works with provinces, territories, Indigenous peoples, civil society, industry, and international partners, and undertakes monitoring, science-based research, policy and regulatory development, and enforcement of environmental laws and regulations.

The Department’s program focus reflects the interdependence between environmental sustainability and economic well-being.

Under the Department of the Environment Act, the powers, duties and functions of the Minister extend to matters such as:

• the preservation and enhancement of the quality of the natural environment, including water, air and soil quality, and the coordination of the relevant policies and programs of the Government of Canada;
• renewable resources, including migratory birds and other non-domestic flora and fauna;
• meteorology; and
• the enforcement of rules and regulations.

A summary description of the ECCC Raison d’être and core responsibilities can be found in Part II of the Main Estimates and the Departmental Plan.

Basis of presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes the ECCC’s spending authorities granted by Parliament and those used by the Department consistent with the Main Estimates for the 2026-27 fiscal year. This quarterly report has been prepared using a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities.

The authority of Parliament is required before money can be spent by the Government. Approvals are given in the form of annually approved limits through appropriation acts, or through legislation in the form of statutory spending authority for specific purposes.

When Parliament is dissolved for the purposes of a general election, section 30 of the Financial Administration Act authorizes the Governor General, under certain conditions, to issue a special warrant authorizing the Government to withdraw funds from the Consolidated Revenue Fund. A special warrant is deemed an appropriation for the fiscal year in which it is issued.

The Department uses the full accrual method of accounting to prepare and present its annual departmental financial statements that are part of the departmental results reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

Highlights of the fiscal quarter and the fiscal year-to-date (YTD) results

Authority analysis

The Statement of Authorities presented in this quarterly financial report (see Table 1) reflects the authorities that were approved as of June 30, 2026. The funding available for use includes the 2026-27 Main Estimates and the Supplementary Estimates “A”.

ECCC’s total available authorities for use for the year ending March 31, 2027 is lower by approximately $1,370.6M ($1,756.6M - $3,127.2M)^{Footnote 1} when compared to the same quarter of the previous year. This difference is explained by decreases in Vote 10 – Grants and Contributions of $704.6M ($346.1M - $1,050.7M), in Budgetary Statutory authorities of $528.4M ($333.9M - $862.3M), in Vote 1 – Net Operating of $129.0M ($1,004.5M - $1,133.5M) and in Vote 5 – Capital of $8.6M ($72.1M - $80.7M).

Vote 1 – Net Operating authorities

The $129.0M decrease compared to last fiscal year in the net Operating authorities is mainly due to the following decreases:

• $85.6M to conserve Canada’s land and freshwater, protect species, advance Indigenous reconciliation, increase access to nature and continue efforts to protect species at risk (Enhanced Nature Legacy);
• $14.6M to reallocate resources from Operating to Capital for departmental infrastructure and capital project requirements;
• $9.0M to reduce greenhouse gas emissions in the transportation and methane waste sectors;
• $7.9M related to the Carbon Pollution Pricing Proceeds Return;
• $4.6M related to the Climate Lens initiative;
• $3.4M to reinvest in Canada’s Hydro-Meteorological Services;
• $3.3M related to Climate Change Communications, Public Education and Advertising; and
• $0.6M for various other initiatives.

Operating Authorities are netted of respendable revenues. Revenues at Environment and Climate Change Canada come from sales of goods and information products and services of a non-regulatory nature. Major revenue items include, for example: fees for new chemical substance notification submissions, Oil Sands monitoring activities, Ocean disposal permit applications, Hydrometric services, Ocean disposal monitoring fees, and Weather and environmental services.

Vote 5 – Capital authorities

The $8.6M decrease compared to last fiscal year in the Capital authorities is mainly due to the following decreases:

• $9.1M to conserve Canada’s land and freshwater, protect species, advance Indigenous reconciliation, increase access to nature and continue efforts to protect species at risk (Enhanced Nature Legacy);
• $5.4M related to Strong Arctic and Northern Communities;
• $3.7M to safeguard the continuous operation of the Dr. Neil Trivett Global Atmosphere Watch Observatory in Alert, Nunavut;
• $1.2M to reduce greenhouse gas emissions in the transportation and methane waste sectors;
• $1.1M for advancing a circular economy for plastics in Canada;
• $0.9M related to the Oceans Protection Plan; and
• $1.8M for various other initiatives.

Offset by the following increase:

• $14.6M to reallocate resources from Operating to Capital for departmental infrastructure and capital project requirements.

Vote 10 – Grants and contributions authorities

The $704.6M decrease compared to last fiscal year in the Grants and Contributions authorities is mainly due to the following decreases:

• $300.0M related to a grant for the Northwest Territories Our Land for the Future Project Finance for Permanence;
• $282.3M to conserve Canada’s land and freshwater, protect species, advance Indigenous reconciliation, increase access to nature and continue efforts to protect species at risk (Enhanced Nature Legacy);
• $125.8M related to the Comprehensive Expenditure Review;
• $37.9M related to Canada’s International Climate Finance;
• $23.2M related to the Refocusing Government Spending Reductions (B2023);
• $14.9M related to Youth Employment and Skills Strategy;
• $4.2M to address imminent threats to wood bison herds;
• $1.7M related to the implementation of Canada’s new marine conservation targets;
• $1.4M related to the Low Carbon Economy Fund (LCEF); and
• $1.0M for various other initiatives.

Offset by the following increase:

• $87.8M to implement natural climate solutions in Canada.

Statutory authorities

The $528.4M decrease compared to last fiscal year in the budgetary statutory authorities is due to the following decreases:

• $466.5M related to the distribution of revenues from fuel charge payments to Indigenous Governments; and
• $64.1M related to the distribution of revenues from excess emissions charge payments under the Output-Based Pricing System.

Offset by the following increase:

• $2.2M related to the contributions to Employee Benefit Plans.

Expenditures analysis by Vote

Details of expenditures by Vote are presented in Tables 1 and 2.

In the first quarter of 2026-27, total budgetary expenditures were $305.0M compared to $442.7M reported for the same period in 2025-26, resulting in a decrease of $137.7M.

Vote 1 – Net Operating Authorities used during the first quarter of 2026-27 totalled $248.4M, which represents an increase of $8.6M ($248.4M - $239.8M) compared to the same period last year. This variance is mainly due to an increase in professional and special services expenditures.

Vote 5 – Capital Authorities used during the first quarter of 2026-27 totalled $7.9M, which represents an increase of $0.2M ($7.9M – $7.7M) compared to the same period last year. This variance is mainly due to an increase in professional and special services expenditures.

Vote 10 – Grants and Contributions Authorities used during the first quarter of 2026-27 totalled $17.0M, which represents a decrease of $5.0M ($17.0M - $22.0M) compared to the same period last year. This variance is mainly due to:

• a decrease in contribution payments for Canada’s International Climate Finance Program;
• a decrease in contribution payments to conserve Canada’s land and freshwater, protect species, advance Indigenous reconciliation, increase access to nature and continue efforts to protect species at risk (Enhanced Nature Legacy), offset by;
• an increase in contribution payments to support projects of conservation, restoration and enhanced land management of wetlands, peatlands, and grasslands to store and capture carbon (Implement natural climate solutions in Canada).

Budgetary Statutory Authorities – Budgetary Statutory Authorities used during the first quarter of 2026-27 totalled $31.7M, which represents a decrease of $141.5M ($31.7M - $173.2M) compared to the same period last year. This variance is mainly due to a decrease related to the Fuel Charge Proceeds Fund for Indigenous Governments.

Expenditures analysis by Standard Object

Details of expenditures by Standard Object are presented in Tables 3 and 4.

Personnel expenditures decreased by $2.9M ($256.9M - $259.8M) compared to the same period last year. This variance is mainly due to efforts to reduce activities and programming that are not core to the Department's mandate and to improve day-to-day operating efficiency.

Professional and special services expenditures increased by $14.8M ($25.7M - $10.9M) compared to the same period last year. This variance is mainly due to the timing of payment of expenditures related to legal services and engineering consulting fees. The variance is also explained by increased expenditures related to the remediation of contaminated sites.

Transfer payments expenditures decreased by $147.1M ($14.5M - $161.6M) compared to the same period last year. This variance is mainly due to a decrease related to the Fuel Charge Proceeds Fund for Indigenous Governments as well as the variances under Vote 10 – Grants and Contributions Authorities noted above.

Risks and uncertainties

ECCC’s financial position and ability to deliver on operational priorities are influenced by a range of internal and external factors that must be effectively managed to ensure sound stewardship of public resources and the continued delivery of results for Canadians. As part of its governance and decision-making processes, the Department considers various corporate risks, including those related to managing complex stakeholder relationships and adopting sound management practices, particularly in the administration of grants and contributions. The Department must also address uncertainties associated with potential vulnerabilities in the security and management of its data and digital and physical infrastructure, which underpin its financial, scientific, and operational functions. Additional information on key risk areas is provided in the 2026-27 Departmental Plan.

Financial management systems, investment planning, cost estimation, real estate, and business continuity are exposed to risks such as those stemming from personnel (experience, knowledge, skills, and turnover), systems, data integration, and changes in requirements. Fraud also remains an inherent risk in financial transactions. Moreover, the Department’s financial position is sensitive to shifts in policy and budget priorities, as well as to socio-economic and geopolitical instability, which could challenge overall financial sustainability and the ability to deliver certain activities and services. For example, fluctuations in operating cost including security-related expenditures, or changes in partnerships, can impact multiple program areas, particularly those reliant on external partners, international collaboration, or joint research, such as cross-border wildlife and wetlands initiatives.

If these risks materialize, they could increase costs, delay program and project delivery, disrupt financial operations, internal controls and reporting, and affect the Department’s ability to procure goods, services and specialized equipment or sustain research and programs. They could also result in asset losses, reputational damage, and reduced public confidence.

To mitigate these risks, the Department maintains a risk-based system of internal controls over financial management, including fraud detection measures. The Department continues to strengthen grants and contributions oversight and stewardship of public funds through implementation of department-wide governance and assurance frameworks. This includes risk-informed recipient audits, quality assurance, policy guidance, and continuous improvement activities that promote the consistent application of the Directive on Transfer Payments across grants and contributions programs. The Department also seeks to continuously strengthen its resilience by diversifying its sources of data and supply, using infrastructure and climate risk assessments to inform investment planning and risk mitigation, and through rigorous program and resource management. To mitigate cost risks, estimates for inflation and contingency are included in cost estimates to cover any deviations from anticipated amounts. In addition, to support long-term financial sustainability, the Department continues to enhance multi-year financial analysis and reporting capabilities.

Significant changes in relation to operations, personnel and programs

There are no significant changes in relation to operations, personnel and programs to report during the first quarter.

Approved by:

Statement of Authorities (unaudited) – Table 1

* The funding available for use includes the 2026-27 Main Estimates and Supplementary Estimates “A”.

** The negative amount under Distribution of Fuel and Excess Emission Charges is due to a payable at year-end from previous year reversed against the current fiscal year.

Statement of Authorities (unaudited) – Table 2

* The funding available for use includes the 2025-26 Main Estimates.

Departmental budgetary expenditures by Standard Object (unaudited) – Table 3

* The planned expenditures include the 2026-27 Main Estimates and the Supplementary Estimates “A”.

Departmental budgetary expenditures by Standard Object (unaudited) – Table 4

* The planned expenditures are based on funding available for use from the 2025-26 Main Estimates.