Building on Budget 2025: Space as strategic infrastructure for Canada’s security and sovereignty

This article appears in our 2026 Defence Outlook guide, which explores the key trends shaping Canada’s aerospace and defence sectors. Read the full outlook and download our guide here.

 

“The influence of space technology will be felt in every home in Canada... It is therefore an inescapable conclusion that the elements of space technology vital to Canada must be under Canadian control.”
– Chapman Report, 1967^[1]

Budget 2025 has refueled Canada’s space ambitions. It introduced a broad suite of investments aimed at rebuilding domestic defence capacity, accelerating dual-use innovation, strengthening industrial resilience, and expanding Canada’s ability to participate in allied security architectures. Several of these measures carry direct and indirect implications for the growth, competitiveness, and global positioning of Canada’s space sector.^[2] In this article we outline some notable space-related spending commitments from Budget 2025.

Dual-use innovation and technology development

• $656.9 million over five years to Innovation, Science and Economic Development Canada to develop and commercialize dual civilian-military technologies across aerospace, cyber, artificial intelligence, biodefence, life sciences, automotive, and marine sectors.
• A new policy direction that prioritizes domestic innovation and encourages Canadian firms to scale technologies with both commercial and national security applications.

Financing and mobilization of small- and medium-sized enterprises

• $1 billion in 2025 to establish the Defence and Security Business Mobilization Program at the Business Development Bank of Canada (BDC), providing loans, venture capital, and advisory services for SMEs contributing to defence and security capabilities.
• Buy Canadian Policy that directs federal procurement officials to select Canadian suppliers by default, wherever possible, in order to reinforce domestic supply chains and strengthen local industrial capacity.

Defence industrial restructuring and procurement reform

• Creation of a national Defence Industrial Strategy backed by $6.6 billion over five years to rebuild production capacity, increase supply-chain resilience, and foster long-term growth in strategic manufacturing sectors.
• Establishment of the Defence Investment Agency to streamline procurement, accelerate program approvals, reduce administrative delays, and prioritize industrial activity in aerospace, advanced manufacturing, and shipbuilding.

Digital, security, and infrastructure modernization

• $10.9 billion over five years for digital infrastructure upgrades across the Department of National Defence (DND), the Canadian Armed Forces (CAF), and national security agencies.
• Investments aimed at strengthening secure communications, cyber readiness, data management, and the digital backbone needed for modern military and space-enabled operations.

Sovereign access to space and orbital capability

• $182.6 million over three years to the DND to establish a sovereign space launch capability within Canada.
• Support for infrastructure, regulatory development, early-stage launch operations, and integration with broader Arctic, surveillance, and communications missions.

These investments are situated within a broader government commitment of $81.8 billion over five years to reinforce national sovereignty and security. Canada faces rising strategic demands to monitor its northern and Arctic territories, protect remote and critical infrastructure, secure communications, maintain situational awareness, and safeguard data sovereignty. Space assets are now foundational to delivering on these responsibilities, including satellites, Earth observation systems, secure links, ground infrastructure, and reliable launch pathways.

Investing in sovereign launch and space capabilities

“Canada's struggle to retain an independent identity…leads us to develop competitive technologies, to train and educate scientists and engineers, and to resist firmly the erosion of national control over the essential fabric of our national structure.”
– Chapman Report, 1967

Through the aptly named Innovation for Defence Excellence and Security (IDEaS) program, Canada is advancing its space and defence capabilities through targeted initiatives such as the Launch the North and Shields Up! Challenges. Led by the DND and the CAF, Launch the North is focused on accelerating the development of Canadian-designed launch vehicles and enabling technologies, with the objective of launching Canadian payloads from Canadian soil and achieving an initial light-lift operational capability as early as 2028. The challenge made available up to $100 million per project, and the first round of proposals closed on January 9, 2026.

Recognizing that militaries of Western democracies, including Canada, are increasingly dependent on capabilities that are delivered or enabled by space-based systems and their associated space and ground infrastructure (e.g., communications, surveillance, environmental monitoring, and navigation), DND and CAF have also launched a complementary initiative focused on developing new and innovative capabilities that can be incorporated into the design and operation of Canada’s space-based systems to defend and protect satellites from a range of natural and human-made threats. Results for this challenge are being published on the IDEaS website.

These innovation efforts are complemented by recent federal action to strengthen space-enabled defence infrastructure in operational environments. In December 2025, the federal government announced a strategic partnership with Canadian space and satellite companies to enhance military satellite communications in the Arctic under the Enhanced Satellite Communications Project – Polar.^[3] 

Moreover, as climate change accelerates, the Arctic is attracting increasing strategic attention due to expanding access to natural resources, longer navigable seasons, and the growing viability of Arctic shipping routes, particularly the Northwest Passage (NWP).

While Canada considers the NWP to be internal waters subject to full Canadian sovereignty, the United States and others consider the waterway through Canada’s Arctic Archipelago as an international strait. In this context, the development of credible defence and space capabilities is essential to Canada’s ability to assert sovereignty in the North, where, given the re-emergence of Realpolitik as a dominant feature of global geopolitics, effective control and sustained presence increasingly outweigh legal claims alone.

These concerns are reinforced by findings highlighted in a June 2023 parliamentary report, Arctic Security Under Threat.^[4] This report acknowledged that satellites are essential to Arctic surveillance and communications, and noted that although DND has committed to procuring next-generation capabilities through initiatives such as the Defence Enhanced Surveillance from Space Project (DESSP), initial operational capability is not expected until 2035.^[5]

DESSP is intended to deliver next-generation space-based surveillance by integrating radar and identification capabilities, with a focus on low-latency, all-weather Arctic monitoring and interoperability with allied systems.^[6]

In the context of heightened strategic competition in the Arctic, where China has classified itself as a “Near-Arctic State,”^[7] and where the current U.S. administration has actively sought to expand its presence in Greenland based on claims of national security^[8], much to the consternation of its traditional allies^[9], it is critical that the federal government effectively implement the space-related measures announced in Budget 2025 to ensure Canada is positioned to assert effective control over its Arctic territory.

Given that, initiatives such as IDEaS and Shields Up! are important steps in the right direction to ensure Canada develops the domestic capacity to independently protect and advance its national interests in a shifting global order.

To stay up to date on the latest developments in Canada’s space policy, regulatory framework and capabilities, visit our Space topic page.