Climate Crunch

➔ Inside Canada’s strategy for the “Davos of Energy”

➔ What Canadian leaders told us about their views on climate action

➔ Canadian oil can deploy industrial carbon pricing at the cost of a Timbit per barrel, according to a study

Signals

Energy transition—not defence—will drive demand for critical minerals. Focus on electric vehicles and other energy transition technologies will be vital to underpin investments in Canada’s critical minerals sector, , according to Energy Lead Shaz Merwat. The good news is that emerging processing technologies—such as flash joule heating and direct lithium extraction—could alter the cost curve for new Canadian refining projects. Canada’s clean electricity advantage could also prove to be a differentiator as processing technology reduce energy intensity sufficiently to compete with China.​​​​​​​​​​​​​​​​ Read Shaz’s Mine & Refine report and Seven Takeaways from PDAC.

How are Canadian business executives addressing climate policies? The Climate Action team was on a listening tour over the past few weeks to check the pulse on climate action among Canadian leaders. Here’s what we heard: Canadian businesses are focusing on the doable. The result is not retreat, but a sharper focus on what can be built, financed, and scaled this decade. There’s plenty of climate capital to scale ambitions. The challenge is deploying it. Read our full briefing here.

Creating demand is the impetus for the new Advanced Carbon Removal (ARC) Coalition in Canada. The coalition launched this month and is made up of RBC, Shopify, the Government of Canada and other investors to mobilize $100 million in new support for Canadian carbon dioxide removal projects by 2030. These projects cross several sectors including energy, heavy industry and agriculture, and focus on scaling durable carbon removal technologies, including direct air capture, biochar, bioenergy with carbon capture and storage, enhanced weathering, and marine carbon dioxide removal. Canada has a competitive advantage in these carbon removal pathways given its vast resources in minerals and biomass, and access to clean electricity sources for processing.

The coming war for climate

The hope is that the Middle East conflict is short-lived. But it’s already casting a long shadow on global economic growth and energy flows—and climate goals.

With much of the oil-and-gas rich region engulfed in the crisis, major European and Asian importers are scrambling to secure alternative fossil fuel supplies. Solar and wind may be “intermittent” power sources, but oil and gas are now facing challenges of their own. The question for both energy-rich and option-poor policymakers is how to make urgent short-term decisions—without undermining long-term climate implications.

Here is what’s at stake…

For Canada: Big decisions, high stakes

Safe-harbour Superpower. Nervous nations have come calling, says Tim Hodgson, Minister of Energy and Natural Resources, looking for politically neutral Canadian oil and gas. Bonus: Canadian hydrocarbons don’t pass through global flashpoints—but do face domestic logistical hurdles. Can Canada ramp up as a reliable supplier without compromising its climate goals?

Investors are already testing the waters. The temptation is to build new West Coast LNG terminals and oil pipelines, and even East Coast projects to power Europe. Newfoundland Labrador recently reached a deal with Equinor and BP p.l.c. to lay the ground for construction and production at the offshore $14-billion Bay du Nord project. The oil pipeline route formerly known as Keystone XL—and now called the Prairie Connector—is all being revived. These projects could trigger an economic growth spurt—most certainly they would raise emissions.

Provincial considerations. British Columbia and Quebec must now navigate the tension between their strict environmental mandates and the pressure of allowing new energy infrastructure through their territories. Alberta, on the other hand, would need to ensure it does not over-index on oil and gas investments amid uncertain global energy demand.

For Europe: A power reset?

Continental drift. The 40% surge inEuropeanLNG prices following the strike on Iran highlighted the economic bloc’s limited options. With the continent still scarred by the loss of Russian pipeline gas, the current Middle Eastern shock has fractured the EU’s green consensus. Italy’s recent move to suspend carbon pricing—and Germany’s quiet recalibration of the 20-year-old Emissions Trading System (ETS)—signals a pivot toward security first over climate first.

Power with strings attached. As Qatari LNG through the Strait of Hormuz dries up, Europe is facing a short-term gas crisis, with Italy, Belgium and Poland more exposed than others. While U.S. LNG is bridging the gap, this reliance is increasingly transactional, coming with “political strings” that complicate the transatlantic alliance. Faced with a complete Russian gas embargo and a supply chain for renewables that remains dangerously concentrated in China, Europe finds itself in a strategic deadlock: return to legacy coal, pay the American premium, or accelerate a transition fuelled by China.

For Asia: Wake-up call

The Electrostate Paradox: China’s energy security is currently defined by a stark contradiction. As the destination for 38% of all oil transiting the Strait of Hormuz, Beijing has much lose from Middle Eastern volatility—a vulnerability compounded by the loss of Venezuelan crude following the ouster of the Maduro regime earlier this year. While Beijing recently issued a cautious 15th Five-Year Plan—lowering its carbon intensity target to 17% to prioritize industrial stability—this retreat masks a deeper shift. As Jason Bordoff, director of the Centre on Global Energy Policy at Columbia University, argues, by absorbing the short-term costs of fossil fuel disruptions today, China is effectively clearing the path to consolidate its dominance as the world’s first true “Electrostate.”

India’s dilemma. Even before the recent destabilization in the Middle East, New Delhi signalled a significant appetite for Canadian energy, with High Commissioner Dinesh Patnaik affirming India’s readiness to absorb “whatever Canada is offering.” While India maintains deep-rooted ties with Middle East nations, the vulnerability of the Strait of Hormuz—which handles nearly 15% of India’s crude imports—has accelerated a long-standing diversification mandate. For India, the crisis could simultaneously trigger higher coal consumption, more Western LNG exports, but also focus on powering up sola, and other renewable energies.

The Asian pivot. Roughly 37% of the oil transiting the Strait is destined for South Korea, Japan, and other regional hubs—a dependency that is forcing a radical strategic recalibration. Rather than waiting for Middle Eastern tensions to stabilize, South Korea is leveraging the volatility as a catalyst. The country’s president framed the crisis as “a good opportunity to swiftly and extensively transition to renewable energy.”

It’s unclear whether fossil fuels or renewables will emerge as winners from the latest cataclysmic conflict. What’s certain, however, is that the global race to secure energy supplies has intensified.

Inside Canada’s CERA play

Canada is all set for the “Davos of energy.” The IHS CERA conference in Houston, starting March 23, will have a much larger Canadian presence than in recent years, with the Canada House pavilion and participation of Tim Hodgson, the Minister of Energy and Natural Resources, with officials from Invest in Canada (IIC), Innovation, Science, and Economic Development Canada (ISED), and Global Affairs Canada (GAC), among others.

Canada’s balancing act would be to attract American dollars but also diversify away from U.S. capital and attract a wider investor base to safeguard its sovereignty and reduce dependence on the American market.

—Canada’s four strategic themes at the event:

• Standing on guard: Position Canada as a secure and stable clean and conventional energy superpower;

• Being resourceful: Showcase Canada’s leadership in innovation, research and development, and emissions reduction in energy;

• Championing Team Canada: Support energy companies by showcasing Canada’s benefits as a destination for energy investment capital; and,

• Leveraging the sovereignty angle: Highlight Canada’s energy sovereignty and ability to meet growing global energy demand through market diversification.

—Several Canadian provinces, energy companies, and thought leaders will be amplifying the message, with Alberta Premier Danielle Smith slated for one of the panels.

—With construction on the roads in minerals-rich Ring of Fire set to commence this year and a new Critical Minerals Strategy, Ontario Minister of Energy and Mines Stephen Lecce will join a panel on the New Geopolitics of Critical Minerals.

—Canada House will feature dedicated programming focused on oil, nuclear energy, LNG, AI and energy, investment in Canada and methane abatement technologies. Some of the planned sessions, include Capital in Motion: Funding an Infrastructure Supercycle, featuring Minister Hodgson. Another with Chief Sharleen Gale, Chair of the First Nations Major Projects Coalition, will be on delivering Canadian energy to global markets.

—Other sessions focus on Canada’s low-carbon LNG, next-generation nuclear reactors, Canada’s methane innovation leadership, AI-enabled clean technology, and breakthroughs and bottlenecks in getting Canadian oil to global markets.

Climate conversations

—The world’s facing a copper shortage. John Stackhouse and Shaz Merwat discuss how Canada can help.

—The agriculture sector is asking, “why Canadian farmers are not participating in compliance carbon markets at scale as a source of offsets?” Interim Head Lisa Ashton presented our Climate Action 2026 findings at the Annual Sustainability of Canadian Agriculture Conference and carbon pricing dominated the Q&A period.

—Canadian Climate Institute’s Dale Beugin and Ross Linden-Fraser explains why the industrial carbon pricing will cost just a Timbit per barrel for Canada’s oil sands sector.

—ESG now means energy, security and geopolitics, writes Liam Denning, Bloomberg opinion columnist.

—Canadian provinces and territories signed a deal to build transmission infrastructure needed to power the country’s next generation of growth. Pembina’s Tim Weis explains its significance.

—It’s not just the latest U.S. tariffs that have gutted Canada’s softwood lumber sector. RBC Economics Salim Zanana explains the thousands cuts.