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Hidden cost in productivity: Why fertilizer emissions accounting needs an overhaul

Author: lavanyakaleeswaran

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As Canadian farmers produce more per acre to feed a growing global population, fertilizer use has jumped 108% over the past two decades. That has come with an environmental impact: synthetic fertilizers now account for a quarter of the agriculture sector’s emissions in Canada.1 But the current emissions accounting system is flawed as it primarily focuses on the quantity used. What’s missing in the equation is farmer stewardship of fertilizer use to optimize placement, source and timing that help lower emissions.

Crop emissions from fertilizers have risen by 111% since 2005. Source: Environment and Climate Change Canada and RBC Climate Action Institute

In an effort to optimize fertilizer use, the number of Canadian farmers with a nutrient stewardship plan has more than tripled over the past five years.2

Rising adoption rates are a sign of climate action. But it’s also an economic decision, especially as geopolitics continue to disrupt fertilizer supplies and raise prices. Nitrogen fertilizers have faced the brunt of supply chain shocks from geopolitical conflicts over the past five years as key producers include the Middle East and Russia. Nitrogen is also the primary driver of GHG emissions from fertilizer use. When nitrogen is not fully consumed by crops to grow, nitrogen can be emitted into the atmosphere as nitrous oxide (N2O) emissions, a GHG that is 273 times more potent than carbon dioxide over a 100-year time scale. When farmers adopt nutrient stewardship practices, GHG reductions can be substantial. An Ontario study, for example, found that when nitrogen fertilizer rates are optimized, and technology and practices that improve the source, timing and placement of fertilizer are adopted, N2O emissions can fall by up to 57%.

To capture in the accounting the full suite of practices, Canada, and other agriculture producing countries, including Australia, Denmark, New Zealand, Brazil and the U.S., are developing research and industry networks to collaboratively advance N2O measurement and monitoring systems.  

These research-driven networks have multiple lab-to-market applications, including those focused on:

  • Improving the understanding of how farmers’ practices impact N2O emissions, supporting investment decisions by farmers, industry and governments in nutrient stewardship

  • Building a suite of indicators that allow for more accurate tracking against GHG emission targets at the farm, regional and national scale

  • Refining the measuring, monitoring, reporting and verification (MMRV) protocols for carbon offsets and sustainability programs, improving the accounting of farmers’ climate actions to better connect them to market-based incentives and provide greater assurance to carbon credit buyers

Canada: A driving force in innovation of measurement and monitoring practices

Canada’s response to fertilizer-related N2O emissions has increasingly focused on improving measurement, coordination, and on-farm nitrogen management. A central initiative is the Canadian Nitrous Oxide Network (CanN2ONet), a collaborative research network involving universities, government agencies, farmer groups, and industry partners. The network was established shortly after Canada’s national target for reducing fertilizer-related N2O emissions by 30% by 2030 was announced in 2020—a policy with notable industry push back that has since faded in sector discourse.

CanN2ONet operates a series of long-term monitoring sites across Alberta, Saskatchewan, Manitoba, and Ontario. These sites use micrometeorological techniques to continuously measure N₂O emissions from agricultural fields under different climates, soil conditions, and management systems. The network also addresses a long-standing challenge in agricultural climate policy: accurately measuring emissions at field scale. Traditional national GHG inventories often rely on generalized assumptions that do not fully capture local soil and weather conditions.

Denmark: An ambitious vision for meeting GHG targets

Denmark’s SmartField initiative represents one of Europe’s most advanced efforts to reduce agricultural N2O through data-driven and field-scale innovation. Led by the Danish Technological Institute and funded by the Novo Nordisk Foundation, SmartField aims to cut N2O emissions from Danish agriculture by as much as 30% by 2030 without reducing yields or increasing other forms of nitrogen pollution. 

Canada and Denmark-based researchers are advising one another as both CanN2ONet and SmartField focus on building a national testing and validation platform for emission-reduction technologies and farming practices. The SmartField project combines stationary “supersites,” mobile measurement systems, advanced sensors, and modelling tools to monitor how fertilizers behave in real farming conditions. These facilities generate detailed datasets on nitrogen cycling, soil biology, crop performance, and greenhouse gas emissions. 

One of the initiative’s features is the integration of science, policy, and implementation. SmartField brings together universities, government agencies, agricultural organizations, and private-sector stakeholders to accelerate the adoption of low-emission farming practices.

New Zealand: Balancing rural economic growth and GHG trajectories

Agriculture accounts for roughly half of the country’s GHG emissions. Cattle manure from livestock and fertilization of grasslands for animal feed are the main culprits of N2O emissions. The agricultural sector is also the largest contributor to export revenue, accounting for 70% of merchandise exports, with agricultural production alone contributing 5% to the country’s GDP.

New Zealand’s approach to managing its large agriculture environmental and economic footprint has evolved over the past five years with an initially strong prioritization on GHG reductions aligned with legislated net-zero targets. Through industry engagement, the focus has shifted towards innovation and scaling practices and technologies that present win-wins in productivity and emissions reduction. A government-led, centralized approach to advancing N2O emissions accounting has been driven by the country’s Ag Emissions Centre and rolls into New Zealand’s broader ambitions to mitigate GHG emissions from agriculture.

Lisa Ashton is RBC Thought Leadership’s Agriculture Policy Lead

Disclaimer

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Also in this edition: Should farmland be used to produce food or fuel? And four potential routes for Canada’s embattled auto industry. 

A summit about managed competition

The summit between President Donald Trump and President Xi Jinping in Beijing produced no breakthrough agreements, but that may have been beside the point. After a year in which tariffs between the two countries exceeded 100% and trade flows sharply contracted, the immediate objective on both sides appears to have been stabilization versus resolution. 

The atmospherics mattered. Trump described the talks as producing “fantastic trade deals,” while Beijing emphasized “common understandings” and continuity. But beneath the optics, the summit revealed where the real negotiations and constraints now sit.  

A few themes stood out: 

The trade relationship is structurally smaller than it was 

  • U.S. imports of Chinese goods and the bilateral trade deficit are now at roughly 20-year lows. Washington’s efforts to reduce exposure to China through tariffs, supply chain diversification, and industrial policy have had a measurable effect. The relationship is no longer defined by integration.

  • There was no material progress on tariffs or the Section 301 trade investigations targeting China over state-subsidized production overcapacity in sectors like steel, and electric vehicles.

China’s priority is predictability 

  • The Chinese spent the years between Trump’s first and second terms doing their homework, preparing counteractive policies for more U.S. trade confrontation. Export controls on rare earths and critical minerals, industrial policy tools, and tighter supply chain leverage have proven key weapons in China’s arsenal.  

  • But the summit reinforced that Beijing’s near-term priority is a more predictable operating environment with Washington—one that reduces the risk of escalation and preserves access to key export markets, technology inputs, and capital flows.  

No major progress on chips and export controls 

  • Global semiconductor stocks slid with no major chip deals announced and continued stagnation over the sale of Nvidia’s H200 chips to China.  

  • This remains the clearest dividing line in the trading relationship. Washington still sees leading-edge chips and export controls as a way to mitigate China’s access to advanced semiconductors that could be used for military applications or AI innovations. Beijing, in turn, hasn’t formally approved shipments of the chips and has looked inward, urging Chinese firms to switch to domestic hardware.

Agricultural purchases are a U.S. political priority 

  • The clearest deliverables, as is often the case in trade negotiations with China, may ultimately come in agriculture. U.S. Trade Representative Jamieson Greer said Washington expects China to commit to “double-digit billions” in annual purchases of U.S. agricultural products over the next three years, including soybeans, poultry, and pork.  

  • The White House needs to be seen as supporting U.S. farmers, especially as the impacts of the Iran war on fertilizer prices and other agricultural inputs rise ahead of the mid-terms and as planting season gets underway.

Both sides appear to want guardrails 

  • Discussions around a possible “board of trade,” investment mechanisms, and even preliminary AI guardrails show neither Washington nor Beijing currently wants uncontrolled escalation.  

  • The strategic rivalry continues, but both sides appear increasingly focused on managing it rather than intensifying it in the near term. 

—Thomas Ashcroft, Global Issues Policy Lead 

Food or fuel? 

Skyrocketing oil and gas prices and supply constraints are pushing countries to boost biofuel production and use. The shift aims to curtail reliance on Middle East oil and gas supplies. But the surge in policy-driven biofuel demand coincides with the rising food affordability crisis reviving a recurring debate: should farmland be used to produce food or fuel?  

The biofuel boom:

  • The U.S.’s Environmental Protection Agency set record Renewable Volume Obligations (RVOs) for 2026–2027 with notable increases for biomass-based diesel, produced primarily from soybean and canola oil in North America. In addition, the U.S. House passed legislation this week to allow nationwide year‑round sales of gasoline containing 15% ​ethanol (labelled as E15), which is largely produced from corn in the U.S. 

  • The European Commission proposed the AccelerateEU strategy in April, which includes measures to boost EU sustainable biofuel production and use. This proposal is a rapid response to the bloc spending an additional €24 billion on fossil fuel imports within the first 50 days of the Iran conflict.  

  • Indonesia revived its plans to introduce a higher biofuel blend in 2026 following rising fossil fuel import costs. The blending rate mandate ​for biodiesel made from palm oil is planned to move to 50% from 40% this year.   

  • Brazil is actively accelerating its biofuel blending mandates to enhance energy sovereignty. President Luiz Inácio Lula da Silva announced in April that the ethanol blend mandate will be raised to 32% (E32) in gasoline this spring. For biodiesel, testing is underway to understand the viability for moving the blending rate from 15% to 20%.  

  • India reached its E20 ethanol blending goal in April. Disruptions to the country’s oil and gas prices and supply are prompting discussions on ramping up to E85 or E100 as production capacity expands.    

  • Vietnam expedited its national mandate for 10% ethanol blends in gasoline to begin in April due to energy shocks in price and supply. Ethanol is produced mostly from cassava, sugarcane, and increasingly corn in the Southeast Asian nation.   

  • …and Canada? In response to the previous shock to Canada’s biofuel supply chains from U.S. trade tensions, the federal government announced a $370 million Biofuel Production Incentive and committed to amending the Clean Fuel Regulation to prioritize domestic low-carbon fuel production. These measures, while not in response to Iran war, are intended to increase the resilience of the domestic biofuel sector.  

Bottomline: The global biofuel market is poised to enter another expansion cycle as countries raise blending mandates to meet energy security and transition to lower greenhouse gas emitting energy sources. However, early signs of rising corn, sugarcane, and vegetable prices may further pressure food prices this year.  

—Lisa Ashton, Agriculture Policy Lead 

Road Test 

About 200 auto sector executives packed into a hotel ballroom this week for the Toronto Region Board of Trade’s Ontario Auto Forum. Magna CEO Swamy Kotagiri laid out three distinct options for dealing with the industry’s headwinds: protect jobs, chase affordability, or build resilience through anchoring the industry in capabilities that can’t easily be replicated. The latter, he said, should be the priority.  

RBC Thought Leadership’s Managing Director Jordan Brennan also took to the stage, presenting findings from his latest report Steering Through Uncertainty, which charts four distinct paths for the embattled auto industry.  

Canada's auto sector lost productive capacity during expansion phases

Read the full report, including the five strategic considerations that cut across all four scenarios, here.  

The week that was  

USTR pushes for “Fortress North America” steel protections under USMCA 

  • Deputy U.S. Trade Representative Jeffrey Goettman said an updated USMCA should include “unified tariff borders” for sectors like steel, aluminum, and autos to prevent products made with non-North American inputs from entering through Canada or Mexico. U.S. steel executives backed tighter “melt-and-pour” origin rules. 

EU sanctions on Chinese chip supplier raise fears of automotive disruption 

  • Industry executives warned EU sanctions of Chinese chipmaker Yangzhou Yangjie Electronic Technology, for allegedly supplying military technology to Russia, could trigger renewed chip shortages across the auto sector. Some firms are already seeking exemptions as manufacturers remain vulnerable following last year’s rare earth and semiconductor disruptions.   

EDC expands focus on diversification, defence, and strategic sectors 

  • Export Development Canada announced it facilitated $135 billion in trade-related activity in 2025, supported nearly 24,000 businesses, launched new programs, while expanding its European and Indo-Pacific presence. 

Bank of Canada research highlights declining maritime connectivity 

  • Canadian ports became less central to global shipping networks between 2016 and 2023, with declining direct connectivity and lower shipping capacity relative to major Asian hubs. The risk, writes the BoC, is “greater exposure to supply chain disruptions that could increase the cost of doing business.”  

Disclaimer

rbc_tl_disclaimer

This report is part of RBC Thought Leadership’s Growth Project, our ongoing initiative to generate new ideas for the Canadian economy. Canada’s auto industry, which employs 125,000 people and accounts for 10% of Canadian exports, is central to the dynamism of the country’s wider advanced manufacturing sector and economic relations with the U.S. Over the past 10 months, to help chart a path forward for the industry at this critical moment, we spoke with automakers, parts suppliers and other industry experts to inform the research, which sets out four different futures for the industry.

Key findings

  • Canada’s auto industry is at an inflection point within the North American industry. Washington’s focus on reviving domestic production threatens to rip up decades-old Montreal-to-Detroit supply chains. In our most pessimistic scenario, auto assembly plants in Canada could shutter by 2040.

  • Alternatively, Canada’s unit volume could grow to two million by 2040. Continued tariff-free access to the U.S. market could ramp up manufacturing in our most optimistic scenario.

  • The industry is also grappling with two global transitions unfolding at different speeds. Electric vehicle adoption is proceeding more slowly than forecast, stranding billions in investments. Meanwhile, AI, autonomy, and software revolutions are accelerating faster than original equipment manufacturers (OEMs) can embed in assembly lines, creating a mismatch between capital commitments and market-ready technology.

  • The auto industry’s future will be increasingly defined by the value generated per vehicle. The U.S. captures roughly twice the amount of GDP per assembled vehicle than Canada–and the gap is widening. Automation and robotics could lead to a world where fewer workers build more vehicles.

  • Market access is a powerful, underutilized asset. Only Americans buy more cars, per capita, than Canadians. With 90% of the Canadian market supplied by imports, Canada can link market access to investment commitments across manufacturing, R&D, software, testing, and certification.

Canada’s auto industry is at the centre of a storm. This isn’t the first time the industry has been threatened by precipitous conditions, but the present deluge poses a serious—perhaps existential—threat. The greatest source of upheaval comes in the form of President Donald Trump’s use of tariffs to repatriate manufacturing capacity to the American heartland. The year following Trump’s re-election was dotted with a painful series of product line cancellations, plant closures, and the most job losses in Canada’s auto industry since the Great Recession.

Adding to the tariff turmoil are four structural shifts in the industry: 

Electrification

Electric vehicle adoption initially grew quickly thanks to consumer incentives, emissions rules, and industrial subsidies. But recent incentive rollbacks have made EVs less attractive for consumers, hurting sales, and prompting automakers to pause or cancel EV programs. In the short term, EV adoption may remain uneven due to affordability and charging infrastructure concerns. Long-term, frequent oil market shocks could accelerate adoption as domestically generated electricity leaves countries less exposed to geopolitical instability. 

Software

As new models come loaded with connectivity, autonomy, AI, and electric propulsion, cars are increasingly becoming rolling technology platforms. More of a vehicle’s performance and value depends on batteries, chips, sensors, and software. As a result, the value pool expands beyond final assembly. That’s leading to a retooling of the industry as demand for new expertise and components disrupt the established skills and supply chains.

Market

In 2025, some 92 million vehicles were sold globally, down from 95 million in 2017. Sales in the U.S. peaked in 2016, with Canada following a year later.1 The combination of an aging population and rapid urbanization is triggering structural shifts in global demand. That’s even before an impending autonomous vehicle revolution that could reimagine car ownership.

China

Chinese automakers surpassed their Japan rivals as the world’s largest car seller in 2025, having grown its market share from less than 1% to ~35% over the past 25 years. The country’s rising dominance in the global auto market, often with superior technology and lower prices, poses the most significant long-term threat to North America’s auto industry.  

Ultimately, Canada must decide how it positions itself in a transformed global auto system. With US$735 million in annual R&D spending, auto manufacturing is a high-tech, high value industry with substantial spillover benefits across sectors.2 Canada has several competitive advantages, too—skilled labour, clean and affordable power, and award-winning assembly facilities—that position it well to capture value across the supply chain. Success depends on maintaining the competitiveness of the ecosystem of suppliers, services, and technology providers.

With punitive Section 232 tariffs on steel, aluminum and copper still in force and the Canada-U.S.-Mexico (CUSMA) renegotiations imminent, Canadian policymakers and industry need to weigh the tradeoffs between competing strategic orientations. With that in mind, we look out to 2040 and explore four potential paths for Canada’s auto future.

China's rising dominance in the global auto market poses the most significant long-term threat to North America’s auto industry. Toyota: Woodstock Assembly - RAV4 Hybrid General Motors: CAMI Assembly (Ingersoll) - Status: Idled Chevy BrightDrop EV Vans cancelled Toyota: Cambridge Plants (North and South); south - Lexus RX 350 (ICE + Hybrid) Lexus RX 500 Hyrbrid; North - Lexus NX (ICE + Hybrid) RAV4 Hybrid General Motors: St. Catharines Propulsion Plant - Next-generation V8 engine Stellantis: Windsor Assembly - Chrysler Pacifica (ICE + Hybrid), Chrysler Grand Caravan + Voyager, Dodge Charger lineup Honda: Alliston Plant Plant 1: Civic (ICE + Hybrid); Plant 2: CR-V (ICE + Hybrid); Plant 3: Four-cylinder engine plant General Motors: Oshawa Assembly - Chevrolet Silverado - (Light & Heavy-Duty models Steelantis: Etobicoke Casting Plant - Parts and components for vehicles Ford: Oakville Assembly - Retooling for Ford Super Duty, Plans to build EV, SUVs abandoned Stellantis: Brampton Assembly - Status: Idled; Jeep Compass program moved to Illinoi

Canada’s OEM Industry Profile

MeasureEstimate Quantities
Employment125,000 workers: assembly (35,000), parts (71,000), body and trailer (18,000)
Units Produced1.3M (2024)
Value Added (GDP)$17B (2024)
Shipments$102B ($64B vehicles + $38B parts)
OEMsToyota, Honda, Stellantis, GM, Ford
# Parts Suppliers700
Gross Capital Stock$65B (replacement cost)
Robot Density1,475 robots /10,000 employees

The road ahead

1. Fast Lane—Higher volume, more value and closer integration

Key assumptions

  • Canada secures duty-free access to the U.S. market

  • Reforms are made to the rules of origin, domestic content requirements, and most favoured nation tariff rates

  • Tariffs limit Chinese access to the North American market

  • The total cost of EV ownership continues to decline

  • Pledged EV investments proceed on a longer timeline

  • Advancements in AI and autonomy boost value per vehicle

  • Canada expands its low-carbon grid and strengthens its critical minerals refining capabilities.

Life in the ‘Fast Lane’

This is a world where North American integration holds, electrification advances, and value deepens inside existing ecosystems. The five OEMs (General Motors, Ford, Stellantis NV, Honda and Toyota) in Canada maintain their manufacturing presence, but plants that were furloughed or operating at low utilization win new product mandates and increase assembly volumes. The Windsor-Montreal corridor combines assembly plants, Tier-1 suppliers, tooling firms, automation, AI and software firms, and in-market engineering talent that few jurisdictions can replicate. The 700-plus suppliers feature world-class Canadian companies, including Magna, Linamar, Multimatic, and Martinrea.

The Fast Lane is narrow but navigable. The foundation is restored duty-free trade with the U.S. Reforms to the rules of origin, domestic content requirements, and most-favoured-nation tariff rates further incentivize OEMs to allocate product to Canadian assembly plants.3 Simultaneously, a protective tariff wall rises around North America to keep Chinese EVs out—creating the competitive breathing room that North American OEMs need to invest with confidence.

Restored access, coupled with improvement in EV affordability unlocks tens of billions in pledged investment, most of which was deferred during the tariff war. Units assembled climb from 1.3 million in 2025 to 2 million by 2040—as many vehicles as Canadians purchase annually. Plus, Canada’s capabilities in light-weight materials, mobile communications, sensors and controls, software, data analytics, AI, cyber security and battery research are leveraged to win new mandates higher up the value chain.4

The Windsor-Montreal corridor functions as a Silicon Valley of the North—with deep engineering talent in autonomy, AI, lightweight materials and embedded systems. This is important since, as McKinsey projects, the software, sensors, control units, and electronics segment of the global industry will grow from US$335 billion to US$520 billion between 2025 and 2035.

The electrification path is longer than originally forecast, but it arrives. After $70 billion in EV write-downs in 2026, battery costs continue to fall while range and charging infrastructure improve. By 2030, market-driven consumer adoption begins. PHEV and BEV penetration rises from 10% in 2025 to 25% by 2030 and more than 60% by 2040. British Columbia and Quebec lead adoption—EV registrations hold around 20% in hydro-powered provinces even after federal rebates expire—before expanding into other markets as economics improve.

Canada trails U.S. on GDP-per-vehicle assembled Motor vehicles and parts manufacturing GDP per assembled vehicle, USD/vehicle* *Canadian industry: Motor vehicles and parts manufacturing; U.S. indsutry: Motor vehicles, bodies and trailers, and parts GDP is based on chained 2017 dollars; CAD converted to USD --Insights from RBC thought leadership

Canada’s critical minerals strategy bolsters Canada’s case. The mining, processing, and secondary manufacture of copper, cobalt, lithium, and magnesium—increasingly concentrated along a Northern Ontario-Quebec supply chain—strengthens battery integrity and reduces OEM exposure to Chinese inputs. Clean, affordable power bolsters the investment case. Ontario and Quebec’s low-emissions grids—Quebec’s electricity prices already sit below auto hubs like Michigan and Ohio—matter more in the smart-car era because electrification raises the power load. Computing, testing, and validation add to that demand. A cleaner, cheaper grid widens the margin and reduces carbon exposure on vehicle exports to increasingly emissions-conscious markets.

The Waterloo-Ottawa-Montreal corridor functions as a Silicon Valley of the North—with deep engineering talent in autonomy, AI, lightweight materials and embedded systems. This is important since, as McKinsey projects, the software, sensors, control units, and electronics segment of the global industry will grow from US$335 billion to US$520 billion between 2025 and 2035.

By 2040, Canada has an ecosystem where value is created across the stack—from the mine to the battery cell to the software-defined vehicle—anchored by assembly.

In this world, it’s clear the auto industry has become a technology platform, not just a manufacturing industry. The winning auto jurisdictions are not only judged on the number of units they assemble, but by the amount of value captured within each vehicle. Industrial ecosystems, not individual firms, bestow sustained competitive advantage.

Strategic tensions

  • Canada strengthens its position inside the North America auto system but becomes more dependent (and more exposed) to U.S. policy volatility.

  • If OEMs vertically integrate, pulling more EV content, software, and system integration in-house, Canada’s move into EVs and smart cars could be threatened.

  • Restricting Chinese imports and foreign competition raises domestic vehicle prices and delays EV adoption, with implications for transportation emissions.

Canada’s EV assembly plants face extended retooling delays Publicly reported project value (CAD $B)

What needs to happen

  • In exchange for duty-free access, Ottawa and the provinces could enter a critical minerals auto pact with the U.S., co-creating incentives (e.g., off-take agreements, stockpiling, price floors) that commercially de-risk private investment flows into the mining and processing of nickel, copper, lithium, graphite, aluminum and REE’s, bolstering North America’s strategic industrial supply chain.    

  • Canada, the U.S. and Mexico could take a coordinated approach to tariffing EVs, steel, aluminum, and auto parts outside the bloc to hedge against Chinese dumping. All three jurisdictions could align policy on the rules of origin and Most Favoured Nation tariffs to incentivize investment within the bloc.

  • To ensure an abundance of competitively priced, non-emitting power, Ontario could embark on an aggressive expansion of hydro, nuclear, and wind power, expanding and modernizing the grid. Federal and provincial governments could massively expand charging infrastructure to bolster EV adoption. 

  • To win new mandates in R&D and software, Ontario and Quebec could consider co-investing with assemblers and parts manufacturers in shared research, testing and validation facilities. Eligibility thresholds for the Scientific Research and Experimental Development (SR&ED) program could be lowered to attract investment mandates in electronics, connectivity, autonomy, cyber security, and lightweight materials.

  • Ottawa could consider reforming its immigration strategy to attract and retain professors and graduate students in computer and materials science, mechanical and chemical engineering, and AI and machine learning, deepening the ecosystem of competitively priced tech talent.

The transition to EVs is underway worldwide

2. Slow Lane—Assembly survives, EV adoption slows,value grows elsewhere

Key assumptions

  • CUSMA survives but is diluted

  • EV adoption continues but is slower than expected

  • Chinese OEMs expand their presence in Canada’s consumer market

  • The U.S. continues to exclude Chinese vehicles 

  • Critical minerals and clean power lead to select mandate renewals

  • Canada retains strategic value as a site for spillover capacity and assembly diversification

Drifting into the ‘Slow Lane’

Canada maintains its presence within the North American system, but its position and strategic relevance diminish. The trigger for the Slow Lane scenario is a sub-optimal outcome in trade talks. CUSMA survives the 2026 renegotiation but emerges narrower and less predictable. Canada secures a 10% headline tariff—a 5% effective rate on assembled vehicles—which compresses assembly margins close to zero. It’s not fatal to plant economics, but it changes the calculus for OEM investment allocation committees sitting in Detroit, Tokyo, and Stuttgart. And with the perennial threat of higher tariffs lurking in the background, investing in Canadian operations becomes prohibitively risky.

The Slow Lane is not a crisis—it sees Canada retain current production—but the higher value layers of the auto ecosystem grow elsewhere. Plants continue to run, retooling investments occur periodically, and assembly employment is largely maintained. Canada steadily cedes the investments, mandates, and capabilities that determine long-term industrial relevance, however. By 2040, Canada assembles 1.2 million vehicles, but Canada captures a smaller share of the value per vehicle over time.

Ironically, Canada’s auto industry was birthed behind protective tariffs on American-made vehicles.5 In the early twentieth century, a 35% National Policy tariff on imported cars was implemented to protect Canadian production from American competition.6 Rather than sustain Canadian automakers, the tariffs prompted American giants like Ford and GM to hop over the tariff wall and establish branch plants in Canada.7 This result: Canada became the world’s second-largest vehicle producer by 1930. By the turn of the century, Canada was assembling three million vehicles a year and ranked first when benchmarked against population. But the country lost that edge, assembling just 1.3 million vehicles by 2024.

The EV transition compounds the problem. Consumer adoption further slows after federal rebates expire—EV registrations fall below 10% nationally in 2025 and do not recover without sustained policy support. ICE and hybrid platforms extend their commercial life, which sounds like a reprieve for assembly but is a strategic trap: the investments Canada made in EV battery supply chains generate returns below their business case assumptions. EV supply remains stranded behind anemic consumer adoption, hindering Canada’s investability.

Meanwhile, the fast-growing layers of the industry migrate elsewhere. R&D mandates shrink as engineering and software functions consolidate around U.S. and Japanese assembly hubs. Contract revenues from OEM R&D programs thin out for the Windsor-Montreal corridor. STEM graduates take their skills to better-paying markets. Some of Canada’s homegrown giants remain globally competitive—but their growth happens in the U.S. Sun Belt, Mexico, and Germany, not in Ontario.

Top Auto Assembly Jurisdictions: 2024 vs 1999

2024 = 92 million units assembled globally

RankCountryUnits Assembled
(Million)		Share of
Global Total		Units Assembled
per 1,000 Residents		Per Capita
Rank
1China31.334%229
2U.S.10.611%318
3Japan8.29%663
4India6.07%415
5Mexico4.25%327
13Canada1.31.5%336

1999 = 56 million units assembled globally

RankCountryUnits Assembled
(Million)		Share of
Global Total		Units Assembled
per 1,000 Residents		Per Capita
Rank
1U.S.1323%477
2Japan9.918%782
3Germany5.710%694
4France3.26%526
5Canada3.15.4%1011

Sources: OICA; UN World Development Indicators

Canada’s aging consumer market reinforces the trajectory. Vehicle sales peaked in 2018 and have not scaled to those heights even as the population had risen by four million by 2025. The slowdown signals structural shifts in ownership patterns among largely urban, younger cohorts who increasingly rely on transit, ride-hailing, and car-sharing. A market that fails to grow in volume gives OEMs less reason to invest in Canadian production capacity.

Governments respond by competing for individual mandates—matching U.S. incentives on a project-by-project basis. The approach is costly and reactive. Each subsidy dollar spent defending existing assembly is a dollar not spent building capabilities—testing infrastructure, advanced manufacturing clusters, engineering talent pipelines—that would make Canada competitive for higher-value mandates. The Parliamentary Budget Office documented that public support for the auto sector between 2020 and 2024 exceeded private capital committed.8 In the Slow Lane, that ratio worsens.

Canadian auto sector retains less value than its North American peers

By 2040, Canada still ships vehicles, but a growing share of the value inside those vehicles—the software stack, the battery chemistry, the electronic control systems—originates outside Canada’s borders. The ecosystem gradually thins out with each lost investment mandate.

It becomes clear that industrial erosion can occur gradually—not through collapse in unit production, but through declining value per vehicle. Value can migrate outside Canada’s borders while assembly remains within it. Industrial decline does not require plant closure; it occurs through missed investment cycles and diminished mandates.

Strategic tensions

  • Canada preserves employment and assembly operations but fails to capture the high-growth, high-value segments of the industry.

  • Governments increase subsidies to retain lower-value layers of the industry, raising fiscal costs without improving ecosystem competitiveness.

What needs to happen

  • Canada’s current industrial policy is optimized for this scenario. Investment incentives are concentrated in construction investment, not operational subsidy, and the SR&ED program excludes activities that would have qualified otherwise.

  • Public policy measures that lower power costs, improve tax competitiveness, reduce regulatory friction, or strengthen critical minerals supply chains are made sparingly, owing to fiscal constraints and industrial uncertainty.

3. On-Ramp—Canada turns to Eurasia for investment

Key assumptions

  • Canadian exports to the U.S. are tariffed at 15%—7.5% effective  

  • Canada dangles market access as a carrot to attract foreign investment

  • Modest tariffs are maintained on Chinese imports

  • The EV transition proceeds. By 2040, most vehicles sold in Canada are BEVs 

  • Canadian auto policy pivots to attract non-U.S. investment

Taking the ‘On-Ramp’

As North American integration slowly fragments under persistent tariffs—Canadian exports to the U.S. face an effective 7.5% rate—Ottawa recasts trade and industrial policy around a strategic remissions framework. OEMs that invest in Canadian manufacturing, R&D, engineering, or certification receive preferential market access. OEMs that do not are tariffed or exit. The definition of ‘investment’ is deliberately widened, encompassing not just assembly and parts but software development, testing facilities, systems integration hubs, and regulatory certification capacity.

This attracts a different mix of firms than the traditional North American model. Asian and European OEMs—Hyundai, BMW, BYD, and a cohort of emerging EV and software-defined vehicle producers—view Canada as a gateway market and a hedge against concentration risk in China and the U.S. Some build or expand assembly operations in partnership or independently; others focus on engineering, testing, and specialized production tied to global supply chains. The Windsor-Montreal tech corridor becomes a hub for compliance infrastructure and software validation, positioning Canada as a trusted jurisdiction capable of certifying vehicles for multiple regulatory markets simultaneously.

Only Americans buy more than Canadians, per capita

The purchasing power of the Canadian consumer also comes into play. Only Americans buy more cars than Canadians, per capita. Canadians spend nearly $110 billion annually on cars. And 90% of those vehicles are built abroad. That gives Canada the ability to leverage market access to secure investments. Canadian consumer preferences shape which OEMs make the investment. The Ford F-Series has been Canada’s best-selling vehicle for 15 consecutive years; the Toyota RAV4 and Honda CR-V dominate the SUV market. This truck-and-SUV profile aligns Canada’s consumer market with higher-margin, higher-content vehicles—the segment where EV and software integration creates the most value. An OEM that wins the Canadian consumer for its next-generation PHEV pickup or smart crossover earns returns that justify the cost of establishing a Canadian R&D or certification presence.

Canada is a prized market for global carmakers

The EV transition proceeds in parallel. By 2040, BEVs represent the majority of vehicles sold in Canada, with PHEVs serving as the bridge for the truck and SUV segments where range anxiety remains most acute. OEMs without an assembly footprint in Canada pivot toward R&D investment, software integration, and certification—embedding themselves in Canadian value chains without owning a stamping press. Employment concentrates in high-skill STEM occupations: systems engineers, software architects, regulatory specialists, and battery chemists working along the Windsor-Montreal corridor.

Canada’s critical minerals endowment and clean power grid serve a dual function. They attract European or Asian OEMs seeking to diversify supply chains away from Chinese inputs, and they give Canada credibility as a partner in global battery supply chains. A vehicle manufacturer that sources lithium and copper through Canadian mining and processing operations builds a supply chain argument for regulators in Europe and the U.S.—and a reason to deepen its Canadian footprint.

Canadians have a penchant for heavier, higher value cars

By 2040, Canada assembles a million vehicles—the majority sold into its own market. Exports to the U.S. continue to decline, constrained by tariffs that impair competitiveness on lower-margin models. But the measure of Canada’s auto economy is not just units assembled. It is also the value embedded in modules, systems, and services that Canada increasingly exports: software stacks validated on testing tracks in Oshawa and demonstration facilities in Markham, battery modules assembled from Canadian minerals, and engineering services rendered for global vehicle programs. Canada is less central to North American production decisions and more embedded in global value chains—becoming a technology integrator. That’s a more defensible position than the branch-plant model it replaces.

Clean power offers Canadian auto sector a competitive advantage

Strategic tensions

  • Trade diversification reduces dependence on the U.S., but risks provoking retaliation or reduced cooperation with Canada’s largest economic and security partner.

  • Greater openness to Chinese OEMs raises national security, data governance, and supply chain integrity concerns.

What needs to happen

  • Canada’s remissions framework could trade market access for investment. OEMs with Canadian operations could import a certain quantity of vehicles duty-free if they maintain Canadian-based production and investment commitments.

  • To incentivize OEMs to re-tool their plants for high-mix, low-volume assembly, Ontario and Ottawa could co-create a capital cost offset fund (carefully designed and stringently monitored) and allow full immediate expensing of investments in automation, robotics, and digital manufacturing systems.

  • Ottawa could help boost demand for Canadian-made vehicles through public sector fleet procurement and restriction of EV incentives to vehicles made in Canada.

4. Off-Ramp-Assembly anchors leave, industrial policy becomes reactive

Key assumptions

  • The auto provisions of CUSMA are scrapped or severely weakened

  • Canada opens its market entirely to Chinese imports in exchange for enhanced market access for Canadian agri-food and energy exports to China

  • By 2040, most vehicles sold in Canada are BEVs

  • Canadian industrial policy is transformed from proactive to reactive

Taking the ‘Off-Ramp’

The Off-Ramp begins with a pattern that has governed Canada’s auto industry for the past quarter century: plants continue to operate, but with diminished mandates. In this case, the mandates expire, as investment decisions tilt toward jurisdictions with lower tariff exposure and stronger policy certainty.

Historically, Canada did not lose assembly capacity during the contraction phase of the cycle; it lost it during the recovery, when the production footprint failed to return, having initially migrated to right-to-work states like Alabama and Tennessee and eventually to Mexico, which grew from 1.9 million units assembled in 2000 to 4.2 million by 2025. The Off Ramp is that dynamic, accelerated and made permanent through the collapse of CUSMA’s auto provisions.

Canada faces an effective tariff of 12.5%, which makes export-oriented assembly economically unviable. Companies continue to assemble vehicles, losing money, but try to hold onto market share for the valuable out-of-warranty parts and servicing of vehicles.

Canada follows Australia in allowing its auto industry to exit.9 By 2040, all auto assembly plants in Canada have shuttered. Low-cost BEVs from Chinese players BYD, Geely, and Leapmotor—already competitive on price and increasingly competitive on quality—fill the demand gap left by departing North American OEMs. By 2040, most vehicles sold in Canada are Chinese-built BEVs. For the Canadian consumer, vehicle prices fall and emissions decline.

Canada's auto sector lost productive capacity during expansion phases

For the Canadian auto ecosystem, the consequences are structural and severe. Plants anchor a supplier network that generates more economic activity than the facilities themselves. Tier 1 suppliers maintain their global competitiveness and continue exporting to U.S. and international customers. But the loss of domestic assembly volume erodes the density that makes Canadian Tier 2 and Tier 3 suppliers viable. Tool-and-die shops—of which Canada has few global peers—lose their customer base. Specialized component manufacturers close or consolidate. Some follow production south; others simply shutter operations. The fastest-growing segments of the auto industry—software, batteries and electronic control systems—were never deeply rooted and fade away without assembly to anchor them. The corridor’s density advantage, built over a century of branch-plant production, dissipates within a decade of losing its anchor customers.

Auto sector job losses and wage stagnation persist in Canada

The knock-on effects run deep. Steel mills in Hamilton and Sault Ste. Marie that have long supplied automotive-grade sheet metal lose one of their primary customers, as do chemical and plastics producers in Sarnia. The advanced manufacturing ecosystem spanning auto, aerospace, and defence loses the cross-pollination of skills, tooling capability, and engineering talent that assembly concentration made possible. Windsor, Oshawa, and Ingersoll face sustained economic decline: unemployment spikes, real estate prices fall, and tax bases erode, generating long-term pressure on social programs and government transfers.

Canada’s industrial policy pivots from active support to triage. Two separate tracks are pursued:

  • Incentives to retool auto parts makers for defence manufacturing. Parts suppliers with the capital and capability to succeed in defence manufacturing are supported through retooling funds, accelerated depreciation, and public subsidy of workforce retraining.

  • Transition the remaining workforce. Fiscal supports for OEMs are repurposed to facilitate displaced workers through retirement bridging, retraining programs, relocation.

The Off Ramp makes clear what other scenarios obscure: auto manufacturing is not just an industry. It is an ecosystem anchored by assembly. Remove the anchor and lose the density required for industrial dynamism across advanced manufacturing.

Strategic tensions

  • The loss of auto ecosystem density accelerates broader industrial decline, weakening adjacent industries.

  • By ending production subsidies, Canada preserves fiscal resources in the short run but loses industrial capacity and capability in the long run. Ironically, this threatens long-term fiscal capacity.

  • The end of domestic auto assembly removes the rationale for protectionism. Canada opens its market entirely to Chinese EVs, which create more affordable options for consumers and reduces Canada’s transportation emissions.

  • Policy focuses on managing industrial transition, redeploying capital and labour toward adjacent sectors such as aerospace, robotics, defence, and advanced manufacturing, and preparing the workforce for a painful transition.

What needs to happen

  • Ottawa could co-create an industrial strategy with key provinces to support the transition of parts makers to defence equipment manufacturing, including financing supports, supply chain integration, workforce retraining, and re-tooling of facilities.

  • To support affected workers and communities, Ottawa could strengthen employment insurance (across eligibility, benefit level, and duration) and, with Ontario, co-fund a targeted program to support auto workforce retraining, retirement bridging, and relocation. 

  • In anticipation of Chinese entry into the Canadian market, Ottawa could enact a connected vehicle security and data governance framework that covers software, hardware, and data localization.

Key considerations

Canada’s auto sector of the future will most likely be some combination of what’s outlined above. What’s critical is that public policy remains flexible and adaptive to any possible future. Cutting across all the scenarios are five strategic considerations that Canada must confront:

  • Defend the North American manufacturing corridor. Canada’s industry was built on preferential access to the U.S. market. Roughly 90%-95% of auto exports flow south. This concentration creates both strength and vulnerability.

  • Compete for value inside the vehicle. Vehicles are becoming technology platforms, with a growing share of value embedded in software, electronics, batteries, and systems integration. Historically, Canadian policy focused only on assembly volumes and employment. This policy focus needs to expand as automation advances and more value migrates toward engineering, software, electronics, and digital services.

  • Use market access as leverage. By global standards, Canada’s domestic auto market is large and lucrative. Production capacity is presently geared towards export economics. Market access can function as a policy tool to secure investment commitments across a range of functions and assets, including manufacturing, R&D, testing, and regulatory certification.

  • Deploy public capital strategically. Governments in North America, Europe, and Asia have committed tens of billions to auto manufacturing, battery supply chains, and advanced automotive technologies. Canada faces a difficult balance. Large-scale subsidies can attract investment, but they also expose public finances to significant risk. The Parliamentary Budget Office estimates that between 2020 and 2024, the $46 billion in pledged investment across the EV supply chain was matched with nearly $53 billion in government support. Taxpayers need to see value for money.

  • Preserve the industrial ecosystem: Assembly plants anchor a network of suppliers, engineers, tool-and-die firms, logistics providers, and service businesses, but they also create demand for other heavy industries such as steel, aluminum, chemicals and plastics. If the assembly anchors weaken or close, the wider ecosystem that supports advanced manufacturing could lose the density required for dynamism and efficiency.

Download the Report

Contributors

Jordan Brennan, Managing Director

John Intini, Senior Director, Editorial

Yadullah Hussain, Managing Editor

Lavanya Kaleeswaran, Director, Digital Marketing and Production

Caprice Biasoni, Design Lead

The author would like to thank the experts who were consulted on this report, some of whom are listed below.

Tim Hollander, Toyota Canada

Brian Kingston, Canadian Vehicle Manufacturers Association

Scott MacKenzie, Toyota Canada

David Paterson, Government of Ontario

Brendan Sweeney, Pacific Manufacturing Association of Canada

Don Walker (Retired), Magna

Advanced Manufacturing Council. 2024. 2024 Advanced Manufacturing Council: Final Report. Toronto: Government of Ontario.

Cain, T. 2026. ‘How many vehicles—and which—were made in Canada in 2025?’, Driving, March 5.

Car Guide. 2026. ‘The 10 Best Selling Vehicles in Canada in 2025’, January 17.

Dykes, J.G., D. Anastakis. 2021. ‘Automotive Industry’, Canadian Encyclopedia.

Giswold, Jill. 2024. Tallying Government Support for EV Investment in Canada. Ottawa: Office of the Parliamentary Budget Officer.

Helper, S. and T. Tucker. 2026. ‘Challenges and opportunities for North American auto industry in the 2026 USMCA renegotiation’, March 4. Washington: Brookings. 

International Energy Outlook. 2025. Global EV Outlook 2025: Expanding sales in diverse markets. Paris: IEA.

Statistics Canada. 2025a. ‘Number of Canadian commuters increases for fourth straight year in 2025’, The Daily, August 26.

McKinsey & Company. 2026. The automotive software and electronics market through 2035.

Statistics Canada. 2025b. ‘Vehicle registrations, 2024’, The Daily, October 17 26.

Statistics Canada. 2026. ‘New motor vehicle registrations, fourth quarter 2025’, The Daily, March 12.

Tanguary, Ray. 2018. Drive to Win: Automotive Advisor Report. Toronto: Government of Ontario.

Williams, G. 2026. Why are Chinese EV’s so Cheap?  New York: Rhodium Group.

Disclaimer

rbc_tl_disclaimer

In this episode, John Stackhouse visits Ross on the outskirts of Ottawa to talk with CEO David Ross about how the company grew from a small Canadian manufacturer into a global live-production infrastructure player. They discuss why the economics of live events changed so dramatically, how cheaper and more powerful screens transformed stadiums and concerts into multimedia platforms, and how Ross helps turn live data into visual storytelling through graphics, overlays, motion systems and production control.

Ross Video is one of Canada’s most consequential technology companies, even if most audiences have never heard of its name. They work across more than 100 countries. Their technology now sits inside countless modern live-event and broadcast experience:  On field graphics, robotic camera systems, data-rich stadium presentation, newsroom and broadcast automation and the production systems behind concerts, major sports, studios and major event coverage for clients like MLB, NFL, PGA, NHL, Premier League, Metallica, Taylor Switft, Coldplay the list goes on and on and on.

The conversation also surfaces a bigger business story. Ross describes its work as brand amplification technology, helping sports teams, venues, concerts and companies use screens, graphics, motion systems and production tools to deepen audience experience and strengthen commercial value. David lays out the company’s operating logic clearly: expand into adjacencies, acquire expertise when needed, keep founders and technical talent engaged, and never fall behind in technology. That approach shows up in Ross’s reinvestment model too: roughly one-third of the company is in R&D. This episode is about sports broadcast innovation, stadium technology, robotic cameras, concert production, real-time graphics, data storytelling, and the broader live-entertainment economy.

Ross sits inside a much larger market shift: a world where live sports, concerts, venue systems and production technology are becoming more immersive, more data-driven and more economically important.

Listen on Apple Podcasts, Spotify or Simplecast

FAQs

Ross Video is a Canadian live-production technology company founded in 1974 by engineer John Ross. It grew from broadcast switchers into a broader infrastructure business spanning graphics, robotics, routing, automation, newsroom tools, replay, audio and experiential systems.

Ross helps power the production layer behind live sports, concerts, studios and major events. In the episode, David Ross describes the company as being in the business of keeping famous customers famous through high-end video.

A big part of Ross’s work is turning data into visual storytelling. David Ross explains that the company is not just about moving video. It is about presenting data in interesting and consumable ways through statistics, strike zones, heat maps, player data and other graphics that help audiences follow the event more clearly.

Ross grew by expanding into adjacent categories, building products for the same customer base, and acquiring companies with expertise it did not already have. David Ross describes the model as moving into adjacencies rather than trying to invent everything from scratch.

David Ross says he was told early in his career to never fall behind in technology, and Ross has taken that to heart by overinvesting in research and development. He says the company has about 1,500 employees, including roughly 500 in R&D.

From MLB to Metallica: The Canadian company redefining live events

SPEAKERS

David Ross, John Stackhouse

John Stackhouse 00:00:10

Hi, it’s John here. I want you to close your eyes for a moment and picture a few things.

First, let’s start with a pro football game and those seemingly magical first down lines that stretch across your screen. Or, what about those golf games where you can now hover over the green and feel a bit like a bird? And who can forget those incredible moments at the Milano Cortina games where, thanks to new camera technology, it felt like we were all part of the ski cross race. Okay, keep your eyes closed and imagine the last concert you were at. It probably didn’t feel like a concert that you might’ve gone to years or decades ago. Concerts today, especially in big stadiums, are explosive in sound, but you have 360-degree imagery all around you. The performers on stage are now, well, just part of the concert. Behind all of this is a remarkable Canadian company, and odds are you’ve never heard of it until now.

Ross Video sits on the outskirts of Ottawa in a really unassuming brown brick campus that could pass, well, for a community college. Then you walk inside and start to see some of the tells. The first is an Emmy Award on the reception desk, and then there’s a wall covered in the caps of almost every major league sports team you can name because this company has worked with them all. Open some more doors, and you come across green screen studios, robotic labs, and control systems being built for some of the biggest live productions on Earth. Ask Taylor Swift who created some of the magic of the Eras Tour, and she might say Ross Video. You’ll get the same answer from Metallica, Coldplay, and every team in Major League Baseball.

This is one of the most innovative companies I think I’ve come across anywhere. It’s also part of a much bigger economic story, one worth roughly $ 500 billion globally. That’s the live entertainment ecosystem that is reshaping how audiences and businesses experience everything from sport to politics to music. Ross Video was started by a great Canadian, John Ross, an engineer whose analog video switcher brought the 1976 Montreal Olympics to the world through the CBC. His son, David, another engineer, took that foundation and built it into a live production powerhouse that’s now operating in more than 100 countries all from this corner of Ottawa. Ross Video strikes me as the kindest story Canadians really need to hear more of these days. It’s about innovation, it’s about global ambition, and it’s about doing a lot of incredible things, including building robotic cameras right here in Canada. That’s the vision and the passion of pretty much everyone in the country, but especially of its CEO, David Ross.

David, welcome to Disruptors.

David Ross 00:03:14

Thank you.

John Stackhouse 00:03:15

I find this, as I said in the introduction, the most interesting company so many people have not heard from. I want to kick off just asking, how do you describe Ross Video to people who are not familiar with it?

David Ross 00:03:29

I thought of a billion different sort of elevator pitches, and I think one of the ones that I like is, “We’re in the business of keeping our famous customers famous through the use of high-end video.” Because if you’re using video at the level that Ross Video provides, you want to reach a lot of people. If you want to reach a lot of people, you’re either famous or you want to be famous.

John Stackhouse 00:03:49

You joined the company 30 years ago, 35 years ago?

David Ross 00:03:51

1991.

John Stackhouse 00:03:52

35 years ago.

David Ross 00:03:54

Right.

John Stackhouse 00:03:55

What did you see or feel as you were starting to take over the company that allowed you to grow it to what it is today?

David Ross 00:04:01

Fear. I came home from university, and my mom said, “You need to go upstairs and talk to your father. He’s one signature away from selling the company.” I wasn’t sure if I was going to want to start work at Ross Video. I was interested in working for maybe NASA or… I heard that Bill Gates came by the University of Waterloo, I’m an engineering student at the time, and I talked a good game about joining Microsoft. I thought I had a big career in joining Ross Video, town of 1, 200 people. Dad just laid off two thirds of the company in the recession from ’89 to ’91. Oh, boy, that’s not what I envision for the grand future of my life, I guess. I talked to dad and I said, “So what’s going on?” He says, “Well, having a challenge seeing a future with the company. I’ve got an offer,” and I said, “Well, maybe we can turn it around together.” He actually looked at me and he said, “Well, there’s a lot of satisfaction you can get from building something out of nothing.”

John Stackhouse 00:04:57

Take us back to the origin story and what your dad, John Ross, still with us, developed in the early 1970s and how that started to transform how we view and experience sport in particular.

David Ross 00:05:11

Well, back in the early 1970s, it was all about the technology. Was your product more functional, cheaper, using the latest tech? But I don’t think anybody who was really focusing on transforming the world is… You have a product, the other guy has a product, you try to make a better product.

John Stackhouse 00:05:27

Right. He developed the 16-4-

David Ross 00:05:30

Yes.

John Stackhouse 00:05:30

… switcher that, for those of us a certain age, actually made the Montreal Olympics as memorable as they are in a good way. What was it about that device that laid the foundation for what Ross is today?

David Ross 00:05:44

I think it was kind of the right product at the right time. It was exactly the right size. It was a really good price point. It was very powerful for the amount of electronics. My dad was an analog design genius, you could sort of say, where he would be able to see the circuitry in a way that was more reliable, higher quality for less parts than anybody else seemed to be able to do anywhere in the world, and so you can say that the company was founded on innovation.

John Stackhouse 00:06:14

It’s fascinating what has happened to the live event business, sport, and entertainment. They’ve become multimedia platforms, not just experiences. So much of what we all enjoy and maybe take for granted is thanks to Ross Technologies. How has the live event market evolved, and what have been those kind of signature changes over the last decade even that have allowed you to be where you are?

David Ross 00:06:40

There’s a couple of things that drove change. I think the biggest one was the fact that the screens got cheaper. It used to be LEDs or the jumbotrons. Basically, it was a television monitor for every pixel, and they took enormous amounts of power, very expensive, very low resolution. As the LED walls started to become more and more dense, cheaper, less power, then people said, “How do we drive all those pixels?” It’s not just one screen. It’s many screens of all different sizes of all different shapes throughout the venue, inside the venue, and outside the venue. And then you think about the canvas of the field as being another set of pixels that you’re drawing on in a virtual world. So it’s just this explosion of what you can see.

John Stackhouse 00:07:30

So there’s been a kind of a tech enablement. That’s also changed expectations in all of us as fans. I can’t even imagine a concert without a screen. If it was just a screen allowing me to see a closeup of the stage, I’d probably be disappointed. Same at the sporting event, hard to imagine a game, rightly or wrongly, without a screen. How have we changed as the end user in your view over the last decade or two?

David Ross 00:07:54

We’re getting much more used to a lot of data coming at us. It used to be that your high school gym that would just show the score and almost nothing else than score and the time left, and now you see what the scores are, you see the statistics, the strike zone, you may see the golf ball curve, the heat map on the floor of all the different places where they took their shots from basketball. You see all the data about all the players of everything that they’ve ever done in their lives, and it just keeps going. It’s not just about moving video, it’s about presenting that data in an interesting and consumable way. There’s lots of periods of times where the things aren’t happening, and the goal I think of some of the sports teams and the venues, as well as just broadcasters in general, is how do you keep people’s attention?

In a stadium in particular, the moment that the play stops is the moment where the stadium sort of kicks in and says, “Now, we’re going to have some fun, and we’re going to do it together, and we’re going to enjoy things.” And maybe at the same time, they’ll work in the ads that sort of pay for the whole experience at the same time, but there’s a really interesting weaving of the way that the game moves into the experience, and the advertisers move in and out, and the statistics move in and out. There’s a lot going on.

John Stackhouse 00:09:14

Talk a bit about the businesses that are between the fan and either the performer or the athlete, usually a stadium, of course, the team. I’m curious what they’re looking for, because you talk to them all the time, that’s your business. What are they looking to fulfill in building out, frankly, really expensive operations, billion-dollar stadiums and the whole district around them, as well as the cost of putting a team on the field or an artist on stage?

David Ross 00:09:42

They’ve got a lot of things that they’re juggling at once. You could sort of say at the base of it all is their brand. That sporting team, that venue, that brand has value, and so it’s all about the fact that there’s only one hockey team in Ottawa, there’s only one football team in Los Angeles as a professional level. Because there is that uniqueness and you have this fan following, how do you keep that excitement up, keep the eyeballs on that instead of some other sport, because there’s competition, or some other event, and keep it fun? It all has to hold together.

John Stackhouse 00:10:19

These stadiums have become destinations. They’re tourist destinations. I think of AT& T. There’s only one Dallas Cowboys, but there’s also only one AT& T Stadium. It’s an attraction not because of the Cowboys on their own, but because of the experience, including the screens and what you provide for that.

David Ross 00:10:37

Yeah, and that’s actually a really interesting thing about what’s going on in the business that we’re in. Because you could say a long time ago, we would be in the business of providing the technology for a television broadcaster. If you think about a sports team or a corporation now that’s using our technology, it’s a brand amplification technology. So it’s not about how much money goes into the equipment that you buy and then how much advertising do you get on the output, it’s how does that change the perception of AT& T.

John Stackhouse 00:11:08

That’s a really interesting view of the business strategy, but the brands are not just companies now. What do you figure is still growing? Because 10, 15 years ago, there were probably a lot of media analysts who said that all of this is going to be disrupted and the individual will take it over.

David Ross 00:11:25

They were wrong.

John Stackhouse 00:11:27

Why were they wrong? I was probably among those who were wrong, so tell me why I was wrong.

David Ross 00:11:32

Well, it’s both. It doesn’t have to be an either/ or. More people certainly watch YouTube than anything else in the world. Feeding into YouTube, you have everything from… I just uploaded a picture of my dog that I did myself to some very professional productions and even movies. It’s a continuum, and there’s just a certain place where Ross plays, which is in that higher-end tier.

John Stackhouse 00:11:59

Let’s talk a bit about the amazing technologies that you both built and literally acquired and then developed. I want to start with Artimo, because we just walked through your lab across the street, saw these robotic cameras zipping around. Those are developed here in an Ottawa suburb, they’re built not far away in Iroquois, Ontario, and they’re transforming so much of what we all kind of take for granted seeing on a screen. We’ll talk about some of the other innovations, but tell us why Artimo is so important in your mind.

David Ross 00:12:31

One of the things that’s interesting about Artimo, you could start from a customer point of view, it’s always good to start from customer point of view, is Artimo replaces different types of manual moves. Instead of it cruising behind a camera, there’s a limit to how much they can do with teleprompters on it and so on. Being able to have a motorized system doing repeatable moves, particularly in a newsroom or at a corporate studio, you need technology to do camera motion properly. It used to be when you’re watching television news and you even still see it in the movies, you imagine rows and rows of people yelling back and forth, “Do you have that shot? Do that shot,” and everything else. Now, at least in 700 newsrooms around the world, even at the highest level, there’s basically one guy with a mouse clicking and mumbling to himself or herself. The computer system is controlling Artimo to make sure that it’s positioned with exactly the right shot, with the right depth of field, and everything else for what is coming up next in the playlist.

John Stackhouse 00:13:34

You also have a whole range of fascinating technologies that have transformed not just what’s behind the camera but what’s on the screen, and I’m thinking of some of the layering technologies. We all kind of take for granted now those red zone markers on an NFL or CFL field, lots of other layering that has made the game experience much more dynamic and interesting. Walk us through a bit of your thinking on how that’s evolved and how that has transformed the viewing experience.

David Ross 00:14:05

Oh, wow. In football, for example, you do have the 1st and 10, the yellow lines and the blue lines and things like that. We didn’t invent that. I will say we didn’t invent it, but we certainly got into the business. One of the places that we did very well is with American college sports, American college football, because they weren’t able to afford whatever was out there at the time at the professional level, and they want to be able to get that on our in-venue as well. Because people are used to watching it on TV, “I want to see it on the big screen in the stadium as well.” We don’t want anybody to come into the stadium and feel like they’re getting a lesser experience than if they stayed at home and watched it on TV. So how do I get the same stats? How do I get the same experience and then have the in-person side of things? It’s the same thing that same technology is used for infield advertising as well, and that gives them ability to charge more for advertisements that way.

John Stackhouse 00:15:02

We’ve also seen incredible changes to the functioning of camera, and I’m thinking of the spidercam, which is another of… It was your acquisition. But wow, what you’ve done with it… Even the Milano Cortina experience, I still can visualize feeling like I was on the speed skating track. The golf experience now, I think you took it to the British Open-

David Ross 00:15:26

We did.

John Stackhouse 00:15:26

… where it now kind of goes over the green, which has just made golf so much more interesting, seeing it from the bird’s-eye view quite literally. Walk us through what you saw in spidercam when you bought the company, and what you are trying to do with it, where you see it going from here.

David Ross 00:15:45

Interesting. We started with the studio robotics, like Artimo, and things that we did before, and that was part of acquisitions. We realized that there’s a lot of value in being able to capture video with camera motion and doing a volume of space. We realized that we were doing really well with studios inside, and then we inverted them, and we could look down on the studio, and so we got that volume thing happening. What can we do outside? Of course, the natural thing is cable cameras. We had been working with spidercam in the past because they would give us telemetry information, and we’d do augmented reality with our graphics technology, and so you could sort of see stats floating in the air or something like that as they’re capturing some event. We already had experience with what we could do and saw synergy with one part of our business moving with another part of the business, just camera motion.

I did actually nudge them a few times saying, “If this is ever for sale, give me a call.” And then one day, the call came, and so we made it happen. What’s beautiful of it as well is spidercam is tier one. It’s the leader in the world. It’s the biggest brand and the biggest part of that business. So for Ross, it’s actually a brand amplification as well, because we are there at the Olympics, we are there at away games for the NFL when it’s in Europe. We’re there now for Premier League, we’re there for cricket all over the world, and we are there for the playoffs right now at the Montreal Canadiens where we put a spidercam into the arena for the first time.

John Stackhouse 00:17:23

Where do you see cameras going from here? We’re all now familiar with drone cameras, which are transforming the event experience, sport, as well as a concert. We’re getting familiar with on-body cameras, whether it’s the ref cam or the player cam. Where do you see it going over the next few years?

David Ross 00:17:41

I think it’s going to become more and more accessible. You’re going to see them more often in more fixed installations. Spidercams, not too long ago, if you wanted to buy one, if you had a million dollars, then that’s a good start. Maybe you could get something for a quarter million dollars, if you’re lucky. Basically, they were rental units, and we would fly them halfway around the world, and these things have winches the size of refrigerators and heavier than a refrigerator, and there’s four of them, and then there’s a big centerpiece in the cameras. It’s an ordeal, and you’re going up into the rafters of the stadium, and you’re putting up pulleys and worrying about safety. Every single game, you then pull it down, and you put it someplace else. We’ve just launched what we call the i-Series for the spidercam, and that means that more venues can own them and get their costs down, which means that you’ll see them in more places.

John Stackhouse 00:18:36

You do much more than just make this stuff and sell it or rent it into the market. You help build literally the infrastructure, help, whether it’s teams or concert tours, create the experience. That’s a very different business than making a robotic camera in Iroquois, Ontario and putting it on a plane somewhere. How are you thinking about the soup to nuts, if I can put it that way, aspect of this business?

David Ross 00:19:01

It’s all about adjacencies and understanding how to move into an adjacent business. When I started at Ross, all we had were analog production switchers. We had about four or five products. They’re about 10 years out of date, to be quite honest. How do you go from that to where we are today? So we started designing new products that would be sold at the same time to the same customer, made in the same factory, into the same market, with the same sales channel, and then you start moving into adjacencies. The challenge was when we started moving from traditional products to new ones. You can waste a whole lot of time and money by saying, “Let’s just invent this thing from scratch,” because you need to have the knowledge and the trust and so on. So the easiest way to do that is to acquire companies and acquire them hopefully with the founders or the genius that’s behind those companies and then don’t piss them off and keep them around.

What a lot of companies don’t do is the founders like to stay with what they know, what they know, what they can control, and so there’s a leap of faith of management where you say, “No, no, I’m going to start doing things that I’m not an expert in.” I’m a computer engineer, “Robotics? That’s madness,” or you say, “We’re a manufacturer, and we’re a supplier. We don’t get involved in our customer’s affairs.” And then we have Rocket Surgery. We buy that company, and we have great people in that company, and you build that up, and all of a sudden they’re talking about the fan experience.

John Stackhouse 00:20:31

Rocket Surgery is kind of like an agency, right?

David Ross 00:20:33

Kind of like, inside of Ross. They’re people that combine the skills of graphics and programming and organization and understanding the sport, the venue, the market, the nationality, and they come in, and they will make the stadium experience real. This vertical integration of having the design, the manufacturing, and then the creative services that are on top of that, you have to, as an owner of a company, like a tech company, be able to say, “We can get into services. We can get into art,” which is a long way from analog design or software. But when you put all these things together, it’s magic.

John Stackhouse 00:21:12

Is the business model and the approach, the knack to this, very different for live music, for concerts, than for professional sports versus outdoor events, corporate events, or general public events? Do you have to take a different approach to each, or is an event and an experience an event and an experience?

David Ross 00:21:32

There’s a common thread through them, of video and organization and so on. But yes, each one is different, and so you have to be able to know, “How do I get those relationships, and how do I understand that concerts and video for concerts is very different than video for a stadium?” For example, in the stadium, you’re talking about wow moments when the touchdown happens and the data and the advertisements and the stats and things like that. In a concert, you could argue that there’s almost not a wow moment. The whole thing is just this burn that happens the entire duration, and now you’re interested in keeping up with what the performers are doing and getting those shots, whether it’s putting video on the screens that is supposed to be synced to what the performer has rehearsed, and hopefully they’re following in live, versus having a spidercam like at a Coldplay or Metallica concert, which we also do as well, and knowing how to get those beautiful shots up on those screens.

John Stackhouse 00:22:31

And I’m guessing, especially on the creative side, on the concert side, that you have to find the right rhythms and beats quite literally. But Metallica is probably different from Taylor Swift in terms of what they’re looking for on stage, is that true or not?

David Ross 00:22:48

Actually, I have heard, I talked to some of the camera operators in a spidercam, for example, you’ve got the engineer in the background, but then you’ve got a pilot who’s flying the camera rig around, and then you’ve got the camera operator who is taking the shot from that moment and zooming in and panning around, and they work together to get the shot. From what I understand, Taylor Swift is always the same all the time, she is perfect, and Metallica is like, “Follow them,” because it could be different at any given time.

John Stackhouse 00:23:22

That’s rock and roll. Yeah.

David Ross 00:23:24

I can’t believe I’m involved in this stuff. It’s like, “I went to computer engineering in Waterloo. How did this happen?”

John Stackhouse 00:23:32

How will AI and robotics change what you’re doing now?

David Ross 00:23:36

AI is coming for software and software development and things like that.

John Stackhouse 00:23:41

Are you seeing that in your own software development?

David Ross 00:23:43

Starting to. It’s an accelerator, but it’s also an enabler. There’s a whole bunch of dimensions about how AI is going to impact our business and every business, and we’re just learning what that is on a daily basis right now. Because every time you think you know the way it stands, it changes yet again, and it can do something new. We’re just keeping up as best we can. We’re a software company and a services company and a hardware company and a robotics company, and there’s threads that tie all those things together. I like to think that those things build a competitive moat no matter what happens in the world going forward. Having a network of dissimilar things that require a broad range of expertise that can’t possibly be in one person’s head that require the organization of humans to pull it together is I think the sort of thing that makes for a strong company going forward.

John Stackhouse 00:24:34

You’ve built an incredible company here. You’ve got a really strong culture, strong values, and I’m sensing it’s very much about the team, the Ross team. Often when you do an acquisition, you’re not entirely sure of the kind of culture that you’re acquiring. You’re getting the talent and technology, but also the culture. How do you, as the CEO, preserve and grow the Ross culture?

David Ross 00:24:55

One of the things my dad said to me many years ago, he said, “A company is only people. It’s not about the products you have. That’s a moment in time. It’s not about the technology you have. That’s also just a moment in time. It’s not about the customers you have. You can lose them. It’s about the people.” And if you think about the sorts of things I was talking about, I don’t know anything about robotics. I know a bit more now, but I’m not a world expert. I don’t know everything that there is to know about creating a great stadium experience. You know what? I haven’t written code in 35 years. Everything that I have had this company create is through encouraging and enabling great people in the company. So if you take them for granted and you don’t listen to them, then you’re going to be in trouble. It turns out that if you treat people really well and you listen to them and you pay them well and you do all the right things, a culture just emerges out of all that, and it’s a pretty good one.

John Stackhouse 00:25:54

You also have a strong code of ethics, which every visitor can see as they walk through the door, and it is beautifully in plainspeak. One of the points that really jumped out at me was, “We don’t ship crap.” You also have a wonderful line about… You say that, when people aren’t sure what to do and there’s no one around to ask, “Just do what in your heart is right.” And then, in brackets, it says, “You can hire a helicopter,” which is I think a nice kind of cheeky way of saying, “Do what’s right, but don’t box yourself in.”

David Ross 00:26:23

Yeah, that’s an empowerment statement. It’s also a customer statement, and it’s also a company statement. Companies have an inherent drive towards bureaucracy and squeezing out individual actions and things like that. Often, those individual actions are the things that save the company or make the company great. When I added that to the list, I knew that the day would come when we would be a bigger company and we would be vanilla, like everyone else, and people would just punch the time clock, do their thing, say, “It’s not my job,” and go home, and leave the customer stranded or leave the company stranded. How do we put this escape hatch into the company in a way that’s memorable? When I talk about, “You may rent helicopters if necessary,” it’s like, “Well, somebody wrote that. They must mean it.”

John Stackhouse 00:27:15

A human wrote that?

David Ross 00:27:16

Yeah, a human wrote that.

John Stackhouse 00:27:22

Where does Ross go from here?

David Ross 00:27:25

In some ways, you could say it’s completely different. In other ways, it’s more of the same. The industry is going to continue to evolve. Video is going to be changing, AI is going to change things, and the world will just continue to change. As long as I continue to encourage our people to pay attention to the early warning signs, or if we’re late to react and catch up, I think we’ll be okay. What’s the same is the way we manage people. Dad was right, a company’s only people. So when the company moves forward, there’s a lot of me just… Following what other people are telling me is the exact right thing to do, and they’re the experts, and they go, “Yeah, let’s do that. Let’s go ahead.” The secret of success is hire smart people and don’t piss them off.

John Stackhouse 00:28:14

Yeah. If you’ve got a talent challenge, you probably have greater challenges, because good companies just attract good talent. I’ve read Ross has never had a down year. Is that correct?

David Ross 00:28:25

Since the day I joined, yeah, we haven’t had a down year. It’s been close sometimes, but we have not.

John Stackhouse 00:28:30

But that’s phenomenal through a few recessions, lots of disruptions. Is there something that has been consistent through that time beyond what we’ve talked about that has enabled that?

David Ross 00:28:41

I think it’s never stopped pushing. When we’re a very small company, I got a chance to have lunch with somebody who was a billionaire at the time, and I was like, “What question do I ask a billionaire over lunch?” I’m 27 years old, so I asked, I said, “Can you give me some advice?” He said, “Never fall behind in technology. You can have great people, you can have great customers, you can have a great brand, and it all seems great until you fall behind in technology. When you’re a tech company, that’s everything in the end. They’ll just feel really sorry that they can’t buy from you anymore because you don’t have the stuff that they need, but they will go someplace else.” I took that to heart, and so we overinvest, you could say, in research and development and push as hard as we possibly can afford to do every single year into R& D. We got 1, 500 people, and manufacturing is in that 1, 500 people. 500 of them are in research and development.

John Stackhouse 00:29:44

That counters so much of the Canadian narrative, that idea of having a third of your employees in R& D, “Very un-Canadian, sounds more like Germany or Japan or Korea.” What are we missing as a country so that we’re now more like Ross Video leaning into the R& D opportunity?

David Ross 00:30:02

I don’t run the other companies. I guess I don’t know exactly. I think there’s a lot of dimensions to what’s going wrong though. Historically, sometimes Canada was known as a place that had lots of R& D but not enough marketing. I took an idea of saying, “You know what? The Americans are very successful in the way that they create great technology, but then they make a lot of noise about it, and they take it to the world, and they push hard.” I remember talking to… just randomly, it was a British company I was looking to buy. I said, “Why is your product the best? Convince me,” and they went, “Well, it’s not really the best. There’s other good ones out there as well.” It’s like, “Stop being modest. You’re trying to sell me your company. This is not what I want to hear,” and we actually didn’t buy that company in the end.

But you have to be likable, hopefully, around the world, and that might be something that Canadians are good at, but at the same time, be aggressive. You realize you are in a worldwide fight to get your product out, and you’re in a worldwide fight for R& D resources that you need to make the best tech and sell it. The best investment funding that you can possibly get is from your customers. It’s called profits, and you take those profits and you reinvest. There’s so many in business school, I swear, they say, “You have a great idea, so the first thing you need is get an investor.” And then where’s that investor coming from? Probably from the United States or not from Canada. And then you have to do a second round, a third round. You’re going to do all these…

What? At what point are you going to make money? At what point do you own anything of your own company? And now you’re diluted so much, then your investors are going to sell eventually, and they’re going to sell to people they know, and it’s not going to be Canada that they’re going to sell to because they’re American or they’re European or they’re from Singapore or whatever. In those early stages, those Canadian startups have already put the landmines in, saying that they’re not going to be Canadian because that’s where they got their investment. If you could say, “I have this great idea. How do I get the first sale and maybe a bank loan and maybe some friends and family?” Start small, but build it, and have patience. 35 years, I’ve been doing this. This doesn’t happen overnight. If I wanted to do it faster, sure, I could have raised a bunch of money, but I wouldn’t be working here today. It’d be owned by someplace else and be a different name on the front of the door.

John Stackhouse 00:32:20

What a masterclass in management and innovation thinking. I’ve learned so much from this conversation, including never stop learning, but never stop pushing, never stop investing. Really great messages. As we wrap up, take us back to the stadium or to the mosh pit in your own experience, what has excited you most as a fan, as a viewer, as a spectator from what you’ve experienced and where that may be taking us as similar viewers and participants in this multimedia revolution?

David Ross 00:33:03

I think it’s just a sense of wonder that you go to these stadiums, you go to these environments, and you just sit there and go, “Wow, look at what these customers did with what we made. All the people that they’re touching and they’re impacting, it’s wonderful and it’s just fun.” I’m sorry.

John Stackhouse 00:33:20

That’s a great final management lesson. There’s no greater thrill for a business operator than seeing your customers succeed. You got them to do it with your tools, but watch their success, and the ultimate end user enjoy it.

David Ross, thank you so much for being on Disruptors.

David Ross 00:33:35

My pleasure. Thanks for inviting me.

John Stackhouse 00:33:39

There’s a version of the Ross Video story that’s kind of easy to tell, Canadian company, great products, famous clients, and good values. But I think there’s an even more interesting version. This is a company that’s been in the content production infrastructure business for more than 50 years, not chasing the spotlight, but building the systems that make the spotlight possible. It seems every time the industry shifts, Ross shows up, often making the shift possible in the first place. It’s also a story of long-term thinking. The companies that will matter in 10 years are the ones like Ross that are making the long bets right now. I think there’s something kind of Canadian about all that, creating the spotlight rather than seeking it, thinking long-term rather than chasing the short-term, and working with others while being super competitive. It’s the kind of innovation and disruption that we’re going to need more of in the years and decades ahead.

You’ve been listening to Disruptors, an RBC podcast. Please rate, review, and follow us on Apple or Spotify. That helps more people find conversations like the one you heard today. And if you want to know more about the sport and entertainment business, check out our show notes. There’s a great compendium piece there that will take you much deeper into this fascinating world. And if you’re looking for more ideas and insights, visit rbc.com/thoughtleadership.

There, you’ll find critical insights to help businesses, policymakers, and communities make more informed decisions in an ever-changing world.

I’m John Stackhouse. Thanks for listening.

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The Hormuz shock is stretching jet fuel supply to its limits

The Strait of Hormuz has now been effectively closed for 69 days, and with global jet fuel prices now over US$180 per barrel—roughly double a year ago—the costs are showing up on earnings calls. Delta Air Line’s fuel bill is expected to rise by US$2.5 billion this quarter alone and the company has signalled higher fares and fees to help offset the costs. The disruption has already driven Spirit Airlines into bankruptcy, with the potential for more as prices remain elevated.

By the numbers: more than half of globally traded jet fuel is impacted

  • 23% of seaborne jet fuel flows directly through Hormuz, primarily to European markets.

  • 40-50% of global jet fuel exports originate from Asia, and those exports are down two-thirds from pre-crisis levels—starved of Middle Eastern feedstock.

  • China, a major Asian fuel exporter, reduced exports of jet fuel, diesel, and gasoline exports by as much as 33% in March to safeguard domestic market from disruptions.

  • With Europe getting 75% of its jet fuel net imports from the Middle East, the IEA warned in mid-April that parts of the region could run out by the end of May if countries don’t find alternatives

The bigger picture: energy security runs through the refinery as well

As Hormuz illustrates, energy security is not just about who controls the crude and (as is the case with critical minerals) final products matter. Along with China, South Korea and Thailand, which are also major fuel exporters, also capped shipments on most refined fuel exports as countries struggle with Middle East supplies or protect their domestic aviation sectors.

India’s response is instructive. Rather than scrambling for alternative imports, it moved to reduce structural exposure—amending its aviation fuel regulations to allow blending with domestic agricultural feedstock. Energy security and clean fuels became the same policy.

In Canada, an often-cited vulnerability has come to the fore

Canada’s physical exposure to Hormuz is limited, but Ontario and Quebec remain structurally reliant on imported refined petroleum products, of which jet fuel is the largest. That import dependency sits with the U.S., which is more than willing to use energy trade as leverage. The Hormuz crisis revisits a harder question for Canada: what is the right shape of tomorrow’s energy integration with the U.S.?

Sustainable Aviation Fuel (SAF): Where clean and secure meet?

Canada is different from Asia in one important respect: we sit on a lot of feedstock. Oil, of course, but also canola, tallow, and municipal waste, which flow into operating renewable diesel infrastructure, most notably in Strathcona, Alta., through Imperial Oil and Come by Chance refinery in Newfoundland and Labrador, Nfld., (Braya). Yet, Canada produces zero SAF.

SAF accounted for less than 1% of jet fuel consumed globally in 2025. That number is expected to climb to 4% by the end of the decade, according to BloombergNEF. And while energy security has not been part of that growth story, it could be the catalyst, as India proved, that brings new participants to the table. For Canada, that would not just be a domestic resilience argument—but a growing export opportunity for the energy and agricultural sector.​​​​​​​​​​​​​​​​

–Shaz Merwat, Energy Policy Lead

Look what’s trending

The surge in oil prices and another spike in gold exports pushed Canada’s trade balance back into surplus in March.

According to Assistant Chief Economist Nathan Janzen: “Significant trade uncertainty remains with negotiations on CUSMA renewal likely to intensify in coming months, but we continue to expect, as a base-case, that a more stable U.S. tariff backdrop in 2026 (albeit still at significantly higher tariff rates for some products) will leave trade as less of a headwind to growth than it was in 2025.”

Read more in ‘Canadian trade balance back in surplus as energy prices surge’ here.

The week that was

U.S. trade court rejects Trump’s latest global tariff push

  • The U.S. Court of International Trade ruled against President Trump’s latest 10% global tariffs, finding the administration improperly used Section 122 of the Trade Act of 1974 to justify broad-based duties tied to trade deficits.

  • The decision is another legal setback for the administration’s tariff strategy following earlier rulings against the use of the International Emergency Economic Powers Act (IEEPA). The White House is expected to appeal and find other ways to implement tariffs.

Trump extends EU deadline while new regulatory disputes emerge

  • President Trump extended the deadline for the EU to implement elements of last summer’s trade arrangement until July 4, while warning tariffs could further increase if Brussels does not follow through on commitments.

  • Separately, major U.S. business groups are pushing Washington to intervene against the EU’s updated Product Liability Directive, arguing new rules around digital products and consumer claims could expose firms to significant litigation risk.

Chinese outbound M&A accelerates

  • Chinese overseas mergers and acquisitions reached a five-year high in Q1, totaling US$9.6 billion and marking the fifth consecutive quarter of growth, according to Rhodium Group data.

  • The increase comes as Beijing simultaneously tightens controls over inbound foreign acquisitions in strategic sectors, including retroactively blocking Meta’s acquisition of Chinese AI app Manus.

Auto sector pushes for continuity under CUSMA

  • Major North American auto industry associations urged the Trump administration to extend CUSMA, warning against splitting the pact into separate bilateral arrangements.

  • Industry groups representing GM, Toyota, Tesla, Volkswagen, Hyundai and others argued that separate agreements would increase regulatory complexity and disrupt integrated North American supply chains during a period of rapid technological transition.

Mexico ramps up commercial engagement with Canada ahead of USMCA review

  • This week, Mexico launched one of its largest trade missions to Canada in recent memory, bringing more than 240 companies to Toronto and Montreal for over 1,800 business meetings.

  • The outreach comes as Ottawa and Mexico City position themselves ahead of the upcoming CUSMA review, though both countries continue to take visibly different approaches to engagement with the Trump administration.

–Thomas Ashcroft, Global Issues Policy Lead

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➔ Renewable projects can serve as a playbook for Indigenous participation in future developments

➔ How methane abatement could replace lost Middle East gas supplies

➔ Your backyard can help save the environment

Signals

Top 10 Indigenous-owned projects by count

Power and utilities dominate Indigenous participation. That’s both its strength and its constraint, says Energy Policy Lead Shaz Merwat. Loan guarantee programs have been most active in western Canada, while northern communities, closest to the mineral deposits the energy transition requires, lack transaction readiness. Yet, the electrification trend offers substantial Indigenous investment opportunities nationwide. Read our Nations Building report that examines ways to boost First Nations participation as Canada embarks on a new project wave.

Methane mitigation could replace gas supplies stranded due to the Strait of Hormuz closure. That’s the stunning assessment from the International Energy Agency (IEA), which estimates that available methane abatement measures could free up to 200 billion cubic metres of natural gas—or double the supply volumes cut off due to the virtual closure of the Strait. Large quantities of produced gas are not being put to productive use, owing to methane leaks, and flaring and venting from oil and gas operations. The cost-effective, proven technologies could abate three-quarters of emissions from oil and gas and about half of coal emissions, according to the IEA. (Also read: What the Canada-Alberta methane deal means for businesses).

Nature conservation icon Sir David Attenborough is now eyeing his backyard for sustainability. After traversing the world’s wildest places, Attenborough’s new BBC series focuses on the often overlooked garden. It may have several low-hanging fruits, literally: home gardens can reduce carbon emissions, sequester carbon, and produce fresh food (pro tip: use rainwater to go truly green). Canadians already have a head start: About three in five Canadian households (59%) grew fruit, herbs, vegetables or flowers for personal use in a survey a few years ago.

How the Middle East conflict is accelerating renewable energy adoption

It’s early days, but the stalemate playing out over the Strait of Hormuz is forcing countries to renew their focus on electrifying their way out of fossil fuels. We have been here before as recently as 2022 when Russia launched a full-scale invasion of Ukraine, upending European energy ties to Russian oil and gas. Yet coal, oil and gas rebounded to near all-time highs.

Will it be different this time? Here are five ways the crisis has rekindled momentum for energy transition.

1. Global consensus is hardening. Santa Marta, Colombia, was the site last week of the First Conference on Transitioning away from Fossil Fuels, where 57 nations—including Canada—sought ways to move towards cleaner energy.While several lofty goals were expounded, a key takeaway was to launch a panel of experts who would provide scientific input on reducing fossil fuel dependence, high energy prices and extreme weather damage. It could be a breeding ground for new ideas.

2. AccelerateEU aims to shield Europe from energy price shocks. One idea is to accelerate the shift to “home green clean energy,” including an Electrification Action Plan to be released by the European Commission by the summer.

3. Knee-jerk consumer behaviour could alter long-term demand. Global EV sales jumped 66% in March compared to February, as some consumers baulked at the prices at the pump and switched to EVs. Several countries in Europe and Asia had record-breaking months. That could have long lasting consequences for fuel demand and what’s called” demand destruction.” In Canada, more than 12,600 zero-emission vehicles were sold in February, compared with nearly 8,700 the month before, recent Statistics Canada data shows. An AutoTrader survey of 17,000 Canadians found half of respondents would now consider buying an EV.

local bureaucrats

4. Chinese bureaucrats are now on the clean-energy case. The country is launching a campaign aimed at accelerating climate action by local authorities, in an effort to plateau CO2 emissions before 2030. At stake: rewards and career progress for local bureaucrats. Never underestimate the resourcefulness of a middle manager keen to get their performance bonus.

5. Most renewables are now competitive with fossil fuels. Even before the Iran war, the price competitiveness of solar and wind energy was the primary driver of power sector decarbonization, according to Ember Energy. In 2025, the average Levelized Cost of Energy (LCOE) for solar ($39/MWh) and onshore wind ($40/MWh) was 60% lower than that of combined cycle gas turbines (CCGT), which stood at $102/MWh. Offshore wind ($100/MWh) has also reached price parity CCGT. US$100+ oil prices only make the case for renewables more compelling. China’s export of photovoltaic solar panels, lithium-ion batteries and new-energy vehicles rose 70% in March year-on-year, Carbon Brief’s analysis of Chinese customs data shows.

The Climate Competitiveness Strategy update

Here’s what Lisa Ashton, Head of Research, gleaned from Ottawa’s latest Spring Economic Update:

Clean investment push continues. Expanded tax credits and incentives for carbon capture, clean electricity, and clean technologies aim to attract private capital and scale domestic innovation.

Proposed $5 billion in international climate investment. Flowing through Environment and Climate Change Canada, FinDev and Global Affairs Canada, the update proposes spending on climate initiatives and technology development in emerging economies around the world to advance global decarbonization. Carbon pricing framework is reinforced. Working to strengthen industrial carbon pricing benchmarks and ensuring consistent national standards remain central to competitiveness. Yet, key decisions are pending, namely performance standards. Another obstacle: the oil industry is pushing back on the carbon tax.

Funding of $3.5 billion towards scaling nature positive outcomes. Announced in the government’s Force of Nature strategy, the federal government will stimulate investments in nature, tying climate competitiveness to conservation goals (e.g., protecting 30% of lands and waters by 2030).

Integration with broader economic strategy. The proposed Sustainable Finance Conference and the development of the made-in Canada sustainable investment guidelines aim to connect public and private dollars in key economic sectors, linking sustainable investments to jobs, affordability, and global competitiveness.

The takeaway. Canada is doubling down on a market-driven, investment-led approach to climate policy. The country will need to advance key strategies and agreements including the energy MoU with Alberta to drive real outcomes through its renewed approach.

Conversations

First Nations Major Project Coalition’s 9th annual conference

  • Atthe First Nations Major Project Coalition’s 9th annual conference, John Stackhouse discussed how economic reconciliation and Indigenous equity are vital to ensure Canada’s big ambitions are fully realized.

  • Gregory Brew, a historian of international energy and U.S.-Iranian relations and a senior analyst at the Eurasia Group, on how America would pay dearly for its energy arrogance.

  • Subsidies and price floors are temporary tools, demand is what would sustain prices and investor confidence in critical minerals, writes Gracelin Baskaran, director, critical minerals security, at the Center for Strategic and International Studies.

Curated by Yadullah Hussain, Managing Editor, RBC Climate Action Institute.

Climate Crunch would not be possible without John Stackhouse, Jordan Brennan, John Intini, Farhad Panahov, Lisa Ashton, Shaz Merwat, Vivan Sorab, Caprice Biasoni, Lavanya Kaleeswaran and Joelle Schonberg .

Have a comment, commendation, or umm, criticism? Write to me here (yadullahhussain@rbc.com)

Climate Crunch Newsletter

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Key findings

  • Modern Methods of Construction (MMC) refers to innovative homebuilding approaches to improve the efficiency, sustainability and quality of construction. It includes of off-site construction, including 3D volumetric modules, 2D panels and pre-fabricated components, as well as innovative on-site approaches, such as robotics and digital tools.

  • It can help build homes up to 50% faster and 40% cheaper than traditional methods. Yet current conditions actively prevent adoption at scale—leaving Canada’s housing crisis unresolved.

  • MMC currently makes up 7.5% of the Canadian construction market. Forecasts show it’s set to grow at a compounded annual growth rate of 5% by 2029.1

  • Deploying these new methods could meaningfully contribute towards Canada’s housing needs. Raising MMC ‘s contribution to 15% of annual supply needs (about 72,000 units a year), would require developing dozens of new factories at current production capacities.2

  • Canadian policy, market, and financing conditions are hindering wider MMC adoption. Reshaping policy and regulatory frameworks and financing mechanisms to support off-site construction can unlock the market commitment needed for MMC to scale

  • Proven methods exist globally. Several international examples—Sweden’s industrialized housing sector, Japan’s engineered modular homes and the U.K.’s MMC agenda—provide valuable lessons for Canada.

Home prices in virtually every major Canadian city, and many smaller communities, have soared out of reach for many people. While the causes of Canada’s housing crisis are varied, all point back to a foundational issue: Canada is not building enough affordable homes fast enough.

To restore affordability and meet projected demand, Canada needs upwards of 480,000 new units a year between now and 2035.3 Over the past quarter century, the country hasn’t come close to that number of housing starts in a single year, let alone at the sustained pace required. A fragmented regulatory environment, stagnant productivity growth, and labour challenges in the construction sector compound the problem. What’s needed, and fast, are new approaches to increase supply, reduce costs, improve delivery times and decrease emissions.

Canada is falling short of CMHC's projected annual 48,000-new-units target Source: CMHC, Housing starts, under construction and completions, all areas, annual.

Against this backdrop, Modern Methods of Construction (MMC) has emerged. MMC, proponents claim, offer several advantages over traditional “stick-frame,” on-site building methods. Factory production can compress overall project timelines by 20-50%4, which not only accelerates housing delivery but lowers financing costs. Controlled conditions allow home builders to deliver a higher quality product with better thermal efficiency and airtightness, which is increasingly valuable as energy prices rise and climate competitiveness intensifies. Off-site work also requires fewer workers and eliminates the scheduling complexity of coordinating skilled trades on-site.

While a growing ecosystem of manufacturers and developers are experimenting with various prefabrication techniques, MMC accounts for as little as 2% of housing starts in Canada.5 That’s largely because factory efficiencies are often offset by transportation costs, overheads, and premiums from lower production volumes. At Canada’s current scale, MMC is not always cheaper than conventional construction on a straightforward unit-cost comparison basis.6 Savings of 20- 40% are possible7 but only with volume and standardization, which is precisely why scale is
so central to MMC’s value proposition.

So, what’s holding MMC back from becoming a cornerstone in Canada’s housing strategy?

What are Modern Methods of Construction?

Developed by the University of New Brunswick’s Off-site Construction Research Centre, MMC revolves around seven distinct categories spanning off-site construction, on-site innovation and emerging technologies.

Category 1: Volumetric (3D) modular construction involves fully enclosed units fabricated in controlled factory environments and assembled on-site.

Category 2: Panelized (2D) structural systems utilize flat structural elements like walls, floors and roofs that are prefabricated and then delivered for assembly.

Category 3: Prefabricated components support portions of the primary structure without constituting a complete system, such as foundation elements and staircases.

Category 4: Non-structural assemblies and sub-assemblies, including prefabricated building service components like bathroom pods, façade assemblies and mechanical and electrical systems that simplify on-site installation.

Category 5: Additive manufacturing represents the emerging field of 3D printing for construction to enable layer-by-layer fabrication either on-site or remotely.

Category 6: Building product-led site productivity improvements, including developing materials in larger formats or with simplified connections to accelerate installation.

Category 7: Building process-led site productivity improvements, leveraging digital tools, automation, robotics and lean management practices to optimize on-site efficiency and workflow.

Costs, timelines, regulatory treatment, financing and workforce requirements vary considerably across these different categories. Volumetric modular construction, for example, offers the most dramatic time savings (units can be stacked in days once the factory work is complete), but requires the largest upfront capital investment and faces the most financing and regulatory hurdles. Panelized systems are more familiar to regulators and financiers, but offer more modest efficiency gains. This framework is valuable as it allows regulators, financiers, and developers to navigate these trade-offs—moving beyond treating modular construction as an outlier to managing it as a coherent set of delivery methods.

MMC’s challenges in Canada

Canada’s construction sector faces a fundamental productivity problem that predates today’s affordability crisis. Between 2001-2023, labour productivity in the construction sector declined 37.3%.8 The sector is highly fragmented, with many small firms lacking the scale to invest in technology or training. Work is seasonal and project-based, making it difficult to develop durable workforce pipelines. And the traditional model of site-based, trade-coordinated construction is inherently resistant to the standardization and optimization that drives productivity.

Canada’s skilled trades shortage compounds these problems. This drives up labour costs and, in some markets, prevents projects from moving ahead. The business model is also materially different. Unlike conventional builders who typically operate on a project basis with variable costs, MMC manufacturers require substantial upfront capital investment in factory facilities and equipment. Factories then need consistent, high-volume orders to achieve economies of scale. Furthermore, traditional construction financing is not well-suited to the MMC model, as lenders typically release funds based on on-site construction milestones rather than factory production phases.

Regulations present another obstacle. Canada’s building codes, while harmonized at a base level through the National Building Code, are administered provincially and adopted municipally. A manufacturer, specializing in MMC, that wants to sell into multiple provinces faces a patchwork of code requirements, inspection regimes and approval processes, which can increase delivery complexity and costs. This fragmentation and regulatory friction are among the most frequently cited barriers by MMC practitioners in Canada.9

The country’s vast geography means that the economics of factory-to-site transportation are more demanding than in markets like Japan or the Netherlands. A local factory can serve the Greater Toronto Area or metropolitan Vancouver area well, but the costs of delivering housing more than a few hours away can erode the economic case for off-site production. Strategic factory placement represents a critical lever for unlocking MMC’s potential. This is particularly critical in remote and underserved regions, including northern Canada and Indigenous communities, where persistent supply chain gaps constrain development.

Canada’s climate adds an additional complication. Extreme cold affects the performance of certain building materials and systems, as well as the logistics of construction. While prefabricated and modular approaches are a great opportunity to build housing more quickly in harsh climates and remote regions, designing for standardization requires manufacturers to develop multiple climate-specific standards (reducing economies of scale) or focus on regional markets (limiting national scalability).

All the factors above continue to slow broader uptake. Many builders already incorporate forms of prefabrication, such as manufactured wall panels or trusses, but full modular construction is a relatively small share of overall housing built. Today, modular construction accounts for an estimated 7.5% of the overall Canadian construction market, representing $5.1 billion in annual value.10 If MMC were to capture even 10-15% of Canada’s annual housing need (about 43,000 to 72,000 units per year), it would need dozens of new factories at current production capacities.11 Simply put, large investments and coordinated action is required for MMC to materially change housing delivery output.

MMC in practice

Caivan

Ottawa-based Caivan, one of Canada’s largest developers, uses off-site manufacturing facilities to build four to seven houses daily, with plans to increase production to up to 5,000 a year. It’s also working in partnership with federal and territorial governments, and Inuit organizations, to build 750 modular homes in Nunavut, modified to accommodate specific needs in the north.

Habitat for Humanity Greater Toronto Area

Habitat for Humanity GTA is using modular technology in the construction of its new building in the east end of Toronto. Emerging from the $1.2 billion New Deal partnership between Ontario and the City of Toronto to increase the supply of below market, attainable modular homes, 33 affordable units will be available when the project completes in 2027, with most units large enough to accommodate families.

Bonville Industries

A fourth-generation family business, Bonville has been manufacturing prefabricated housing components for decades, mostly for the Québec and Ontario markets. It has developed over 45,000 homes to date, producing everything from large custom homes to multi-unit affordable housing projects, including the ‘missing middle’ buildings between 4-12 units.

How to scale MMC

1. Recalibrate policy and regulatory frameworks to capture substantial opportunities

All levels of government in Canada are responsible for getting housing built, making policy central to wider MMC adoption.

Building code harmonization is perhaps the most important policy lever and one that MMC manufacturers, industry associations and sector researchers have cited as a significant barrier.12 13 A manufacturer today must navigate different code interpretations, inspection requirements and warranty regimes across jurisdictions, creating real costs that are potentially prohibitive for smaller firms. In the U.S., a uniform national building code for manufactured homes (the “HUD” Code) is in place, and Australia is planning to implement a National Voluntary Certification Scheme for MMC manufacturers that will make meeting code requirements more straightforward. In the 2026 Spring Economic Update, the federal government committed to updating the National Model Codes to better support factory-built housing, including by accelerating the review and approval processes of innovative and prefabricated construction products and expanding the codes to

support more flexible building options (such as engineered wood).14 But this requires coordination and consensus across levels of government and industry stakeholders, alongside rigorous technical reviews.

Municipal permitting and approvals processes can present another critical bottleneck for MMC adoption, reflecting a tension between legitimate regulatory oversight and the need for systems that can accommodate industrialized construction timelines. Current frameworks were designed around traditional stick-built construction and require manual review of projects as a unique design, even when modular units are repetitive and factory-certified. For MMC to achieve its potential, municipal processes need to be fundamentally expedited to reduce approval times, including through mechanisms like pre-approved typologies, use of digital platforms and streamlined review tracks for certified manufacturers. The federal government has indicated that it intends to work with provinces and territories to reduce regulatory friction and provide clearer and more predictable pathways for factory-built housing, but this will take time to materialize. Without such modernization—supported by both regulatory reform and capacity-building for planning departments—the apparatus designed to protect public interests paradoxically undermines Canada’s ability to create housing supply at the speed and scale needed.

Public procurement is a powerful and under-utilized tool. Governments at all levels support the development of both market and non-market housing. When procurement requires or incentivizes MMC techniques, it creates the demand that manufacturers need to justify factory investments.

Build Canada Homes, the federal housing agency launched in September 2025, is mandated to galvanize the implementation of MMC and accelerate the delivery of affordable housing. Canada Mortgage and Housing Corporation (CMHC) is also starting to promote greater use of MMC by incorporating provisions for MMC into their programming. Other government homebuilding initiatives offer noteworthy opportunities, including increasing the supply of housing in the north and on military bases.

The variation in provincial and municipal building codes matters. Federal collaboration across levels of government to align policy and regulatory levers—not just in building codes, but with procurement, planning rules, and approval processes—can meaningfully reduce the fragmentation that limits developers’ and manufacturers’ ability to successfully deploy MMC.

2. Solve scale, standardization and skills challenges

Policy sets the framework, but market conditions determine whether private actors have the ability and motivation to operate within it.

Typically, MMC manufacturers work with developers to bring these technologies into the homebuilding process. Appetite for using MMC in projects is growing and those most likely to embrace off-site construction—large market housing developers, non-profit housing providers with extensive pipelines and institutional landlords creating purpose-built rentals—are building in volume. Other players remain less convinced due to the higher upfront costs, uncertainty about demand and delivery, and the complexity of managing an unfamiliar supply chain. Consumer interest, on the other hand, may be less of a barrier than is sometimes assumed, though there is little data on Canadian preferences and perceptions. Survey data from other jurisdictions suggests that consumers (especially renters) have few objections to factory-built homes when they are well-designed.15 16

Supply faces more structural constraints. Factory capacity is currently limited and geographically uneven. Small-scale developers can face higher barriers to adopting MMC, such as absorbing up-front costs and managing complex procurement. The economics of factory operation are also challenging; a modular facility needs to produce between 500 and 1,000 units a year to make modular construction cost competitive.17

Standardization is the key to unlocking efficiencies. When building types, dimensional systems and connection details are standardized, manufacturers can invest in tooling and processes that dramatically reduce unit costs. But it requires coordination across developers, manufacturers, designers and regulators that is difficult to find in a fragmented industry. Countries that have adopted MMC have done so either with strong public developer mandates (Sweden) or through large vertically integrated manufacturers that have sufficient market power to drive standardization (Japan). Canada has neither. Creating anchor demand through public procurement, and facilitating industry integration across the value chain, are the two most direct ways to create market conditions that could generate a tipping point.

Workforce development also tends to be overlooked, though the tide may be about to turn with the federal government’s recent $6 billion investment in skilled trades. The shift to factory-based production requires a different labour profile, with more emphasis on manufacturing process skills, digital design literacy, and quality systems management. Canada’s existing apprenticeship and trades training is not well-aligned to these requirements, but construction workers typically have many of the core skills needed for modular factory work, making re-skilling possible. A workforce strategy for industrialized building—incorporating provincial colleges, sector councils and manufacturers—will be central in building human capital.

3. Adapt financing mechanisms to boost investing environment

Even with supportive policy and favourable market conditions, financing remains a decisive barrier. The financing of off-site construction does not fit traditional financing frameworks developed over decades, as financing needs to be provided for materials and work outside of standard security frameworks.

Conventional construction financing is built around the draw structure, where lenders advance funds progressively as on-site milestones are achieved and the partially completed building acts as security, via land title. For volumetric modular construction, the largest costs are incurred in the factory, often before a single module arrives on site. At the point of maximum factory expenditure, there is little on the ground to serve as security, leaving developers to typically finance the production phase from equity or working capital. This front-loading of equity requirements increases the effective cost of capital for MMC projects, partially or fully offsetting efficiency gains. Particularly for smaller developers or non-profit providers, it can be a difficult barrier to overcome.

Financing Comparison: Traditional Construction and MMC

Financing Comparison: Traditional Construction and MMC
Traditional ConstructionMMC (Modular/Prefab)
Risk assessmentEstablished risk modelsUnclear/less established risk
Valuation approachComparable sales and valuation data readily available

Appraisers understand consistent methods		Few comparable sales

Inconsistent appraisal methodology
Draw scheduleStage-based inspections

Foundation -> Framing -> Finish		Upfront factory payments

Not aligned with traditional stages or lender security
Insurance and warrantiesStandard insurance and warranty products with risks well-understoodCoverage gaps during transport

Limited warranty options

Lack of data regarding claims

CMHC has begun to adapt programs for modular construction, and, as federal policies and frameworks evolve, there is opportunity to go further. Build Canada Homes could also play a complementary catalytic role by effectively de-risking the model. Both agencies could also address the capital gap that prevents manufacturers from expanding at scale, potentially working with other public or private partners.

For MMC to reach scale, Canada’s banks and private lenders need to be active participants. At present, a lack of familiarity with large-scale MMC projects can make them difficult to assess from a risk perspective. A recent U.K. government inquiry on MMC reported that real barriers exist in the form of risk aversion on the part of warranty providers, insurance companies and banks,18 which speaks to lenders, even experienced ones, being constrained in their ability to assess and approve each building system, material type, component and construction method.19

The most immediate impactful change would be a re-thinking of the construction draw schedule. Banks could adapt protocols that allow advances against verified factory production milestones, which is how MMC loans are secured in Australia and the UK.

Security valuation could be considered along with lending schedule changes. Modules in a factory are considered personal property, not yet attached to real estate, and their value in a default scenario is uncertain. Lenders could overcome this by creating security frameworks tied to factory-built components; industries like shipping and aircraft manufacturing involve lending against high-value assets in production and similar approaches could translate to modular construction.

Beyond loan mechanics, banks can invest in improving institutional knowledge. Effective lenders elsewhere have created specialist teams with expertise in MMC, relationships with manufacturers and insurers, and tailored risk frameworks. Lenders with specialist capacity have an edge in a market that could grow substantially—some estimates indicate that modular construction in Canada is expected to reach $6.4 billion by 2029 (compared to $5.1 billion in 2024).20

Banks can also play a constructive role in shaping the standards infrastructure. In markets where MMC has achieved greater scale, third-party certification and inspection frameworks have been critical in giving lenders the assurance needed to advance funds against factory production. The U.K.’s Buildoffsite Property Assurance Scheme (BOPAS), developed jointly by industry participants and the Royal Institution of Chartered Surveyors, offers an interesting model that has been broadly adopted by U.K. mortgage lenders. Canadian banks could work with industry bodies to help define these standards.

Finally, financial institutions could make financing for MMC-based homes more accessible for buyers, ideally treating factory-built homes that meet all standards like site-built homes for mortgage qualification and insurance purposes. This is not currently the case among most lenders in Canada. Uncertainty in the end-buyer mortgage market suppresses developer appetite for MMC, even when construction financing is available.

MMC is not a suite of products that can be dropped into the existing homebuilding system. It represents a fundamentally different approach to production, one that requires a correspondingly different system of policy, market and financing support. The existing system has been shaped by decades of site-based construction norms and transforming it requires simultaneous and coordinated action across multiple fronts.

The preceding sections are not an exhaustive checklist—first streamline regulations, then grow the market and fix the financing. Progress on one dimension, without simultaneous progress on others, is likely to produce limited results or stall altogether.

Consider the financing gap. Even if financial institutions and governments fully reformed their draw-schedule frameworks tomorrow, developers would still face a thin and immature supply chain, manufacturers would still be operating below efficient scale and regulatory environments would continue to vary significantly across jurisdictions. Financing reform, in isolation, would help at the margins but would not produce a step change in MMC adoption.

Or consider a scenario in which procurement policy is transformed, with federal and provincial housing programs committing to MMC for a large share of their social housing pipelines. This could create greater demand volume, but if building codes remain inconsistent across provinces, if financing products are not widely available and if the skilled workforce for factory production does not exist, the procurement commitment will not translate into the affordable housing units that are needed.

Aligning all the levers

MMC has failed to achieve scale in countries that opted for incremental adoption. While individual projects can succeed, and manufacturers can grow to a point, this approach does not create the system shift necessary for MMC to go beyond a niche offering. Achieving systemic change requires a different kind of ambition, with policymakers willing to coordinate the suite of available levers—building code harmonization, accelerating approvals, procurement mandates, public financing support, industrial policy for factory investment—over a sustained period. It calls for private sector actors making long-term commitments to business models organized around MMC, which requires the policy and financing stability that gives those commitments a reasonable chance of success. And it requires institutions to work together to manage a complex transition.

High-priority actions should come first. National Building Code harmonization—specifically the provisions governing off-site construction—is a foundational step for unlocking action. Encouraging CMHC and Build Canada Homes frameworks to fully accommodate MMC is similarly important, given their central role in housing finance and insurance. Creating anchor demand commitments through government housing initiatives could provide the market signal that manufacturers need to invest seriously in Canadian factory capacity. This could incentivize more direct capital investment and involvement from developers and financial institutions. All the while, municipalities can seek to expedite approval and permit processes to better align with factory production timelines.

These actions would not, by themselves, produce the desired scale of MMC adoption, but they would create a solid foundation on which to build with expanded government support, market capacity, and maturing financing tools specifically geared towards the unique nature of off-site housing development.

Canada’s housing crisis is severe and MMC is an important component of a broader housing strategy. It has international precedents, demonstrated performance and clear potential to address the speed, cost, quality and labour challenges that are holding back housing delivery. The path and the technologies exist. The economic case, when properly structured, is sound. What’s missing is the coordinated, sustained commitment across government, industry and the financial sector to create the environment for MMC to flourish.

Lessons from around the world

These examples show that MMC can scale when the policy, market and financing conditions are aligned. No country has achieved this purely through the intrinsic merits of the technology alone.

Sweden offers perhaps the most instructive international example for Canadians. Swedish homebuilders produce about 45% of new housing using some form of off-site manufacturing, achieved after decades of market evolution, consistent and supportive building codes, and a cultural acceptance of standardized design.

Japan’s industrialized housing sector, led by major manufacturers like Sekisui House and Daiwa House, demonstrates how vertically integrated companies can use
MMC to quickly build high-quality, disaster-resilient housing.

The United Kingdom—through its Homes England agency, MMC definition framework and a series of policy initiatives—has made serious efforts to catalyze MMC adoption, with mixed results, but valuable lessons. The 2019 Farmer Review, for example, concluded that the U.K. construction sector must “modernize or die”.

Australia, which faces many similar housing challenges to Canada, has seen a cluster of MMC manufacturers emerge, supported by proactive state-level procurement policies. The current administration has led a targeted investment of $54 million in advanced manufacturing of prefabricated and modular home construction.

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Stephanie Shewchuk, Housing Policy Lead, RBC Thought Leadership

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Canada and Alberta’s recent agreement-in-principle on methane equivalency sets a 75% reduction target in oil and gas methane emissions by 2035, relative to 2014 levels.1 It could prove to be consequential for the country’s climate ambitions: methane has roughly 80 times the warming impact of CO₂ over a 20-year period and accounts for nearly a quarter of the sector’s total greenhouse gas emissions, making it one of the lowest-cost, highest-impact levers for near-term climate progress.

For oil and gas producers, methane emissions measurement and performance now has greater flexibility on implementation but brings verification to the forefront.

In many instances, things are already up and running among oil and gas operators as several key methane emissions abatement technologies are well established, including:

  • Vapour recovery units that capture gas from storage tanks that would otherwise be vented;

  • Low-bleed pneumatic devices that eliminate routine methane releases from instruments controlling valves and pumps;

  • Compressor seal replacements that prevent leaks from pressurized equipment;

  • Leak detection and repair programs that use optical gas imaging and continuous monitors to find and tackle fugitive emissions.

Collectively, these technologies could reduce emissions by more than three million tonnes per year, representing roughly 1% of Alberta’s annual emissions.2

The province has deployed them at scale. Alberta has invested $172 million in methane reduction technology since 2019, including the installation of more than 58,000 low- or no-bleed devices. The outcomes are tangible: government-funded programs have prevented an estimated 17 million tonnes of emissions from being released, according to the Alberta government. A $25-million implementation program helped 49 operators deploy equipment across more than 650 sites at abatement costs below $50 per tonne.3

Canada’s broader methane mitigation sector has grown to more than 130 firms, with compliance actions under the enhanced regulations projected to generate 34,000 jobs from 2027 to 2040.

However, the progress is not without its headwinds. Alberta had frozen the TIER Fund credit price at $95 per tonne in May 2025, well below the federal trajectory to $170, citing U.S. tariff pressures.4 The MoU commits both governments to a minimum effective price of $130 per tonne, but days after signing, Alberta introduced amendments that flooded the credit market.

The measurement gap

While the agreement is promising, success depends on transparent verification, particularly given that a multi-year aerial campaign found Western Canadian oil and gas methane emissions were nearly twice official inventories.5 Canada acknowledged this when it updated its methodology, resulting in a more than 35% increase in reported fugitive emissions.6 The agreement’s commitment to independent third-party assessment may prove its most consequential element.

How Canada compares to its peers

Norway has the world’s lowest methane intensity thanks to a flaring ban dating back to 1971, but its oil and gas sector is a fraction of Canada’s scale.7 The IEA’s Global Methane Tracker 2025 places Canada’s upstream intensity at approximately 0.40 kg methane/GJ, below the global average of 0.55 kg methane/GJ and well ahead of Russia, Iran, and Turkmenistan, but higher than Norway and Saudi Arabia.8

The EU’s Methane Regulation, the world’s first legally binding standard, will require importers to report methane intensity from 2028 and meet maximum intensity thresholds by 2030, connecting low-methane performance with market access, potentially creating an advantage for producers that can compete on methane intensity.9

Private capital is tracking the signal. One recent example is Montreal-based GHGSat, which raised $47 million in September 2025, bringing total financing to $173 million, backed by Canadian entities Yaletown Partners, BDC Capital, and National Bank.10 The company now operates 16 methane-detecting satellites and has partnered with ExxonMobil and Aramco.

What’s next

A draft equivalency agreement is expected for 60-day public consultation later this year. The signals point toward a tightening global methane regime: EU import standards by 2030; Japan and South Korea seeking lower-carbon gas supply; and the Global Methane Pledge, endorsed by 159 countries.

Vivan Sorab is RBC Thought Leadership’s Clean Tech Lead

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Food prices were expected to stabilize globally in 2026, but disruptions have materially changed that outlook. Instead of easing, risks are now skewed toward renewed food inflation.

The biggest geopolitical driver right now is the Middle East conflict, specifically disruptions to a critical artery—the Strait of Hormuz—for global energy and fertilizer trade. The World Bank now expects energy prices to jump roughly 24% in 2026. This rise in energy prices matters for food prices as energy feeds directly into transportation, processing, and refrigeration. This is a classic second-round inflation effect: food inflation lagging energy inflation by several months.

Disruptions to fertilizer supply chains is the hidden risk to food prices from conflict (and the most underpriced one). Fertilizer prices are projected to rise 31% as roughly a third of global fertilizer trade flows through Hormuz, according to the World Bank. Urea, a key fertilizer vital for boosting crop yields, is up 86% in March 2026, compared to the same time last year, with a 53% jump since February alone on Middle East troubles.

Generally, the fertilizer price shock creates a delayed but powerful effect: Farmers reduce fertilizer usage, leading to crop yields decline, a surge in food prices rise is triggered—with a lag (2026–2027).

We’re already seeing early signals of this effect with farmers expected to plant fewer acres of crops and tightening grain balances into the 2026-2027 season, according to the International Grains Council.

Layering in climate risk, this year’s food production outlook has flipped from benign to another accelerant to rising global hunger. This growing season, farmers are expected to face what projections are calling a “super” El Niño-related disruption, causing droughts across Asia and Australia, while potentially dumping the excess moisture in North and South America. These hard-to-predict weather dynamics could hinder production across the world’s biggest breadbaskets growing rice, wheat, and soybeans.

Globally, an estimated 363 million people are at risk of acute hunger in 2026—a rising number with growing conflicts and climate change effects, especially heat waves and droughts, that challenge food production and access in developing and unstable countries.

In Canada, a nation of abundance, people experiencing food insecurity are most impacted by food affordability. And global disruptions are expected to rise prices even further in 2026. The most recent estimates from Canada’s Food Price report project a 4% to 6% jump in food prices for Canadians between 2025 and 2026-that’s nearly an extra $1,000 dollars on groceries per year for an average family of four.

What to watch for: Reactive policy from food inflation could further disrupt global trade flows. Geopolitics can reset trade flows when global risks intensify through export restrictions to protect domestic food stocks and monetary tightening by central banks can suppress demand but raise global volatility in supply chains.

Bottomline: Food access and price risks have moved from moderate to accelerated. Food inflation expectations are being revised, higher, and quicker: The United Nation’s Food and Agriculture Organization’s Food Price Index is up 2.4% between February and March 2026, with notable pressures in oils, sugar, and grain prices.

—Lisa Ashton

Foreign investors’ Canadian playbook amid the trade war

Ottawa is preparing a summit later this year to attract $1 trillion in new investments over five years. The February securities data offers an early read on the foreign investors’ Canadian playbook.

Global investors are staying in Canada, but repositioning around the trade war. In February, foreign investors put $6.2 billion into Canadian securities, adding to the $106 billion accumulated over the past four months. At the same time, Canadian investors deployed $25.4 billion into foreign securities—the largest outflow since March 2024. While monthly securities data is volatile by nature, the net result was a $19.2 billion outflow from the Canadian economy. The headline, however, understates what is happening. The February data is less a single story than three simultaneous ones—foreign investors distinguishing between Canadian credit and growth, domestic capital chasing U.S. returns, and a market navigating the trade tumult.

Within equities, the rotation is structural, not random. Foreign capital is rotating hard within Canadian equities—out of energy and manufacturing, into banks. Foreign investors sold $9.2 billion of Canadian equity securities in February, even as the benchmark TSX rose 7.6%. At the sector level, credit intermediation and related services absorbed $12.1 billion in February alone, the largest single-sector inflow in the dataset. Energy and mining shed $9.4 billion  the same month, its weakest reading in the past five months. Manufacturing has posted outflows in four of the past five months. This pattern isn’t random: foreign allocators are concentrating in assets insulated from trade disruption (e.g. banks) while cutting the ones that aren’t (energy and manufacturing).

The bond market offers some comfort. Foreign investors added $22.6 billion in Canadian bonds in February, including $11.1 billion in corporate bonds, mostly foreign currency bonds issued by Canadian financial corporations—and $8.4 billion in federal government bonds. At the same time, they sold $9.2 billion in Canadian equities. It demonstrates foreign investor’s confidence in Canada’s credit, and more caution towards equities.

—Sydney Wisener

The week that was

USTR provided more CUSMA comments

  • U.S. Trade Representative Jamieson Greer told an audience in Washington that “America First” will continue to guide policy, and that the Canada-U.S.-Mexcio trade deal put its two partners in the most enviable trading position with the U.S.

  • Greer did signal a willingness to work with Canada on energy and critical minerals development but warned against using those as leverage in trade negotiations. Almost on cue, U.S. President Donald Trump signed an order authorizing a proposed Canada-Wyoming oil pipeline.

Top EU trade official leaving position over disagreements on U.S.-EU deal

  • Sabine Weyand will step down as Director-General for Trade after raising concerns that the agreement the EU struck with President Donald Trump does not meet global trade rules.

  • The President of the European Commission Ursula Von Der Leyen has repeatedly defended the deal—where the EU agreed to pay 15% tariffs on most products while reducing tariffs on most American goods to zero—as the first step towards a broader free trade agreement.

OECD reports sustained increase in critical mineral export restrictions

  • Analysis shows export restrictions on critical minerals have increased fivefold since 2009, with more countries applying controls across defence, technology, and energy inputs.

  • China continues to dominate supply, producing roughly 70% of rare earths and over 90% of some key materials, with recent export disruptions highlighting ongoing supply chain vulnerabilities.

China warns of retaliation over EU “Made in Europe” proposal

  • China’s commerce ministry warned the EU it may take countermeasures if the bloc’s proposed Industrial Accelerator Act restricts access for Chinese firms to subsidies and procurement.

  • The EU initiative is squarely aimed at reducing dependencies on China, and seeks to raise manufacturing’s share of GDP to 20% (from 14.3%) by 2035.

—Thomas Ashcroft

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From a crippled spacecraft to city streets, the technology that mirrors the physical world is remaking how we build, move, and plan.

In April 1970, an oxygen tank ruptured aboard Apollo 13, roughly 330,000 kilometres from Earth. NASA engineers on the ground had no way to physically reach the spacecraft. What they could do was feed real-time telemetry from the vessel into a bank of simulators in Houston, reconfigure those models to mirror the damage, and test survival strategies before relaying instructions to the crew. It worked, and the astronauts came home. Nobody called it this at the time, but mission control had just demonstrated the core logic of what would later be known as a digital twin.

Dr. Michael Grieves formalized the concept at the University of Michigan in 2002, and NASA’s John Vickers coined the phrase in 2010.1 But the underlying principle was already clear: build a virtual replica of a physical thing, keep it synchronized with real-world data, and use it to ask questions you cannot safely or cheaply ask of the original.

From Replica to Oracle (What is a digital twin)

A digital twin differs from an ordinary simulation in one decisive respect: it is continuously updated. A simulation models what was designed, a twin mirrors what exists right now. Feed it sensor data from a jet engine, a wind turbine, or a hospital ventilation system, and it becomes a living model, one that can flag an impending bearing failure, test a configuration change, or forecast demand three hours ahead. The distinction shifts decision-making from retrospective analysis to real-time anticipation.

McKinsey estimates that 70% of C-suite technology executives at large enterprises are exploring or investing in digital twins, and that the technology can improve public-sector infrastructure efficiency by up to 30%.2 The global market, valued at roughly US$36 billion in 2025, is projected to exceed US$329 billion by 2033, growing at a CAGR of 31%.3

The sensor revolution that made it possible

NASA could twin one spacecraft because it had a dedicated mission control. Scaling the same idea to a factory, a power grid, or a city required something that did not exist in 1970: cheap, networked sensors everywhere. That infrastructure arrived with the Internet of Things (IoT). There are now more than 21 billion connected IoT devices worldwide, a figure growing at roughly 14% a year and expected to reach 39 billion by 2030.4 Each device: a pressure gauge on a pipeline, a magnetometer in a road surface, a camera at an intersection, generates the continuous telemetry that keeps a digital twin alive.

Where twins are working now

The range of applications is vast. In energy, Siemens Energy has built digital twins of gas turbine components using neural networks on NVIDIA’s Omniverse platform, accelerating power-grid assert simulation by 10,000x5, and enabling predictive maintenance that could save utility providers US$1.7 billion per year.6 Singapore’s national grid operator SP group is piloting a Grid Digital Twin that models real-time conditions of the entire electricity network, a necessity as the country targets a tenfold increase in its renewable energy share by 2035.7

In manufacturing, BMW’s plant in Regensburg exists as a complete digital replica in NVIDIA Omniverse, where engineers optimize robot placement and test new car models on a virtual assembly line without halting production. Helsinki uses a city-scale twin to model how replacing heating systems in specific districts would affect CO₂ emissions against its 2030 carbon-neutrality target. Rotterdam’s twin simulates storm surges to make proactive decisions about sluice and dam operations. In healthcare, 66% of executives expect increasing investment in digital twins over the next three years, with applications ranging from hospital operations modelling to virtual drug testing and surgical planning.8

The pattern across these cases is consistent: an asset or system too complex, too expensive, or too dangerous to experiment on directly gets a virtual counterpart fed by live data. The twin absorbs the risk of trial and error.

Miovision and the instrumented intersection

Urban traffic offers a particularly clear illustration. In Ontario, the economic and social cost of congestion was estimated at C$56.4 billion in 2024, projected to approach C$108 billion by 2044.9 Digital-twin logic—sense, model, anticipate, act—applied at the intersection level lets traffic engineers see how signals, vehicles, cyclists, and pedestrians behave, rather than how a timing plan assumed they would.

For a Canadian-born example of this approach at global scale, listen to the RBC Disruptors episode featuring Miovision, the Kitchener-based company whose sensor and analytics platform now operates at more than 170,000 traffic intersections across 68 countries. Their work is a case study in how digital-twin principles migrate from aerospace and heavy industry into everyday civic road systems. It also demonstrates how a Canadian startup can build a category-defining business by instrumenting something as mundane as a traffic light.

What to watch for as the technology evolves

  • The convergence of digital twins with generative AI. McKinsey’s operations practice describes a shift from twins that monitor and predict to twins that recommend and, increasingly, act autonomously.

  • The emergence of twin ecosystems. A factory’s digital twin exchanging data with the twins of its supplied components and the twin of the power grid that feeds it. Interoperability, common data models, shared interfaces, certified audit trails, will determine which platforms capture long-term value.

The broader trajectory is one NASA’s engineers would recognize. When you cannot reach the physical thing, or when acting on it without rehearsal is too costly, you build a model, keep it honest with live data, and let it think ahead of you. The technology has outgrown the spacecraft, but the principle has not changed.

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Sabreena Shukul is a research assistant at RBC Thought Leadership