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

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

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

Signals

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

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

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

The coming war for climate

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

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

Here is what’s at stake…

For Canada: Big decisions, high stakes

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

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

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

For Europe: A power reset?

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

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

For Asia: Wake-up call

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

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

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

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

Inside Canada’s CERA play

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

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

—Canada’s four strategic themes at the event:

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

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

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

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

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

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

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

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

Climate conversations

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

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

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

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

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

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

➔ Stick to net zero by 2050 or abandon it?

➔ Some land sectors have a new emissions standard

➔ Canada makes a big nuclear push in Europe

The signals

Could April 1 reset Canada’s off-course climate trajectory? The Canadian Climate Institute’s latest report (which notes that Canada’s climate targets are “off course”), suggests that strengthening measures such as industrial carbon pricing and oil and gas methane rules is critical to coming close to the targets. Both measures are part of the MoU that Ottawa and Alberta agreed to hammer out by April 1. Together, these two policies could deliver an emissions-busting punch (see chart).

Should the world give up on net zero by 2050? U.S. Energy Secretary Chris Wright thinks so. He recently chastised the International Energy Agency (IEA) for its “destructive illusion” of the 2050 goal. Amid this friction, energy ministers at an IEA summit in Paris last week failed to agree on climate objectives. It’s true that the world’s struggling to hit its net-zero targets, the UN projects, as nations from Canada to Germany retreat from some of their more ambitious climate policies. But few are looking to cast aside net zero just yet. France and other European nations pushed back during the summit, noting that electrification remains a cornerstone of the bloc’s economic policy. Meanwhile, Canada is expected to unveil its Climate Competitiveness Strategy, and China has already emerged as the world’s first “electro-state.”

China has galloped ahead of competitors with a new electric work horse of the ocean. Fittingly, in the new Year of the Horse, China debuted ocean-going Ning Yuan Dian Kun, featuring a battery capacity equivalent to 380 Tesla Model 3s. The test launch comes as the international Maritime Organization dithers on solving ocean pollution—technology, as it so often does, is leading policy here. Crucially, the batteriescan be shore-charged and swapped like cargo container to ensure its 740 twenty-foot equivalent (TEU) load can sail further. It’s a critical breakthrough: half the world’s container fleet is under 3,000 TEUs (twenty-foot equivalents) and these vessels are considered the ocean’s true work horses. An emissions dent in that space could make a real splash.

From lab to land: Can the new emissions standard deliver?

– By Lisa Ashton, Interim Head, Climate Action Action Institute

The first international standard for accounting for land-based sectors’ greenhouse gas (GHG) emissions is a true test of taking science from the lab to the field—and of patience.Land-based sectors, including agriculture and forestry, finally have an international standard for accounting, reporting and tracking GHG emissions.

The GHG Protocol’s Land Sector and Removals Guidance (LSRG) is intended to standardize GHG inventory accounting across companies with land-based GHG emissions allowing for consistent disclosures, which is necessary to boost their credibility with investors and regulators around claims like farmers increasing soil carbon sequestration and tree planting that are at risk of miscalculating their real impacts given the complexity of tracking GHG sources and sinks in natural systems.

It was a long time coming, taking more than five years of debates, revisions—and even a period of derailment—to land the GHG Protocol.

Why did it take so long? Simply put, it was due to tensions between climate accounting purists and industry trying to agree on a practical standard.

The sticking points:

• Not knowing who your farmer is: Agri-food supply chains are geographically dispersed and cover large swaths of land to feed a growing population, challenging companies pursuing perfection in tracking changes in GHG emissions and soil carbon removals happening on the farms from which the companies are sourcing from.

• Counting GHG emissions when land use changed: Repurposing land from, say grassland to cropland, has GHG emissions and soil carbon change implications that could alter a company’s GHG emissions inventory. Determining which measurement technologies, like remote sensing, are acceptable for tracking these changes and how to report net impacts has been a source of confusion.

• Accounting, measuring and tracking soil carbon: GHG changes in natural ecosystems like agricultural soils is deeply complex and datasets take years to establish. The right approach that allows companies to track soil carbon changes without becoming an exhaustive, expensive academic exercise is still up for debate as measurement approaches are still being refined and many factors influence soil carbon changes.

Should Canadian businesses align with the GHG Protocol’s Land Sector and Removals Guidance?

Companies that source agriculture and forestry products are now faced with this challenging question as the decision influences their business far beyond their climate goals–from supply chain logistics and relationships to their sourcing regions and ingredient choices. The decision is even more complicated because the standard took longer than expected to be developed and missed a window when influential companies were creating their GHG accounting frameworks and developing incentive programs for farmers and foresters to deliver on-the-ground climate action in the early 2020s.

A thousand cuts

– By Stephanie Shewchuk, Housing Policy Lead

Canada’s stumbling forestry sector could hurt the country’s ability to develop homegrown sustainable solutions for packaging, building and retail sectors. The Forest Products Association of Canada called 2025 “one of the most challenging years in recent memory.” In addition, wildfires—paradoxically exacerbated by climate change—laid to waste 886,300 hectares in 2025 alone, which is well above the province’s 10-year average.

Ottawa and the B.C. governments have both acknowledged the depth of the province’s forestry crisis through targeted budget measures, but there may be room for more: new investment tax credits to encourage biomass use, improved procurement guidelines to support greater uptake of Canadian wood in government projects, and for the newly launched Build Canada Homes agency to prioritize Canadian lumber in federal construction products. It could prove to be a significant climate move as buildings currently make up 18% of Canada’s greenhouse gas emissions.

These approaches will support an industry in crisis today but its future will hinge on three key factors: market recovery, positioning sustainable wood products as a strategic asset in the transition to a low-carbon economy, and how effectively it can adapt to climate-driven wildfire risk.

Climate conversations

• Canada’s Energy Minister Tim Hodgson was in Warsaw recently pushing the CANDU nuclear technology for Poland’s next suite of nuclear reactors. “We have what Poland wants,” Hodgson said as he drums up more interest for the baseload power source. Canada is also reportedly eyeing a uranium deal with India during Prime Minister Mark Carney’s visit to New Delhi this week.

• Canada’s new auto strategy promises a new path for the sector, but Climate Action Institute Economist Farhad Panahov says the road ahead will be driven by three key themes.

• Geothermal—the heat beneath our feet—could be a transformative baseload power source. CAI’s Clean Energy Lead Vivan Sorab digs into the opportunity.

• Who came up with the 1.5 Celsius global target anyway? Climate scientist Katharine Hayhoe explains how science and politics converged on a number that defines global ambition.

• Any credible scenario for Canada’s electricity future must consider wind and solar supplying majority of new demand growth. “The question is not whether these sources will expand, but whether Canada will begin to treat solar power as a core strategic asset or continue to regard it as marginal,” writes Peter Nicholson, Chair, Canadian Climate Institute, in an essay.

• “Energy is not an end in itself; what people want is hot showers and cold beers.” Micheal Liebreich and others believe policymakers will have better success if they count energy from the consumer’s perspective.

• Pollution poses a bigger threat to India’s economy than trade tariffs, IMF chief economist Gita Gopinath warned recently. Here’s why one of the world’s largest economies is being choked.

➔ Meet Coalie, the hard-hatted American mascot

➔ Ottawa’s auto strategy comes with a climate-action twist

➔ What should be the North Star for Canada’s proposed national electricity strategy?

Hot takes

➔ Canadian companies aren’t waiting for Ottawa’s signal to advance the U.S.’s mineral ambition. While the federal government is holding off signing any formal deals with Washington on critical minerals, Toronto-based Cyclic Material is investing a strategic US$82 million in a rare-earth recycling facility in South Carolina, after securing new funding from the Canada Growth Fund, among other investors. It’s a trend: Vancouver-based Lithium Americas is building a massive project in Nevada, while Trilogy Metals is developing a copper-zinc-gold district in Alaska—with the U.S. government taking the unprecedented step of buying small stakes in both recently. North America’s market and geographical gravitational pull would hopefully overcome political posturing.

➔ Climate Adaptation and Resilience (CA&R) could be the next frontier in climate investing. RBC Capital Markets’ report Private Markets Innovation in Climate Adaptation and Resilience highlights five areas where capital could make a difference: earth data, insurance solutions for businesses and society, wildfire and the grid, water, and the built environment. CA&R secured only US$65 billion in capital flows in 2023, compared to US$1.8 trillion in traditional mitigation investments such as renewables and energy storage. Climate Action Institute’s Clean Tech Lead Vivan Sorab believes while mitigation efforts’ address both current and long-term trends in emissions, their immediate impact tends to be muted; CA&R investment can potentially deliver more visible and quicker results in the form of less downtime and assets protected. The insurance costs are already mounting: 34 extreme-weather events triggered insured losses of US$1 billion or more in 2024—the second-highest number on record.

EV spring comes after winter

– By Farhad Panahov, Economist, RBC Climate Action Institute

Canada’s new strategy to boost EV sales has a twist: a cap of $50,000 for the total transaction value to be eligible for a subsidy. A more stringent rule—to boost mass market models—compared to a previous program that allowed purchases of more expensive trims.

Average price Canadians paid last year for a new vehicle was $55,000, and nearly $70,000 for an EV. And while each $1,000 could add 11% to the EV demand, based on Canadian Climate Institute’s analysis, only 13 of the 163 battery-electric models available in Canada are priced below that level, according to the Canadian Automobile Association. Another 10, priced at around $55,000, are potential candidates to be marked down to claim the subsidy.

Meanwhile, the 49,000-quota for Chinese EVs, should add further impetus to vehicle transition. Crucially, while these vehicles are excluded from the incentive program, they could enter the market at the lower end of the price range, as models like BYD and Geely made up about a quarter of global EV sales last year, are sold for $35,000 in China—roughly half of what Canadians paid for EVs in 2025.

But North America is notoriously in love with large cars, such as trucks and SUVs, a segment where Chinese EVs might not have the same price leverage. And don’t forget the 6.1% Canadian tariff that still applies on Chinese cars, plus shipping costs. Chinese EVs, facing less intense competition than at home, could also seek higher markups for their models in Canada.

The success of the Canadian strategy could rest as much on consumer trust as it does on the final price tag. Nearly half of Canadians are still not in the EV camp based on recent poll from Clean Energy Canada; and only one in 10 would buy a Chinese EV with another two in the “maybe” mindset.

The previous federal program of $2.7 billion helped put about half a million EVs on Canadian roads. The fresh round of subsidies, with a lower $2.3-billion allocation, could add 840,000 new EVs, the government projects.

The new auto strategy could help transport—a stalwart sector for emission cuts over the past five years (see our Climate Action report)—deliver the following in climate action:

• EV mandates out, standards in. Abolishing the much contested EV sales mandates in favour of emissions standards will aim to achieve 75% EV sales share by 2035.

• Emissions standards. Emissions standard are a common practice for automakers and allows for higher compliance flexibility compared to sales mandate while still incentivizing a pivot towards emissions-free vehicles. Since 2011 alone, emissions per mile from passenger cars and light trucks have declined 50% and 30%, respectively.

• U.S.-Canada policy is diverging. Historically, Canada aligned its emissions standards with the U.S. It’s different now as Canadian policy diverges from the U.S. Environmental Protection Agency (EPA) push to roll-back Biden-era standards (that would have halved emissions per mile by 2032).

• …As is Detroit 3’s strategy. The auto policy supports another $3 billion investment in the EV sector “positioning Canada as a place where the vehicles of the future are built.” However, the Detroit Three—Ford Motors, General Motors and Stellantis—are scaling back EV roll-out plans that has cost them around US$50 billion, amid tepid customer demand.

• Networks are getting a supercharge. Ottawa is committing $1.5 billion to expand the charging network, adding to the $1.1 billion in funding, which so far has helped add 7,000 installations. Canada’s public charging network is already sufficient for current levels of EV adoption, at ratio of ~21 EVs per charging port, but will need to significantly expand as adoption accelerates.

Also check out: RBC’s Electric Car Cost Calculator

Climate Conversations

A scan of notables and notable developments

• Lisa Ashton, Interim Head of the institute, is in Ottawa for Agriculture Day festivities, a timely opportunity to share insights from Seeding Scale, our new research on the growth capital pipeline in the agri-food sector. Lisa heard that the innovation pipeline needs focused improvements as well and universities and industry are working collaboratively to devise a clear vision for the sector ahead of the agriculture ministers meeting in July. 

• As the U.S. convened allies, including Canada, on critical minerals last week, John Stackhouse shared a few thoughts. His first point: even the U.S. knows it can’t go-it alone on mining.

• Canadian Climate Institute’s Rick Smith finds another climate angle on a recent Canadian court ruling that reinforced Ottawa’s right to list plastics as “toxic”: “…polluting industries and some provinces have been spinning a yarn that the federal government’s Clean Electricity Regulations, also enacted under CEPA, are an illegal over-reach. As of today, those arguments look like the thinnest of gruel.” Read the ruling.

• As Canada develops a national electricity strategy, Polaris Strategy’s Dan Woynillowicz has some thoughts on what the strategy should set as its North Star: Double energy productivity, double production, and double the share of final energy demand met by clean electricity.

• Nugget from a House of Commons report on climate change, from Janis Sarra of the Canada Climate Law Initiative, on the importance of Canadian taxonomy: “An estimated $115 billion annually is required for Canada’s low-carbon transition, and a  science-based taxonomy will create the market integrity, clarity and interoperability, globally, necessary to accelerate global capital to come and invest in Canada’s businesses.”

➔ Winter Olympics: running out of slope?

➔ Chinese EVs: low emissions, high drama

➔ Notes from Davos: The looming fight for grid power

Hot takes

➔ Only four locations would be able to host Winter Olympics by 2050 if current climate trajectory persists. The 2026 Winter Olympicorganizers are powering venues in Milan and Cortina d’Ampezzo with certified renewable electricity and sustainable sourcing, even as the February event is expected to emit around 930,000 tons of CO2. More crucially, snow management remain an issue as the Alpine region has seen a 25% drop in snowfall since 1980. It’s a problem that’s unlikely to go away: a new University of Waterloo study shows that of the 92 potential Winter Olympic host locations, only 52 would remain-climate reliable for the winter edition and 22 for the Paralympics in the future, if current climate policies persist. Without snowmaking technology—only four will reliably be able to host the event by 2050.

➔ China-made EVs could lower Canadian transport emissions—but at a political cost. The decision to allow Chinese EVs in return for Canadian agri-food access comes as Canadian federal and provincial governments have rolled back subsidies. EVs have done the heavy work of lowering Canda’s emissions over the past six years, with transport emissions down 6% compared to 2019, according to Climate Action 2026 report. Cheaper EVs could help maintain the momentum. But rumblings from Washington suggest the deal could complicate CUSMA negotiations.

➔ Canada’s agri-food processors are not waiting for policy perfection. In Atlantic Canada, processors are investing to extract more output from less energy and water, while farmers see emission cuts as a way to boost productivity, observed our Interim Head Lisa Ashton, during her trip to Prince Edward Island to share Climate Action 2026 report’s findings. PEI farmers are leading the way with their 2040 Pathways plan to reduce GHG emissions, accelerate on-farm climate adaptation actions, and boost economic outputs and trade by 2040. It’s an example of how farmers can organize and design a pragmatic plan to drive environmental and economic outcomes for their businesses.

Warming up to the north

Nowhere has climate change, resources and geopolitics collided more quickly. U.S. interest in the Arctic island of Greenland and Russian ships patrolling the region should compel Canada to cover—and bolster—its northern bases.

Climate change is the trigger for interest in the Arctic: Washington’s sudden interest in the “piece of ice” is sparked by a climate-change induced thaw that’s opening up the region to activity— benign or otherwise. The Arctic has just ended a year of record heat and shrunken sea ice as northern latitudes become rainier and less ice-bound due to the climate crisis, scientists say. That’s also accelerated a race for control by the U.S., Russia and “near-Arctic state” China. Canada needs to catch up.

While the Arctic’s location is strategic—so are its resources. The northern region contains significant fossil fuel reserves—an estimated 13% (90 billion barrels) of the world’s undiscovered conventional oil resources and 30% of its undiscovered conventional natural gas resources. In addition it also contains rare earths, nickel, cobalt, graphite and other elements that are vital for energy transition. While it’s unclear whether the region can meaningfully meet rising global energy demand at cost and at scale any time soon, the faster the region warms, the more attractive and accessible its resources would become.

Sovereignty and strategic competition: Canada’s Arctic sovereignty is shaped by competing interpretations under the United Nations Convention on the Law of the Sea, with Canada ratifying the treaty and defining extended continental shelf claims, while the United States has signed but not ratified it.

The North American Aerospace Defense Command (NORAD) detected and tracked Russian military aircraft operating in international airspace near Alaska in 2025, while China and Russia launched a joint patrol in 2024.

Canada’s calculus: Canada makes up 28% of the Arctic land area, second only to Russia’s 67% Arctic landmass. However, the Canadian Arctic accounts for just under 2% of the Arctic region’s economy, and negligible population.

The Major Project Office’s focus on developing Churchill Port at the mouth of Hudson Bay, the Red Chris Mine Expansion and the North Coast Transmissions Line and Ksi Lisim LNG, along with a separate $1-billion investment to strengthen the North’s trade and transportation infrastructure, suggests Canada is joining the Arctic race. Getting these proposals to completion would be the ultimate test. The projects—and more defence spending—will be vital to allay U.S. concerns about the vulnerability of the Canadian Arctic.  But they also need to be respectful of climate and Indigenous issues.

Notes from Davos: The looming fight for grid power

By John Stackhouse, Senior Vice President, Office of the CEO, RBC

John was at Davos last week to make sense of the new world order and a global economy that’s resembling more a bartering and babbling souk than a tightly wired marketplace. Among his observations, two directly impact energy and climate: the competing priorities for grid power, and the continued rise of renewable energy—against all odds. Read the excerpts:

A/C or AI: It’s gridlock
The next energy crisis won’t be fuelled by oil or gas; it will be strained by the world’s faltering electricity grids. Electricity demand globally is rising three times faster than total energy demand, driven by air conditioning and electric vehicles, as well as data centres.

While 90% of Americans have access to air conditioning, the number is 20% in India, 18% in Indonesia and 5% in Nigeria—each with some of the world’s fastest-growing cities. Add to that the growing demand for EVs, which now account for a quarter of global car sales, up from 5% in just five years.

Fatih Birol, head of the International Energy Agency, said the world will need 10,000 terra-watts of new electricity in the next decade, which is the equivalent of adding another U.S., Canada, Europe and Japan. Without any innovation breakthroughs, that would require 70% more copper, and a vast expansion of steel and critical minerals processing.

A renewable lease on energy: There were two vastly telling moments in Davos’s main Congress Hall, one speaking to scarcity, the other to abundance. Donald Trump went off script to lambaste renewable energy, especially wind which he said was for “losers.”

A day later, Elon Musk used the same stage to profess a glorious future for renewables, especially solar which he said could power all of America if he had his way. Just give him a parcel of land, 160×160 kilometres, and tariff-free solar panels! Away from North America, renewables are still the driver of energy growth and have shifted from a “transition” source to a default for new supply in many markets. Europe reached roughly 50% renewable generation in 2024.

In other fast-growing markets, renewables are increasingly seen as energy additions, not just replacements for fossil fuels. Falling battery costs (solar is down roughly 80% in India) and longer lifetimes (30–35 years) have helped shift economics from a simple cost per unit to a cost per lifecycle.

Read John’s full Davos commentary here.

The Institute in Action

• Interim Head Lisa Ashton recently hosted a roundtable in Edmonton with industry leaders and investors on growth capital in Canada’s agri-food sector to dive into the investment challenges that were highlighted in The Next Generation of Growth.

• Energy Lead Shaz Merwat moderated a panel at the BC Natural Resources Forum at Prince George, focused on Canada’s future gas and LNG competitiveness with senior executives from industry, Indigenous organizations.

➔ How’s Canada doing on fighting climate change? It’s complicated

➔ Is the world falling out of love with Teslas?

➔ Canada’s methane rules get pragmatic

Hot takes

➔ Can the IPCC survive its breakup with Washington? The UN-backed Intergovernmental Panel for Climate Change is in a “keep calm-and carry-on” mode after the U.S. decided to pull out, noting that it continues to work on its next cycle of reports, starting in 2027. The IPCC reports are extremely influential, and many countries benchmark themselves to its authoritative data. It’s critical for IPCC to persist, but one of the criticisms of the body is its focus on the science and the tech, that underplays the economics and politics of energy transition. While the White House labelled the IPCC (and the 65 other UN organizations the U.S. exited) as a “waste” of American taxpayer money, others argue that the IPCC has been instrumental in focusing global policymakers on one of the world’s most critical challenges. Science, they hope, will prevail.

➔ New methane rules mark a pragmatic evolution in Canadian climate policy. The new rules—covering onshore oil and gas operations and large landfills with requirements beginning in 2028—pair high ambition with greater regulatory flexibility. The most consequential change is optionality, says Vivan Sorab, our Clean Tech Lead. Government estimates suggest that the new rules could deliver cumulative reductions of 304 Mt CO2e from 2028 to 2040. Operators can follow a regulator-prescribed inspection pathway, subject to regulatory verification and enforcement, or demonstrate compliance through their own processes, backed by monitoring and verification. The removal of the five-year expiry on federal-provincial equivalency agreements further strengthens the framework by improving long-term certainty for provinces and the industry. The rules are reinforced by a $16-million federal investment in methane monitoring and verification tech. Given ongoing uncertainty on methane emission volumes, the focus on measurement could prove to be crucial.

➔ Is the world moving past Elon Musk’s Tesla? It’s hard to say whether the billionaire’s politics put off many, but it could certainly be a factor. Globally, EV cars sales hit a record 21.7 million last year, Bloomberg New Energy Finance estimates, even as Tesla sales contracted 9% to 1.64 million. BNEF forecast 24.3 million EV car sales in 2026—a slower pace of growth than previous years—as falling government incentives are offset by falling battery prices, a bump in commercial vehicle sales and the slow ramp up of robotaxis.

What it takes to write a climate action report

Behind the scenes, the Climate Action Institute team spent the past six months on what’s emerging as a benchmark of Canadian climate action: our Climate Action report, now in its third year.

While there’s been some retreat on climate policies, there’s plenty of action too, on climate. Our report title, Retreat, reset or renew?, suggests it’s all of the above.

The report is based on calculations, aggregations and estimates using a variety of measures from across the economy and society. We selected those metrics to help paint a picture of where we’re at, how far we’ve come and some of the distance ahead. The report, and its measurement tools, are not designed to be a precise diagnostic of any one sector, policy or technology—it’s more like a mirror in which we can see Canada’s successes and shortcomings.

The report was also informed by our team attending over 100 events, and visiting farms, facilities and offices, cross-country, where we listened, spoke and compared notes with peers, experts and skeptics. Over 2,000 Canadian consumers and 150 business executives participated in our two annual surveys. Peer groups dove into the methodologies and several external experts stress-tested our analysis. For our case studies, several companies agreed to heart-to-hearts on the challenges of putting their boardroom promises into action on their factory or office floor. The result is a snapshot of Canada’s climate journey: some milestones achieved, a few dead-ends, and strapping up for the next curve round the bend.

Read the full report here, but here’s a peek at a handful of findings:

• Emissions progress is mixed: National emissions are down 7% since 2019, with reductions in electricity (-27%), buildings (-19%), and oil/gas (-19%) sectors. However, new projects like the TMX pipeline expansion and LNG Canada Phase 1 are projected to increase oil/gas emissions.

• There’s a strong pipeline of climate funding. Climate capital flows of around $20 billion annually continue to support the low-carbon sector.

• …And there’s more on the way. Nearly $100 billion worth of incentives for clean-tech and climate programs and initiatives budgeted for deployment between now and 2035—although funding remains uncertain given policy shifts.

• Climate Action Barometer declined: the Institute’s flagship index fell for the first time in six years amid policy uncertainty.

• Canadians still care about climate: Cost of living issues, healthcare access and strengthening the economy were front and centre, but 33% still consider climate change as a top-three priority for policymakers.

Five insights from the frontlines of climate policy

Don’t fixate on 2030 Canada’s emissions targets. That’s the message from Environment and Climate Change Canada (ECCC) in its latest progress report on the country’s 2030 emissions reduction plan, released days before the Christmas break. Focusing on 2030 targets “at all costs” risks undermining the long-haul climate fight, the report notes. “Focusing narrowly on short‑term reductions could also divert attention from the deeper, systemic transformations needed to reach net‑zero by 2050.”

Pushing heavy industry and oil and gas—two sectors that are deeply tied to competitiveness, investment flows, and trade— could “trigger capital flight, carbon leakage, and a loss of international competitiveness, especially if compliance costs outpace those faced by peer economies.”

Economist Farhad Panahov pored through the data trove to glean 5 valuable insights:

• Emission declines are impressive, given population growth. By 2023, Canada’s emissions declined 8.5% from 2005 levels. More impressively, emissions intensity was down 35% based on the economic size and 29% based on population (which has been growing at a fast clip over the past two decades).

• We need four times the pandemic era emissions declines. Canada’s emissions would need to drop fourfold compared to the 2020-COVID-era magnitude to reach its 2030 targets.

• Most sectors are pulling their weight. Electricity, transportation, heavy industry and buildings sectors are projected to deliver a combined 68 MtCO2e emissions reductions by 2030, through several measures including electric vehicle and heat pump adoption, fuel switching and electrification in heavy industry, and renewable technology deployment.

• Fossil fuels are the outliers. Oil and gas sector, however, has a diverging projection, ranging from either flat to 33 MtCO2e emissions with enhanced methane regulations, hydrogen substitution, and deployment of solvent-based extraction technologies.

• What’s going to move the needle? The controversial, and now shelved, Oil and Gas Emissions Cap (excluded from the projections) would have only added 3MtCO2e in emissions reduction. Meanwhile, agriculture practices along with nitrogen management could contribute up to 12 MtCO2e in emissions reduction.

The Institute in Action

• John Stackhouse will be on the ground in Davos next week. Watch out for his analysis on what he saw, shared and heard at the world’s most influential forum for discussion and debate on the global economy.

• Lisa Ashton, the Institute’s Interim Head, was the keynote speaker on how agri-food can lead a new era of economic development at the Saskatchewan Crops Forum this week.

• Lisa also hosted a roundtable in Saskatoon with industry leaders and investors on growth capital in Canada’s agri-food sector to dive into the investment challenges that were highlighted in the Next Generation of Growth.

• Shaz Merwat, Director of Energy Policy, is moderating a panel on Canada and B.C.’s Competitive Edge as a Global Gas and LNG Producer on Jan. 21 at the B.C. Natural Resources Forum.

On our binge list

• The Elements of Power: A Story of War, Technology and the Dirtiest Supply Chain on Earth by Nicolas Niarchos, on what it takes to usher in the battery era.

• TV series Landman, starring Billy Bob Thornton, that shows wildcat drilling is alive and well in Texas—often powered by wind turbines.

• Disruptors podcast: Alberta’s Next Energy Mix. John Stackhouse speaks with Premier Danielle Smith about the future of power in Alberta.

• Things Are Never So Bad That They Can’t Get Worse (2022), by William Neuman, on the steady collapse of Venezuela over the years.

➔ Mark Carney’s Climate Competitiveness Strategy spotlights critical minerals and tax credits

➔ What to expect at COP30

➔  Gates’ reboots his climate view

➔ Further reading: Unearthing Value: How nature can play a critical role in pro-growth agendas – RBC

Hot takes

➔ The fight for critical minerals is only heating up. Beijing and Washington may be on talking terms these days (unlike Ottawa and Washington), but the fight for rare earth supremacy will be this decade’s big battle. Canada has entered the fray with 26 new partnerships with 9 allied countries and has earmarked capital in the new budget (see below). Vivan Sorab, Senior Manager of Clean Tech, says Canada has the resources, the capital, and the intellectual property to start building a supply chain, but needs to mobilize at speed. That will involve (a) fast-tracking funding for rare earths, (b) guaranteeing demand for the minerals, and (c) building domestic processing capability. Read Vivan’s full briefing here.

➔ Across the pond, several EU members refused to agree to legally binding 2040 goals. Member states agreed to cut emissions by between 66.3%-72.5% by 2035 as part of a submission to the UN ahead of the COP30 Summit in Brazil. But several member states refused to agree to the legally binding 2040 goal unless significant concessions were made that would allow countries to claim 5% of their emissions reductions by selling international carbon credits. The EU also agreed to weaken other politically sensitive climate policies, including delaying the launch of an upcoming EU carbon market by one year, to 2028.

A climate competitive Canada

The federal budget promised to show how the Mark Carney government intertwines climate policy with its growth agenda. It’s early days, but as the federal climate policy takes shape it presents a fascinating trade—stronger industrial carbon pricing and clean electricity regulations for a likely end to the emissions cap and an extension of tax incentives for carbon capture. Let’s see what Alberta and Saskatchewan have to say. (read John Stackhouse’s view on the federal budget here.)

Here’s what caught our eye:

Industrial Carbon pricing: Canada needs robust carbon markets to support clean growth investments. The government plans to work with provinces to set a multi-decade industrial carbon price trajectory that targets net-zero by 2050. It will give businesses confidence. The plan is to fix the benchmark and harmonize across the country in providing a common, strong price signal. We wrote about the importance of harmonizing industrial carbon pricing last year. Expect Canada Growth Fund to continue to issue carbon contract for differences (CCfD) for projects.

Methane: The government aims to finalize enhanced methane regulations for the oil and gas sector and landfills, and work with provinces to negotiate equivalency agreements.

Oil and Gas Emissions Cap: The government plans to leverage technologies such as carbon capture and storage to lower oil and gas sector emissions, which means the Oil and Gas Emissions Cap “will no longer be required.”

Clean Fuels: The government plans to maintain the clean fuel regulations meant to help transition Canada toward less carbon-intensive gasoline and diesel, a rule that the Conservatives have criticized.

Tax credits: The government expanded pre-investment tax credits for green manufacturing, as well as carbon capture and storage (CCUS). Under the budget, the CCUS tax credit, which covers up to 60% of relevant investments, would extend the current rate until 2035.

Critical minerals: A $2-billion Critical Minerals Sovereign Fund will include equity investment, loan guarantees and offtake agreements. The $371.8 million First and Last Mile Fund aims to bring late-stage projects to production stage. Additional critical minerals, like antimony, indium and gallium, are now eligible under the clean tech manufacturing tax credit.

What’s at stake at COP30

It may be more low-key than previous years, but COP events always serve as a pulse check on the state of global climate action—or inaction.

Here’s what to expect from the event:

Belém, the host with the most (to lose): The north Brazilian city is the gateway to the Amazon region—known as the “lungs of the world” – as it produces 20% of the world’s oxygen. But the region is facing disturbances through land use, wildfires and climate-change fuelled extreme weather, plus the relentless march of industrial and commercial expansion. So Belém seems like a fitting, if far-off, location showcasing the ground realities of climate change, unlike the more convenient and glitzy financial hubs of New York and Dubai.

A decade after Paris. The world’s changed since 2015 – when virtually the entire world was united in its pledge to lower emissions. Now, not so much. Current mood: uncompromising. Commodity exporters are feeling emboldened, while climate litigation is at an all-time high.

A logistical challenge for a region with 18,000 rooms. Host Brazil expects 50,000 policy types to attend the negotiations, and has even suggested some delegates share rooms. Organizers are also arranging cruise ships, private properties and converting schools into hostels to accommodate climate-biz tourists. Last month, 81 countries were in negotiations with organizers over hotel rooms while 87 countries had already reserved accommodation, according to Brazil’s COP30 Presidency.

There may be a U.S.-sized hole at COP. The U.S., which is in the process of pulling out of the Paris accord, does not plan to send “high level“ representatives to Belém. Still, Washington’s shadow is expected to loom large over negotiations.Organizers have high hopes. COP30 delegates are pushing forward five key agenda items: (1) stronger national climate plans with clearer investment pathways, (2) mobilizing US$1.3 trillion for climate action, including US$300 billion for developing countries, (3) incentivizing sustainable and climate-aligned investment, (4) finalizing rules for an UN-backed global carbon market, and (5) a “fair and inclusive transition” away from fossil fuels, ensuring support for workers and vulnerable communities impacted by climate change. Let the negotiations begin.

Gates reboots his climate view

Bill Gates, the Microsoft co-founder who launched a successful second career as a climate tech financier, recently shared “some tough truths” about climate. His latest note has upset some but have been welcomed by others, including the U.S. President.

Beyond the headlines, his comments may be more nuanced.

Reframe the risk: Gates argues that while climate change will profoundly reshape global systems, it is unlikely to render the planet uninhabitable. His emphasis is on proportionality—recognizing climate change as a chronic, worsening challenge rather than an existential endgame. A new UN report on climate action now expects temperatures to rise 2.3-2.5°C, compared to 2.6-2.8°C in last year’s report, leaving the “world heading for a serious escalation of climate risks and damages.”

From temperature to welfare: Gates has urged that climate action should be evaluated not only by emissions avoided or degrees of warming averted, but also by how effectively it improves human welfare, particularly in vulnerable regions. It aligns with a growing call in development circles to integrate adaptation and poverty reduction within the climate agenda.

Innovate, innovate, innovate: Gates continues to position technological innovation—in clean power, industrial processes, and agriculture—as the decisive tool for decarbonization, suggesting that will drive lasting emissions reductions.

Avoid doomsday narratives: Alarmism may erode public trust and misallocate resources, Gates notes. Some might argue though that the continued focus on climate issues drove action and channelled trillions of dollars into energy transition.

The Institute in action

➔ John Stackhouse , Senior Vice-President, Office of the CEO, spoke to a G7 delegation, and advisers, ahead of a G7 Energy and Environment Minister meeting in Toronto last week, sharing insights on how RBC sees the world evolving. Read his keynote here.

➔ At the Toronto Global Forum on Oct 17, John held a main-stage conversation with Heather Chalmers, President and CEO of GE Vernova Canada, and was also part of a working session on skills and supply chain issues with Ontario’s energy minister Stephen Lecce.

➔ At the GLOBE Food Leadership Summit in Calgary the Canadian Alliance for Net Zero Agri-Food (CANZA) unveiled the Million Acre Challenge, a new initiative to scale climate- smart farming practices across Canada.

➔ At the Arrell Food Summit on Oct 21, Lisa Ashton, Director of Agriculture Policy, sat down with Rene Van Acker, President and Vice-Chancellor of the University of Guelph, to discuss Canadian agriculture’s sustainable growth while addressing one of its most pressing challenges—the country’s growing innovation gaps in agri-food.

➔ Lisa also took part in a panel on climate-smart agriculture food systems at Simon Fraser University, Vancouver.

Hot takes

➔ The IEA has tempered Canada’s renewable energy growth forecast. The International Energy Agency’s latest report still expects Canada to add 21 gigawatts of renewable energy capacity by 2030, almost double the growth of the previous six years, mainly in onshore wind and utility-scale solar PV. However, that’s an 11% decline from the IEA forecast from last year. Ongoing grid challenges and policy and regulatory changes in Alberta were among the key reasons for the IEA pulling back its forecast. It’s a major reversal elsewhere too, with the U.S. and China—the world’s two largest renewable energy markets—facing slower growth amid policy shifts, supply chain vulnerabilities and financing pressures.

➔ Can Canada attract H1-B visa types that are no longer welcome in the U.S. For all the talk of Canada capitalizing on U.S.’s visa snarls to attract the world’s brightest and smartest comes a sobering stat: it takes 53 months for Canada to issue a Start-Up Visa (SUV). A new Betakit study shows that the decade-old program has been facing several challenges, while the government has also slowed the process as part of a wider immigration slowdown. Getting some of the world’s smartest climate, cleantech and innovative minds would require some quick thinking—and processing—from policymakers.

➔ David Greybeard made Jane Goodall. The chimpanzee, with the silver facial hair, was the first animal conservationist Goodall saw using tools and eating meat—sparking a lifelong quest by the conservationist in her pursuit of a greener and richly-biodiverse Earth. She anthropomorphized animals (pointedly rejecting the established practice of using numbers to identify animals by naming Greybeard and his family). By making it personal, Goodall—who died last week, aged 91—lifted them up and, through the Goodall Institute saved countless (though not nameless) species. Goodall was ahead of the curve, but her focus on nature is finally gaining traction.

➔ Further reading: Unearthing Value: How nature can play a critical role in pro-growth agendas – RBC

Cultivating the next generation of Ag innovators

Canada’s agriculture sector has all the ingredients to be the best in the world—productive soils, temperate climate, advanced on-farm mechanization, and a growing agri-food manufacturing sector. But capitalizing on the moment, won’t be easy, according to a new RBC Thought Leadership report . The sector has struggled to attract the right mix of talent and maintain the level of investment in R&D that is required to remain a global leader.

Research by Lisa Ashton, Director of Agriculture Policy, highlights the scale of the challenge:

• Canadian agriculture has immense potential, but the innovation curve may be slowing down. Canada is home to some of the world’s most productive soils and innovative farmers. But agriculture’s annual growth in productivity has declined to about 1% over the past decade from 2% the previous decade, suggesting that few breakthrough innovations are making it to farms.

• The sector is not attracting enough talent. Job vacancy rates are 1.5% above the national average. Less than 1% of STEM and business graduates, who play increasingly important roles on the modern farm, are choosing occupations in agriculture.

• The research and development system is becoming less diverse. Public investment in agriculture knowledge generation, which includes R&D, has declined by 15% since 2010. Private sector outsourced R&D to universities is down 77% over the past five years. And the number of enterprises conducting R&D in the past decade has shrunk by 29%.

• Other countries are pulling ahead. Canada has fallen behind Australia, the U.S., Japan, and Brazil in public investment in agriculture knowledge generation. Home-grown agriculture commercialization is in a slump as the country’s trade balances grow in innovation areas including agriculture chemicals, fertilizers, and services.

• Commercialization of agriculture solutions are headed south. Investment in American agri-food technology startups has been 22 times larger than Canada’s over the past 5 years. The outsized market for investment in the U.S. is pulling Canadian innovation south for capital, mentorship, and market application.

To address the agriculture skills gap, RBC launched an investment initiative in Winnipeg today to help cultivate the next generation of Canadian farming. Introduced alongside Manitoba Premier Wab Kinew, RBC Generate was launched with a $5 million, five-year investment in agriculture in the Prairies with plans to expand through programming delivered as part of a national movement with farmers, The Canadian Alliance for Net-Zero Agri-food (CANZA) Nature United, Sustainable Food Systems for Canada (SF4C) and Indigenous sustainable farming initiatives.

NUCLEAR

SMRs: Small but mighty

RBC Thought Leadership’s Vivan Sorab moderated a panel on Tripling Nuclear Power by 2050: The Role of SMRs in Achieving Global Energy Goals at the SMR Forum in Edmonton last week.

Joined by Atkins Realis Carl Marcotte, Terrestrial Energy’s William (Bill) Smith, GE Vernova Hitachi Nuclear Energy’s Lisa McBride, and George Christidis from the Canadian Nuclear Association, the panel explored the role of SMRs and Canada’s advantages. Here are some of the key takeaways:

• Collaboration is Canada’s competitive advantage: Ontario has taken the lead, commencing construction of the G7’s first grid scale SMR, and has brought together government, utilities, the Canadian nuclear supply chain, and academics to build Canada’s first new nuclear plant in 3 decades. As provinces outside of Canada’s existing nuclear provinces consider nuclear for the first time, building on this collaboration will be key to success.

• Canada must seize the opportunity: With initiatives like Canada’s SMR Roadmap and first-mover advantage on SMR construction, Canada has positioned itself as a leader in next-generation nuclear. But with competition from the U.S. and other countries heating up, Canada must act fast to maintain its lead and ensure that its SMR expertise enables energy security and decarbonization globally. More synergy between the federal and provincial governments will be critical.

• Investment must grow: Canada’s future nuclear fleet will need new investment to sustain a growing supply chain, a next-generation workforce, and the skilled tradespeople needed to build new reactors.

• SMRs have a big price tag. The Ontario Power Generation’s four SMRs at Darlington with a capacity of 300-magawatt are expected to cost $20.9 billion. That compares to the 377-megawatt natural gas-fired power station in Saskatchewan carrying a price tag of $825 million. While SMRs can have geostrategic value, they will still need to compete with gas, hydro and bigger nuclear plants to attract capital.

• Indigenous communities are front and centre: New nuclear projects will not succeed without placing indigenous communities at the forefront. Engagement must be early and projects must enable indigenous participation and equity.