Driven by aggressive provincial housing mandates, multibillion-dollar federal investments in clean energy and electric vehicle supply chains, and the push to unlock critical minerals in regions like Ontario’s Ring of Fire, we are accelerating infrastructure and resource development at a pace not seen in decades. At the same time, Canada has committed not only to protect nature but to halt and reverse biodiversity loss by 2030 and put nature on a path to full recovery by 2050.

These goals are typically framed as being in conflict. But the real problem is not the tension between development and nature. It is that we have never built a system that allows them to work together.

Canada’s growth agenda is not optional. Housing shortages, energy systems and major infrastructure projects must move forward quickly. The question is not whether we develop. It is whether we continue to do so in ways that degrade the natural systems our economy depends on, or whether we build a system that allows development and nature to advance together.

The missing piece isn’t capital – it’s architecture

Over the past decade, a familiar argument has taken hold: nature is valuable, essential to the economy and increasingly at risk. The conclusion seems obvious. Capital should flow toward protecting and restoring it.

But it hasn’t, at least not at the scale required.

The reason is not a lack of capital, policy intent or even progress on measurement. It is a lack of architecture. Nature largely remains outside the systems that drive investment decisions. It is measured inconsistently, accounted for incompletely and governed through fragmented, project-by-project processes. The result is predictable: nature remains economically invisible and therefore largely non-investable.

That is now beginning to change.

The economic stakes are enormous. Globally, an estimated $700 billion per year is required by 2030 to halt and reverse biodiversity loss. At the same time, Canadian pension funds and institutional investors manage hundreds of billions in capital seeking long-term, stable returns.

The issue is not capital. It is the absence of structures that allow it to flow into nature.

A convergence of conditions

Canada’s emerging nature strategy signals a structural shift. It positions nature not just as something to protect, but as a foundation of long-term economic prosperity. More importantly, it introduces tools that could fundamentally reshape how development and conservation interact.

One of the most significant is the use of regional assessments under the Impact Assessment Act. This tool is designed to evaluate cumulative environmental, social and economic effects across entire regions, including past, present and future activities.

This is a quiet but profound shift. For decades, environmental decision-making in Canada has been reactive and project-based. Regional assessments are emerging as a mechanism to shift toward proactive, forward-looking land-use planning that can define ecological limits in advance.

They are more than a planning tool. They are the foundation of a functioning nature market.

By defining cumulative impacts, ecological thresholds and development scenarios at a regional scale, regional assessments create the clarity and predictability that capital requires. Without this, nature remains too uncertain to price, too fragmented to manage and, ultimately, too risky to invest in.

If Canada is serious about becoming a nature-positive economy, regional assessments cannot remain occasional exercises. They must be institutionalized, scaled and embedded into how development decisions are made across the country – and quickly.

At the same time, other foundational elements are falling into place. Advances in ecosystem measurement and accounting frameworks are improving how nature is understood and valued. Financial frameworks are beginning to integrate nature-related risks into decision-making. Artificial intelligence, satellite monitoring and environmental data are making it possible to measure and verify ecological outcomes at scale.

Crucially, Indigenous stewardship is emerging as a central pillar of both conservation and economic participation. Large-scale Indigenous Protected and Conserved Areas, such as the Seal River Watershed, demonstrate how Indigenous leadership can secure vast carbon sinks and protect biodiversity at scale. Mature initiatives like British Columbia’s Great Bear Forest Carbon Project show that conservation can also be highly investable, generating long-term revenue streams through verified ecosystem services.

Paired with financial tools such as Indigenous loan-guarantee programs, Indigenous communities are uniquely positioned to become primary suppliers and equity partners in nature-based solutions.

The constraint is no longer the absence of data alone. While important gaps remain, advances in environmental measurement, accounting and monitoring are rapidly reducing this barrier.

Individually, these developments are important. Together, they represent something more: Canada is no longer missing the pieces. It is missing the architecture.

From protection to recovery – and the case for net gain

This shift is reinforced at the global level. Under the Kunming–Montreal Global Biodiversity Framework, countries have committed not only to protect nature, but to halt and reverse biodiversity loss by 2030 and restore ecosystem integrity by 2050.

That ambition goes beyond conservation. It implies a transition from minimizing harm to actively restoring nature – from “no net loss” to net gain. Over time, development must not only reduce its impact, but contribute to rebuilding natural systems.

From limits to markets

If regional planning defines ecological limits, it also creates something markets require: certainty.

That certainty can be translated into a simple but powerful mechanism.

When major projects affect ecosystems, they are generally expected to follow the mitigation hierarchy: avoid, minimize, restore and only then offset residual impacts. In practice, however, its application remains uneven and fragmented, limiting its effectiveness as a foundation for consistent, investable outcomes.

What if those residual impacts were consistently quantified and priced? What if developers were required to deliver not just mitigation, but net-positive outcomes?

This is not theoretical. In the United Kingdom, “biodiversity net gain” rules have already created a functioning market that channels private capital into restoration and conservation.

Canada is now in a position to build its own version – potentially more ambitious and more integrated.

A Canadian nature-positive market

At its core, the system would be straightforward:

• Regional plans define ecological limits and priorities. 
• Developers are required to address impacts, with residual effects converted into measurable obligations. 
• Markets allow those obligations to be met through investment in restoration and ecosystem services. 
• Indigenous communities, conservation authorities and landowners become suppliers of nature-based solutions. 

Over time, this could expand beyond biodiversity to include carbon, water, flood mitigation and habitat, creating multiple, stackable revenue streams.

With the right structure, these projects begin to resemble infrastructure investments, with long-term, stable returns tied to measurable ecological outcomes.

Sticks, carrots – and a familiar playbook

For this system to scale, it will require both regulation and incentives – and, crucially, alignment between federal environmental ambition and provincial jurisdiction over natural resources.

In practice, this means a combination of “sticks” and “carrots”: clear ecological limits, mandatory net-gain requirements and enforceable obligations, alongside tax incentives, blended finance and public guarantees that reduce risk and attract capital.

Canada has used this model before. Flow-through shares and public–private structures helped build the oil, gas and mining sectors. The same logic can now be applied to nature.

A nation-building opportunity

This is not environmental policy. It is economic strategy.

Canada has a once-in-a-generation opportunity to move from protecting nature to financing it, embedding natural assets into the same systems that fund roads, energy and housing.

The choice is no longer between development and conservation. It is between continuing with fragmented approaches that fail to scale or building a system where growth and nature are structurally aligned.

The pieces are now on the table. What remains is the architecture.

Peter van Dijk is a former global finance executive, adjunct professor at Brock University, and incoming PhD researcher at the University of Ottawa focusing on nature finance and the economic architecture for a nature-positive future.

The post How to put nature at the centre of investment decisions appeared first on Corporate Knights.

But the hope of federal governments to unlock supposedly sleeping animal spirits is a long-standing one, and the problem has proven resilient. What is required is a break with models whose narrative doesn’t match results and a decision to upset cornerstones of Canada’s economic framework. 

To unlock investment and corresponding productivity gains, the Carney government will need to bring real competition for markets and workers to a corporate sector that has been doing better than ever under the status quo.

Do profits drive investment?

A quick survey of moves by the Carney government on the economic-policy front reveal reforms to the tax system to encourage investment, work to address regulatory barriers across borders and governments, and the spinning up of public-sector funding bodies to complement private-sector investment.

The narrative is that Canada’s productive capacity is held back by taxation that blunts financial rewards, a regulatory system that throws sand in the gears of private enterprise, and a public sector reticent to invest. For taxation in particular, the logic seems clear: why invest if you can’t keep a meaningful portion of the profits? But recent experience at home and abroad suggests that this proposed remedy for unlocking lagging investment and productivity growth comes with a caveat.

If profit and investment move in a pack, Canada should be in the midst of an investment golden age. Changes to the taxation of corporate profits to spur investment – both those enacted in the most recent budget bill and further cuts requested by business groups – come at a time when Canadian corporations have never been more profitable. 

Since 2020, there has been sustained growth in Canadian private-sector profits without a corresponding increase in capital expenditures. Except for oil and gas extraction, sectors that have seen real growth in capital expenditures – mining, utilities, transportation – have experienced relatively flat profits since the pandemic. This suggests that the link between profits and investment is not as clean as initially pitched. Amid an all-time high in macro-level profits, the tax incentives designed to drive investment brought in through Budget 2025, the “productivity super-deduction” and “scientific research and experimental development” tax credit enhancements, might at best change the timing of investment decisions already on the books. 

But recent efforts do not bode well for this strategy. The previous government’s suite of clean-economy tax credits, designed to encourage investment in greener economic activities such as carbon capture, utilization and storage, still a plank of the current government’s approach to climate change, have seen little uptake. As of July 2025, the auditor general of Canada reports that clean-economy credits related to carbon management, hydrogen development and greener manufacturing have seen no uptake. 

A fair response is that these tax credits were misguided in the first place in their attempt to spur investment in sectors where the business case, credit or not, does not exist. But what, then, of more broad-based efforts to use tax reform to spur investment?

The Tax Cuts and Jobs Act (TCJA) of 2017 brought in by the Trump administration represented the largest cut to the United States’ corporate tax system in a generation. While the headline figure was the reduction of the federal corporate tax rate from 35% to 21%, the act contained several investment-specific provisions, including a similar super deduction accelerating the expensing of capital investment for businesses. While the uptake of the tax cut has been universal, adding more than a trillion dollars to the United States’ annual deficit, the promised investment gains have been scarce. A 2023 analysis by the think tank American Compass showed that, despite allowing U.S. corporations to keep billions more on the books, the TCJA has had no measurable impact on investment-driven growth. 

What can spur investment?

If at the macro level Canadian corporations are already awash in profits, what can Canadian policymakers do to unlock desired investment and corresponding productivity growth? 

The answer, counterintuitively at a moment when Canadians have never felt less secure of their place in the world, is competition. While a sufficient return is a necessary condition of investment, it is the competitive process that keeps the flywheel in motion. The rivalrous process of competition, being chased by another firm attempting to outdo you and steal share, is what ultimately spurs companies to continue to invest in new and better ways of doing business. 

Studies show that competition is a driver of productivity-enhancing investment, and the relaxing of the competitive constraint is a recipe for complacency. While academics such as Philippe Aghion make the case for a point at which competition is so fierce that it ultimately blunts competition, a market singularly obsessed with beating out the competition to win the business of customers seems like a side effect worth bearing.

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In this area, the Carney government has made encouraging moves. Efforts to reduce interprovincial trade barriers can create the conditions for greater competition among Canadian regional businesses and economies. Though rarely framed in these terms, we are exposing our own companies to greater competition. On the sectoral front, Carney is finally set to open up Canada’s infamous banking oligopoly, a move the Trudeau government set in motion.

The most recent spring economic update provided a clue that this thinking might be resonating on a deeper level within the federal government. The headline of “Driving Productivity and Affordability Through Competition” teased a “whole of government” approach to spurring competition that is desperately needed. But, so far, what’s on offer is platitudes about red tape and a promise of future action.

To successfully drive productivity, the government must take an imaginative approach to the project of a more competitive Canadian economy.

Rather than cutting red tape, Ottawa must understand that regulation can be a powerful tool for opening markets for contestation. Long-standing oligopolies must be broken – open if not necessarily up – whether through orders to spin off business lines or regulation that erodes walled gardens. Here, the example of progress on competition in the banking sector is encouraging and cautionary. Encouraging because a growing list of firms angling to break down the gates and cautionary because of the sheer volume of sand incumbents were able to throw in the gears of the modernization of the plumbing of Canada’s banking sector.

The Carney government must also understand an underappreciated vector of driving productivity: competition for Canadian workers. While often framed in terms of vying for market share, competition for inputs is a critical driver of productivity. As the recent oil price shock has shown, make an input more valuable and you increase the incentive to reduce your reliance on it. Paradoxically, competition for Canadian workers must drive wages higher to drive the adoption of the technologies to augment their productivity.

This runs counter to Canada’s pitch as a source of high-quality, low-wage labour for companies both foreign and domestic. While the Temporary Foreign Worker Program has come under scrutiny, just as damaging to our productivity ambitions has been the discounting of our most qualified. By putting high-quality and relatively low-wage employees on offer, Canada has been able to attract businesses willing to set up branches within our borders. While this approach may have generated good jobs and recognizable logos on buildings, it has created a tension between generating the high wages that drive productivity and placating a corporate community dependent on cheap labour. Whatever the mechanism, a tighter labour market with more intense competition for Canadian workers will be key to breaking out of Canada’s persistent productivity slump.

The Carney government faces the unenviable position of breaking out of a secular productivity slump while familiar elements of our traditional economic model break away. Meeting that moment will involve breaking out of the policy responses whose narrative has fallen short of results. Allowing competition to flourish for both markets and workers is the path forward.

Keldon Bester is the executive director of the Canadian Anti-Monopoly Project and a fellow at the Centre for International Governance Innovation.

The post If Carney wants to drive investment in Canada, competition is the way appeared first on Corporate Knights.

This “clean and conventional energy superpower” construct pops up a lot in recent government speeches and announcements and was the framing for the prime minister’s “Forward Guidance: Canada’s Energy Future” video released just before Canada Day.

The argument is a double-barrelled one.

Let’s start with the clean part of the equation: looking into the future, the world will be powered by electricity, not fossil fuels. Electricity is inherently more efficient, and therefore cheaper for consumers. It’s also something that can be produced domestically at lower and lower costs, and something that we can control, freeing the Canadian economy from the volatility and unpredictability of foreign-caused oil price spikes.

Canada needs to lay track to prosper in this emerging Electric Age, but in the meantime the Carney government argues that the path to that cleaner future will be paved with the profits from expanded oil and gas production. Maximizing this profit requires curbing the industry’s greenhouse gas emissions so that Canadian oil and gas is the “greenest” option in the marketplace (something, it should be noted, that Canadian companies have been claiming for years). This is the “conventional” part of the argument, and there is no doubt, after last week, that the federal government is prepared to throw everything but the kitchen sink at it to make it a reality.

In fact, it appears Ottawa is even prepared to ignore an important aspect of the recently signed Alberta–federal memorandum of understanding related to the necessity of the new pipeline having a private-sector proponent. With none in the offing (which Canadian Climate Institute board chair Peter Nicholson predicted would be the case in a widely read recent article), the Alberta and federal governments are contemplating up to 90% public ownership.

What isn’t yet clear is the extent to which the federal government is prepared to put its money where its mouth is when it comes to sparking the “clean” side of its energy superpower ambitions.

The prime minister’s statements last week could not have been more categorical. Invoking the name of the visionary founder of Ontario Hydro, he said, “Our new plan will help build clean energy on a scale that would astound even Sir Adam Beck.” Later in his video, the PM underlined the broad societal benefits of electrification: “The path to affordability is electrification. The path to competitiveness is electrification. The path to sustainability is electrification.” He’s on solid ground with all of this, and recent Canadian Climate Institute research underlines this point.

Thus far, however, the rhetorical enthusiasm for “clean” has not been backed by on-the-ground support at a scale similar to what’s rolling out for “conventional” projects. The duelling announcements last week were a case in point. The press conference by Minister Hodgson referenced above was for a federal government contribution of $26 million for 17 clean-energy projects. A couple of days prior, Prime Minister Carney and Alberta Premier Danielle Smith announced that Canadian taxpayers may be on the hook for up to 90% of a $35- to $43-billion price tag.

Millions of dollars for “clean” versus billions for “conventional.”

The next few months will provide no shortage of key moments that put the federal government’s “clean” commitments to the test.

Will Saskatchewan keep burning coal in violation of a Harper-era policy? Will the dispute between Newfoundland and Labrador and Quebec over hydro development on the lower Churchill River be resolved? Will Alberta continue its de facto moratorium on low-cost renewables while building new unabated natural gas plants for artificial intelligence?

There will also be ongoing tests of the commitment to shrink the emissions of Canadian oil and gas production: it’s not clear at the moment whether the revised industrial carbon price will actually enable the long-promised Pathways carbon-capture project.

After last week, it’s clear that Carney intends to forge an entirely new way forward on climate and energy – one he views as more strategic and sustainable than climate policies of the past and aligned with a goal of net-zero emissions by 2050. In his own words: “The climate crisis is still with us and our commitment to fighting it is absolute.”

Achieving that goal requires deliberate policy choices. Net-zero isn’t a switch that can be flipped in 2045; becoming a clean-energy superpower requires steady, sustained effort. The most interesting question to watch in the months ahead is whether Carney’s government assembles a new climate and clean-growth plan with sufficiently ambitious detail to achieve the outcomes the prime minister has now personally set.

Rick Smith is president of the Canadian Climate Institute.

The post Getting serious about clean energy in Canada appeared first on Corporate Knights.

But what if the projects Carney is fast-tracking will not actually make Canada stronger? Most of the energy-related projects of national interest currently on the table for billions in taxpayer subsidies and other support would see Canada further expanding fossil fuels or nuclear energy. Many of these are likely to be terrible investments, further entrenching our economy with inefficient and declining energy platforms – at the exact moment when technological advances are driving many global buyers to rapidly shift their energy systems in the other direction.

Instead of propping up sunsetting industries, we think Canada needs a hard pivot. Our organization Adamant spent this spring working with many smart partners on a vision built around saying “yes”: yes to large-scale, transformative, distributed energy megaprojects. If these projects are supported in the same way as fossil fuel and nuclear megaprojects, they would deliver more jobs, more economic independence and help with affordability – all with less market risk and far less pollution.

Here are five clean megaprojects that are worth building a nation around.

Triple our clean-energy capacity

Imagine paying the equivalent of 25 cents a litre to fill your tank. Imagine your heating bill dropping by half because your heat pump runs on cheap, clean electricity. Imagine hundreds of thousands of new jobs in every part of the country, while Canadian entrepreneurs and factories win global contracts because their products are made with clean power.

All of that is possible, but only if Canada builds enough clean electricity to make it happen. The Public Policy Forum notes that Canada’s power output will need to be two to three times larger by 2050 than it is today and that we need to build more electricity infrastructure in the next 25 years than we built in the previous 100.

Carney’s grid plan announced in May is a good start, but the vision should be more ambitious, it should happen faster, and it should go all-in on clean. First Nations are already showing the way. The Athabasca Chipewyan First Nation in Alberta owns three solar farms. Henvey Inlet Wind is a massive project on Georgian Bay, generating enough power for a quarter-million Ontarians. Almost all of B.C. Hydro’s recent clean-power proponents are Indigenous co-owned. Let’s keep going.

Get serious about energy efficiency

Energy efficiency could be Canada’s most cost-effective economic lever. Building efficiency into our aging buildings and homes would cut energy costs by more than 60% and create hundreds of thousands of jobs. Every dollar invested in energy efficiency produces $4 to $7 in gross domestic product growth, a productivity multiplier larger than virtually any other infrastructure investment category.

With two-thirds of Canadian buildings built before 2000, transforming residential and commercial heating, ventilation and air-conditioning systems is a big undertaking, yes, and will require an integrated approach. But the payoffs are immediate.

The results will be worth it, driving down energy bills while creating up to 200,000 jobs in all areas of the country. Good, local jobs that are tariff- and AI-proof. The question is whether Canada is ready to treat energy-saving innovations as the nation-building priorities they are.

Wire Canada together

Canada has some of the world’s best wind, solar and hydropower resources, and huge geothermal potential. The problem is that these resources are spread across provinces that don’t have the transmission lines to share them.

Right now, more than 80% of Canada’s electricity trade flows south to the newly unreliable United States, while our own provinces barely trade with each other. This weakens grid reliability and saps local economies.

Wire the country together with new transmission lines and the payoff is real: doubling the B.C.–Alberta connection alone is projected to return nearly $6 for every dollar spent. Nationally, upgrading the grid would create tens of thousands of jobs. The Ontario East–West Tie, a single 450-kilometre line, generated 2,600 person-years of work and more than $200 million in economic benefit, with Indigenous workers making up more than half the crew.

Revolutionize the housing industry

The scale of our housing crisis demands big new ideas. The government’s Build Canada Homes initiative tinkers around the edges, delivering only 26,000 homes over five years, a sliver of the half a million we need every year just to regain some margin of affordability. Here’s something that will: a massive smart-modular-homes industry built right here in Canada.

Canadian workers in regional factories could build 150,000 energy-efficient modular homes per year by 2050. These high-quality, high-tech homes manufactured in worker-friendly conditions are faster and cheaper to build and offer residents permanently low utility bills thanks to innovative energy-efficient technologies – also made in Canada. We could create up to 100,000 jobs and significant affordability benefits for people locked out of today’s broken housing markets.

Fanciful? Sweden already did it in the 1960s, building a million homes in 10 years and turning prefabrication into a national industry that still works today. Japan has produced an average of 150,000 units of modular housing per year since 1995. Why not Canada?

Unlock Canada’s geothermal bedrock

Geothermal is the biggest clean-energy opportunity that most Canadians have never even heard of. We sometimes forget that the earth under our feet is an infinite source of energy. Canada produces today only enough geothermal energy to power a small town, while Europe runs more than 150 geothermal power plants that already supply electricity to 11 million people. That’s on top of another 400 district energy systems that provide direct heating and cooling.

If low-cost, always-on energy isn’t enticing enough, geothermal uses virtually the same drilling skills and equipment as the oil and gas sector. As the technology advances, it is opening up what the International Energy Agency predicts could be a $3.5-trillion industry. Act boldly and Canada could be a global leader in geothermal energy – both as a low-emissions domestic energy source and a booming global technology export industry.

With our abundant clean natural resources, highly educated population and advanced economy, Canada has significant advantages in the global energy transition. Instead of doubling down on the dirty and inefficient energy systems the world is rapidly leaving behind, why not build Canada better? These clean, distributed energy projects will provide more jobs, save Canadians money and align us with the direction the rest of the world is fast pursuing.

Excited? Read our full project plans on the Build Canada Better section of the Adamant website and sign up to use your voice to advocate for better choices from our governments.

Jason Mogus is the chair of Adamant, a new public policy organization promoting smarter economic choices for Canada. Tyee Bridge is a journalist and researcher and a coauthor of the net-zero scenario report Jobs for Today. 

The post Build Canada better: Five clean megaprojects worth building a nation around  appeared first on Corporate Knights.

Since 1983, Canada has experienced more than 300 catastrophic weather events (extreme weather occurrences causing more than $30 million in insured losses; $25 million prior to 2022). Four decades ago, Canada averaged about two catastrophic events annually; by the mid-2020s, that figure climbed to roughly 15 per year. From 2009 through 2025, insured losses from climate-related disasters jumped to average nearly $3 billion annually versus $400 million to $700 million typically each year from 1983 to 2008.

As disturbing as these figures are, they do not capture the full extent of losses. For every $1 of insured losses, there are usually another $3 to $4 of uninsured costs. Nor do insurance figures convey the lives lost or the full extent of the economic, financial and health impacts of catastrophic weather. The former includes the tragic loss of 619 lives during British Columbia’s heat dome in 2021. The latter includes large gross domestic product and income losses and the much higher government spending that occurs. For example, total economic loss estimates and the large-scale government firefighting and emergency assistance for the widespread Canadian wildfires in 2023 exceed $10 billion.

These and other tragic impacts and escalating costs from extreme weather make greater resiliency through climate adaptation both essential and long overdue.

Yet three major political barriers prevent effective Canadian adaptation from being a key policy goal: lack of understanding, inadequate will and weak policy capacity. The problem of understanding is that adaptation is not seen as core economic and fiscal policy as well as crucial environmental and health policy. The problem of will reflects the longstanding, excessive focus of government on announcing policy versus genuine and practical action, and the dominance of other priorities in the political agenda. The problem of capacity is evident in the modest funding for, and limited in-house expertise of Ottawa and the provinces in, adaptation design and implementation.

Creating a national office for climate adaptation is a critical step toward addressing these deficiencies. A national office would help lessen problems from the lack of understanding and political will. It would provide much-needed analytical and advisory capacity to improve federal policy design and implementation.

1. Lack of political understanding

Climate adaptation and mitigation are both essential

Mitigation means preventing or reducing greenhouse gas emissions that drive climate change. This is an existential Canadian need now and, especially, over the medium to long term. Adaptation refers to protecting or lessening the impacts on people, business and infrastructure from climate change and extreme weather. Adaptation is vital to contain the rising costs and risks of climate change while giving Canada the opportunity to make substantive progress in mitigation.

Effective climate-change policy comprises adaptation and mitigation. It is a false narrative that there is choice between them. Mitigation depends upon adaptation to allow the time for its measures to succeed. Adaptation will not work if climate change is not mitigated. Success depends crucially on both.

Adaptation is a fundamental economic, fiscal and financial requirement

Federal adaptation funding and resources as well as program implementation have been a small fraction of those for mitigation. Leading experts point to the imbalance of “$1 spent on mitigation for every $0.05 spent on adaptation,” or approximately a 20:1 ratio. Adaptation has received too little federal and provincial attention apart from weather disasters. Even then, governments’ focus tends to ebb away quickly once the emergency phase ends.

Ottawa’s funding approach, and that of most provinces, demonstrates a clear lack of understanding that climate adaptation is fundamental economic and fiscal policy. In addition, populist leaders at both levels continue to make deeply flawed arguments such as there being a choice between economic growth and preserving natural assets (e.g., wetlands and forests) that are critical to adaptation and mitigation. They have created and sustained the mistaken view that Canadians cannot afford essential adaptation investments.

Yet the reality is the exact opposite. Wetlands lessen flood damage and risk. Forests sequester carbon and help regulate water flows. Ecosystems help reduce coastal communities’ impacts from storms and erosion. Urban green spaces reduce heat stress and improve public-health outcomes. Moreover, adaptation requires sustaining and enhancing natural (green) infrastructure and improving the resilience of built (grey) infrastructure. Canadian communities, businesses, households and governments depend heavily upon high-quality green and grey infrastructure for their economic, financial and health needs.

Extensive international and Canadian research shows that climate change and catastrophic weather reduce gross domestic product, productivity and incomes. This occurs through multiple channels. Supply is reduced from damage to utility, transportation and communication networks as well as harm to or destruction of commercial buildings and equipment. Extreme heat reduces workers’ cognitive and physical capacity, while heat stress and wildfire smoke increase absenteeism. Lesser income from these supply impacts reduces key sources of demand such as investment and consumption, further decreasing GDP.

Increasing fiscal costs result from surging expenses for emergency assistance and infrastructure repairs and growing need to invest in resilient infrastructure. A 2026 study on proactively upgrading grey infrastructure assets to adapt to extreme rainfall and rising heat estimated that Canada could save up to $9 billion annually in net costs compared to not making these adaptation investments. The savings exceed $4 billion per year relative to a reactive approach, where upgrades are made only at the time of asset replacement.

For businesses, extreme weather means higher insurance premiums plus the costs of immediate repairs, long-term recovery and investment in more resilient offices, factories, warehouses and equipment. Individuals face income disruptions, time away from work and lower personal productivity. Households are confronted by fewer mortgage options in high-risk areas, plus repair and rebuilding costs not covered by insurance.

2. Inadequate political will

Too little long-term thinking and the absence of a systems approach

It is difficult for governments to think long-term when acute crises and large-scale shocks occur, especially when these create a polycrisis whereby multiple, inter-related crises and shocks occur simultaneously. From the pandemic and the surge in inflation and interest rates in the early 2020s to the ongoing geopolitical shocks (as of June 2026) from Russia’s invasion of Ukraine, major wars in the Middle East, and structural U.S. disruptions in trade, defence and Canada–U.S. relations, the polycrisis has led to near-term needs dominating government focus.

The polycrisis challenges have meant that long-term thinking and strategy to deal with climate risk – despite its chronic nature becoming devastatingly acute this decade – received far too little attention from Ottawa and the provinces apart from mainly short-term responses to catastrophic weather events.

This insufficient long-term thinking has been compounded by the absence of a systems approach. The lack of systems policymaking was and is evident in the priority of short-term economic (e.g., building housing in high-risk flood areas) and fiscal (e.g., delaying investments in resilient infrastructure) benefits at the expense of higher medium- and long-term costs. It also meant that serious harms to the environment and health of Canadians occurred from the failure to factor the adverse effects on these related systems into policy.

Policy and strategy announcements with very modest follow-through

Over the past 15 years, there have been numerous federal announcements of adaptation programs and initiatives, culminating in the 2023 National Adaptation Strategy. Despite the proliferation of these efforts from 2015 onwards, and various laudable objectives and selected notable content in the NAS, federal spending on adaptation during the Justin Trudeau years was a small fraction of the outlays on mitigation.

Under the Mark Carney government, mitigation remains the main climate-change policy focus, even though overall funding and policy support have fallen compared with the Trudeau era. While the National Adaptation Strategy remains in place, adaptation spending continues to be much lower than on mitigation, accounting for only a small share of climate-related expenditures from 2025 through June 2026. Ottawa’s emphasis has been on carbon capture and electrification to fight climate change and, more recently, a renewed goal of sustaining natural capital, which included citing nature assets’ role in adaptation. For their part, provincial funding and focus continue to be insufficient.

Looking at just local government needs alone, a 2020 analysis determined that municipal infrastructure and other local adaptation requirements were $5.3 billion annually, a figure that would be substantially higher in mid-2026 given inflation over the past six years and the increasing occurrence and impacts of catastrophic weather events. It bears emphasis that this figure does not include the spending and investment needed by firms, homeowners and senior levels of government to achieve more robust adaptation resilience.

3. Lack of policy capacity

Resilience in Ottawa’s nation-building strategy will be crucially dependent on building right the first time. As of June 2026, more than $25 billion in federal capital spending has been announced in defence, housing and other infrastructure. Important additional investments in these areas include multibillion-dollar commitments from the private sector.

Given the scale and pace of these investments, it is imperative that Canadian infrastructure and other economic assets be designed and constructed from the outset to better withstand extreme weather. Resilience needs to be embedded in the design and construction of military installations and other critical infrastructure such as transportation, energy, hospitals, water systems and emergency operations. Greater climate adaptation in new and existing housing is also vital for homeowners and communities alike.

Yet the federal capacity to make policy and to advise and assess these resilience needs is far too disparate, limited and uncoordinated.

Ottawa’s robust strengths in climate forecasting and weather analysis are clear. Significant specific knowledge about natural assets exists in the public sector, including Statistics Canada’s expertise from its Census of Environment efforts and selected staff in leading municipalities such as Calgary and Mississauga that have implemented unaudited disclosures of natural assets on their balance sheets. Canada Mortgage and Housing Corporation’s work in housing and climate change resiliency is a notable advantage.

Yet far more capacity is present in the non-profit sector. Examples include the advanced economic analytical and modelling capabilities on climate change impacts in organizations such as the Canadian Climate Institute and the Smart Prosperity Institute. Robust technical abilities in adaptation analysis, practical implementation and related expertise reside in leading national entities like the Intact Centre on Climate Adaptation and the Climate Risk Institute. Various government-funded non-profit regional climate service entities – CLIMAtlantic, Ouranos (in Quebec), the Ontario Resource Centre for Climate Adaptation, ClimateWest in the Prairies, and the Pacific Climate Impacts Consortium in British Columbia and the Yukon – offer local and regional adaptation knowledge and capacity.

The problem is that not enough adaptation intelligence and know-how resides within the federal government – even though it designs national policy and plays a key liaison role with provincial and municipal governments in climate adaptation. Ottawa’s capabilities are neither sufficient nor are they set up to provide sustained analytical and information support, let alone coordination advice, for: the federal policy reset, especially the massive investments in defence, housing, infrastructure and major projects; and for initiatives across two or all three levels of government.

The latter problem is particularly acute for most municipalities, especially small and medium-size local governments, given their constraints in budgets, staff and systems. The adaptation challenge is accelerating faster and in more complex ways than municipalities can handle.

Beyond these absolute needs and problems, the very large disparity in resources, especially staffing versus other federal priorities, stands out. The modest budgets and other resources for federal adaptation policymaking and program design and implementation contrast starkly with the funding and staffing provided to defence, housing and infrastructure. The Major Projects Office and Defence Investment Agency, set up in mid-2025 and early 2026, respectively, illustrate the far greater priority and support federally for these areas.

It is hard to describe federal support in terms of funding and other institutional resources for adaptation other than as decidedly inadequate given the creation of these and other new agencies in the first year of the Carney era, the financing provided to them, and their respective mandates to operate as separate entities from government departments and to hire an array of private-sector expertise to build their “in-house” capacity. 

4. Why a national office helps address these challenges

A national office for climate adaptation would provide Canada with a much-needed policy focal point, bolster federal analytical and information capacity, and create a non-partisan adaptation champion within government. Its ability to hire experts from the non-profit and private sectors should be stressed. The Major Projects Office’s and the Defence Investment Agency’s successes in attracting non-public-sector expertise are notable. Indeed, the scale and scope of these two new entities relative to traditional federal departments merit highlighting even though we are not advocating for similar scope and powers for a national office’s role.

Canada’s adaptation policy needs to have a clear catalyst and robust assessment capacity. A national office for climate adaptation would be a central entity to help address the vast array of design implementation and other construction, equipment and systems requirements for effective climate resilience in defence, housing, infrastructure and major projects. These tasks include building grey infrastructure assets for resilience from the start of their design and construction. In green infrastructure, examples include understanding and applying the lessons from leading countries such as the United Kingdom and the Netherlands in integrating natural capital and ecosystem service information into public policy to boost resiliency and mitigation such as in new infrastructure, land use and housing development.

Lastly, in strongly advocating for a national office for climate adaptation, we want to avoid being overly prescriptive in its specifics. Such detail is beyond the scope of this article, including whether this entity would be a new agency or whether it would report to the Privy Council Office, the Prime Minister’s Office or the minister of the environment, climate change and nature. We also recommend solid links to Public Safety Canada and the Ministry of Finance given adaptation’s importance for both.

The crucial minimum aspects for a national office for climate adaptation are (1) its ability to hire private- and non-profit-sector expertise and (2) a mandate to examine, assess and provide information support on adaptation requirements across applicable federal, provincial and municipal activities.

Conclusion

Extreme weather and climate change continue to be escalating threats in Canada. Major prairie hailstorms; serious flooding in central Ontario, Montreal and the Prairies; and severe wildfires in Western Canada and the Northwest Territories have occurred already in 2026. With El Niño underway, the likelihood of climate extremes globally, rising costs and growing risks for Canada are clear.

In 2015, then Bank of England Governor Mark Carney presciently identified and described the tragedy of the horizon from the severe repercussions of climate change occurring well beyond the short-term focus of political and business cycles, and of technocratic authorities. In 2021, while UN special envoy on climate action and finance, he devoted a whole chapter to “Breaking the Tragedy of the Horizon” in his book Value(s).

The reality with climate adaptation in Canada today is that the tragedy is no longer on the horizon. The tragedy is unfolding now and will be far worse unless an effective national office for climate adaptation is created and soon.

James K. Stewart is an economist, a senior fellow at the C.D. Howe Institute, and a member of the Advisory Committee for the Intact Centre on Climate Adaptation.

Hugh O’Reilly sits on a number of boards including the Rick Hansen Foundation, is a member of the Advisory Committee for the Intact Centre on Climate Adaptation and is the former CEO of a Canadian public sector pension plan. 

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High oil prices are seen as a net positive for Canada. For energy sellers, that’s true. For everyone else, it means crisis: the largest oil shock in history is headed our way, and nothing can stop it. If the strait stays closed long enough, Johnston warned, the economic impact “will be like the pandemic without COVID.” This time, Canada must get the crisis response right.

My non-partisan report, Outrunning the Storm, explored risk scenarios at $90, $150 and $200 a barrel. At every price, critical national systems are at risk. It’s more than energy: petrochemical inputs underpin the entire food system, including fertilizer; the entire healthcare system, including medical supplies and pharmaceuticals; the lifeline to remote First Nations communities. In Ontario, car sales, manufacturing and a risky finance sector are exposed –industrial capacity Canada cannot lose.

The report includes 90 urgent recommendations which will deliver a $10 to $15 return on every dollar – because that is what it will cost if we wait. Some are near-costless, like lowering speed limits and extending Ontario’s Bruce Nuclear licence to protect Ontario’s energy supply. Others, like investing in farm upgrades and establishing stockpiles of fuel, fertilizer and pharmaceuticals will cost between $6 to $7 billion at today’s price of oil, my analysis finds. Wait until $150/bbl and the same measures will cost $17–39 billion.

While Canada’s governments should be racing to shield residents against next winter’s food, fuel and supply shocks, the only way to weather this storm and emerge stronger is to permanently reduce our reliance on fossil fuels through sustained, transformative investment.

For many northern First Nations, that means ending reliance on diesel-powered generators and replacing it with solar energy and an expanded electric grid. A green ammonia plant powered by hydroelectricity would end prairie farmers’ dependency on imported fertilizer. Ramping up Canadian pharmaceutical production to increase domestic supply is a matter of economic security.

A national passenger-rail renewal program could serve several needs at once. High oil prices can trigger a cascade of shocks through sales and manufacturing for aviation and vehicles. My analysis has determined that retooling auto and aviation plants to build passenger rail cars, paired with payments to owners who recycle vehicles, could create or preserve up to 358,000 jobs. Night trains and expanded auto ferries could replace short-haul flights on routes like Vancouver–Calgary and Calgary–Edmonton. Over its 80-to-100-year operational life, a national rail network would avoid an estimated 475 million to one billion tonnes of carbon dioxide equivalent.

Another major opportunity is converting Canada’s waste methane to hydrogen and carbon materials – methane that is being freely vented from coal mines, landfills and Alberta’s 80,000 stranded wells. Methane to hydrogen and carbon could create 100,000 jobs, many requiring the current skills of oilfield workers; it would be a new source of sought-after synthetic critical minerals, all while reducing Canada’s greenhouse gas emissions by up to 33% and generating billions in new revenue.

Acting now pays twice: higher oil prices improves the payback on alternatives, and these investments will never be cheaper.

Canada and the world are already in the most serious crisis since the 1930s. The United States is undermining our economy with tariffs, with the president openly threatening to make us the 51st state, and Alberta separatists are helping. Extraordinary times demand wartime-level economic responses. The Depression-era and wartime policies of C.D. Howe, William Lyon Mackenzie King and the Bank of Canada offer a proven path. These investments will toughen our economy and transform our infrastructure; the private sector has a role, but Ottawa must lead.

We do not have years or months. We have days. The sooner we act, the better the outcome – and fortune favours the bold.

Dougald Lamont has been a public policy researcher for 30-plus years. He was leader of the Manitoba Liberal Party and MLA for St. Boniface for five years and has lectured in government–business relations in Canada.

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Finisterre means “the end of the world,” which feels a bit too on the nose these days. We bought our tickets before Israel and the United States launched their war on Iran, and we certainly never expected to be travelling during a global oil shock. But more frightening than travel interruptions is the strong likelihood of a “Super El Niño summer” that’s now developing in the Pacific Ocean. As Europe bakes under record-breaking temperatures, a key part of our travel prep is mapping contingency plans for extreme heat at each leg of our journey.

In short, global heating is progressing faster than expected, fossil fuel economics are as nakedly violent as ever, and life goes on.

The seduction of doomerism

Doomsayers have always held an important voice in the climate movement, but defeatism and pessimism have gained even more prominence as the oil and gas industry fights gloves-off to retain its influence and revenues. There’s a reason that hope is in demand: things look bleak. Personally, I don’t see doomerism as wrong so much as one-dimensional. It’s true that most people alive today still seriously underestimate the harms that climate change will cause. Yet on the other, much of what’s happening is best expressed by that one key word: change. There’s bad and good and just different, but plenty that’s good.

For example, nature-based solutions are gaining prominence as an effective and cost-efficient countermeasure to carbon pollution and other environmental damages. A system is now being built that will make restoring ecosystems a much more central field of human endeavour. Leveraging nature’s power to heal the earth does mean accounting for it in financial terms – an exercise in commodification that many will balk at. But we need to remove carbon from the atmosphere, and people need to get paid to do it, so capital has to flow. We can be grateful when it goes to forests and wetlands.

Travelling across a changing landscape

To get to Europe and back, our round-trip carbon dioxide emissions – not including the baby, who’ll ride on our laps – is roughly two tonnes, which is about what we’d pollute on a drive from our home in Montreal to Vancouver and back. For that quantity of emissions, I can buy decent carbon offsets from tree-planting projects for as little as $20. I could even contribute to projects that support sustainable aviation fuels, though it’s hard to see a viable path for air travel to switch to lower-carbon fuels. Carbon reduction programs that involve biofuels have proven particularly problematic, such as in Brazil, where criminal networks of “carbon cowboys” are exploiting the state-run system. When greenwashing overlaps so closely with climate urgency, every path forward lies somewhere between skepticism and pragmatism.

The new edition of the magazine, out this week, is themed on travel and tourism. In it, our writers examine different ways that climate change is altering how we move around and explore. Some are visiting glaciers before they disappear; some are using their holidays to remove trash from the environment. Some are just picking different destinations: cooler climes instead of the traditional equatorial getaways. Humans aren’t the only ones changing our trajectories. Other species are shifting, too, often toward the poles, like trees, bacteria and even great white sharks.

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The most important climate migrations are not for pleasure or discovery. Tens of millions of people are already leaving their homes, and the rate of displacement could rise to hundreds of millions by mid-century. In more targeted – and certainly privileged – fashion, digital nomads are also leaving their mark on territories and exposing some of the contradictions that belie our times.

Finisterre in Spain is not the end of the world, though people in Europe used to think it was. Climate change is not the end of the world, either. Nor is it simply a physical description of how our planetary ecosystem is evolving in response to a massive, human-caused carbon explosion. Climate change is more like a calling to adjust, adapt and grow. Like a long walk across an unfamiliar landscape, we cannot predict exactly how it will unfold. But it will surely teach us resilience. To that end, we may permit ourselves a sense of humour, a good dose of curiosity, and maybe even a taste for adventure on the journey.

Mark Mann is the managing editor of Corporate Knights. He lives in Montreal.

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We need to look at a broader range of indicators to monitor economic well-being and grapple with Canada’s deeper economic challenges. The standard recipe of lower taxes, reduced regulations and freer trade just doesn’t work as promised.

Despite solid critiques from such as Canadian economist Jim Stanford or U.S. economist Joseph Stiglitz, the notion of gross domestic product per capita as a measure of productivity or economic success marches on.

To illustrate how the conventional dogma works, just look at a recent editorial in The Globe and Mail, which warns about the growing government deficits, and hence inevitable large tax increases or spending cuts. To avoid those hard choices, the familiar solution gets trotted out: “reigniting economic growth” through improved “labour productivity.” Then comes the well-known recipe of “reducing taxes, tearing down inter-provincial barriers, and de-regulation.”

The challenge, alas, is more complex.

Uncertain data

While productivity seems a useful concept when considering efficiency at a factory level, extending it to the economy introduces a whole set of problems. It was never intended to serve as a proxy for national well-being.

The standard productivity measure neglects structural issues like the economy’s shift from manufacturing to services, or how the natural resource sector produces little in terms of added value and remains vulnerable to price volatility. And how to measure productivity in the large public sector – education, healthcare, social services?

Rather, we should treat the somewhat abstract aggregate GDP per capita figure as a rough indicator of direction, rather than elevate it to gospel.

Misleading comparisons

It is tempting to analyze trends over time or compare Canada to other countries. The typical conclusion is that we are “falling further behind.” But it’s just not that simple.

For example, the impact of inflation needs to be removed from a series of annual GDP figures to generate real data in constant dollars. And yet, the choice of which price index to use can have a major impact on the result. Even the alarmist commentator Andrew Coyne acknowledged a few years ago that using a consumer price index instead of a producer price index changes a decline in Canadian productivity over the past nine years to a small gain!

Moreover, comparing across countries presents a statistical challenge. In a detailed 2014 report, Statistics Canada calculated that – after taking into account terms of trade, investment income and resource prices – Canadian growth in real income per capita was actually much higher than in the United States between 2002 and 2012. So much for the big panic.

Intuitively, it makes sense that an economy such as the United States with a higher proportion of more expensive private services will have a higher GDP per capita than Canada’s. The point is that big policy changes can’t be driven by comparisons that are so uncertain and inherently limiting.

An analysis using data from the Organisation for Economic Co-operation and Development shows that Canada’s labour productivity does trend lower than other Group of Seven countries over the last three decade-long intervals.

But take note of the two countries at the top of the pack. Aren’t France and Germany afflicted with high taxes, stifling bureaucracy and long vacations? They both have challenges, and neither are paradise by any means, but we should be looking to those countries for lessons instead of to Alabama, with its anti-union policies, deep rural poverty, hospital closures and low-wage economy.

The real questions

So, where do we go from here? Why, despite its imprecision and blinkered scope, does the GDP per capita measure rebound continuously, as one of those “zombie ideas” popularized by Paul Krugman that are immune to contrary evidence while suiting a particular political agenda. Yes, there are legitimate concerns about Canada’s low growth, declining rates of business investment and inadequate innovation. But we need to look beyond the simple productivity narrative and consider structural causes, such as Canada’s low value-added natural resource exports, the foreign ownership of much of the manufacturing sector (we have the subsidiaries, or “branch plants,” while major investment or R&D decisions are made at head offices elsewhere) or the protected oligopolies in key industries (finance, telecom, grocery), instead of simply “improving the investment climate.”

By constraining the conversation, we avoid confronting the real choices in front of us. We have made those choices before, and we can see their consequences clearly.

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For example, this chart shows that productivity growth de-linked from real wage growth in the United States around the time of Ronald Reagan’s neoliberal program, whose policy choices weakened labour unions, reduced taxes on high incomes and removed large parts of the social safety net. The increase in productivity created wealth, but it went upwards to the top 10%. This outcome then leads directly to the populist and authoritarian backlash affecting so much of U.S. society. Similar trends, albeit less extreme, are underway in Canada.

Assuming that our common goal is an economy that innovates, provides good-quality employment and generates sustainable increase in social well-being, we need to monitor what really matters and measure policy against a broader range of indicators. In that spirit, a “beyond GDP” initiative launched in Quebec in 2022 draws together a broad coalition of 15 civil society organizations. They have developed a set of about 70 indicators, grouped in 10 themes, to portray and measure well-being across economic, social and environmental dimensions. Each year the data is updated, and the concept is used by various levels of government to measure progress. The G15+ initiative now needs to be extended nationwide with greater media attention, since it highlights elements of well-being that are often neglected.

The Canadian difference

Canada’s historical choices for public services to provide shared needs has created a distinct culture and contrast with that in the United States. But this key element in our success is increasingly at risk. One repeated claim is that “we can’t afford it anymore.” But is that really the case? Most people are aware of the poor state of our infrastructure, inadequate social services and pressures of an aging population, plus the huge challenge of the transition to renewable energies. Those expenditures will put further strain on the deficit. Reversing previous tax cuts to generate revenue for such priorities should not be dismissed as impossible. A study of the large cuts in federal income tax (personal and corporate) dating from the late 1990s, calculated the “lost” revenue to the federal government in 2016 at roughly $94 billion. For one year.

Another recent report in Quebec estimated the loss in Quebec revenue from tax cuts since the late 1980s at $12 billion per year. They suggested a partial return to earlier tax rates, and that, if focused only on the top third of income earners, would generate an additional $3 billion per year.

Finally, there remains the environmental crisis. The obsession with GDP growth increasingly ignores the reality of resource limits. A recent report from the Potsdam Institute for Climate Impact Research estimated that our collective economic activities are already exceeding seven of nine planetary boundaries.

And yet, the drumbeat continues for the same old orthodoxy: all our problems can be fixed, we’re told, with a return to higher economic growth. But the facts don’t bear that out. What if the realistic and sustainable route is one of continued low growth? We need to adapt our economic systems to live within our planetary boundaries. There is an urgent need to slow down, produce less of the harmful goods and more of what we need to be sustainable, and improve quality of life by redistributing and expanding public services.

When we challenge the productivity panic and growth mantra, we create space and vision to imagine alternative options for a sustainable future.

Stefan Harpe managed impact investments for funds based in Africa, the Netherlands and Canada. He is an amateur economist, lively skeptic and lives in Montreal.

The post When we fixate on productivity, we lose sight of better economic solutions appeared first on Corporate Knights.

Read the original story here. 

Last month in Santa Marta, Colombia, the world’s first international conference dedicated to transitioning away from fossil fuels convened 57 countries representing more than half of global gross domestic product, 30% of the world’s population and 20% of global fossil-fuel production.

Together, participants sent a powerful signal to markets, investors, industries and governments: the future belongs to clean energy, resilient economies and fossil-free development.

The conference took place against a background of increasing geopolitical, economic and security concerns, all of which are accelerating the energy transition.

Recent instability linked to tensions in the Strait of Hormuz once again exposed the fragility of fossil-fuel dependence. The temporary closure of the strait triggered what the International Energy Agency has described as the worst energy crisis in modern history.

Countries that have invested in renewables are proving to be far more resilient. China is leading the transition, Pakistan has seen rapid rooftop solar expansion, India is accelerating solar deployment, while Indonesia has developed a massive solar strategy, and enormous new investment in renewables is being made across the globe, including in Latin America and Europe. All of this demonstrates that energy security increasingly means renewable-energy sovereignty.

The global transition is underway, gaining momentum, and becoming irreversible. Indeed, global investments in the energy transition reached a record US$2.3 trillion in 2025, while renewable capacity expansion continues to accelerate worldwide.

Financial institutions are sounding the alarm

Salient discussions at Santa Marta revolved around the strong warnings coming from central banks, insurers, economists and financial regulators who are increasingly viewing fossil-fuel dependence as a major destabilizing risk. In fact, the European Central Bank now views fossil-fuel dependence as a macroeconomic stability risk, which makes the transition away from fossil fuels a matter of monetary policy.

The recent report from asset managers Impax stresses that financial markets are dangerously underpricing physical climate risks, as investors, insurers and lenders increasingly recognize that many assets exposed to floods, fires, hurricanes, droughts and heatwaves are likely significantly mispriced, overvalued and vulnerable to sudden repricing.

And the era of perpetual fossil fuel expansion is ending. While this doesn’t mean that oil and gas will disappear overnight, it does mean that betting national economic futures on long-term fossil-fuel growth is increasingly becoming a high-risk strategy.

Countries that continue to double down on oil and gas dependency will become exposed to a variety of risks: stranded assets, declining export markets, rising insurance costs, fiscal instability, trade disadvantages and growing geopolitical vulnerability.

Countries investing early in the transition – including electrification, clean manufacturing, renewable deployment, storage, critical minerals, energy efficiency and resilient infrastructure – are positioning themselves for industries of the future.

A momentous conclusion coming out of discussions in Santa Marta was the growing recognition that voluntary climate promises are no longer sufficient. Implementation requires binding legislation and aligning budgets with climate commitments.

Moreover, many studies show that the uptake for voluntary standards based on risks and opportunities has been limited in scope and depth and has not resulted in meaningful change.

Legislation can provide clear and consistent rules that can level the playing field and ensure an orderly transition. This in turn could foster the predictability needed by the private sector to attract domestic and foreign investment. In a time of high economic uncertainty and rapidly evolving geopolitical shifts, the ability to diversify economies and attract investment becomes more important than ever.

The Climate-Aligned Finance Act: a Canadian example

The Climate-Aligned Finance Act (CAFA), which is currently being considered by Canadian lawmakers, is a legislative tool designed to modernize the country’s financial governance. It intends to provide the structure and legal clarity needed for Canada’s financial system to operate consistently with our climate commitments. The act provides clear expectations and ensures that financial decisions support long-term prosperity, creating stability for investors.

At its core, the act is about accountability and transparency. The legislation would protect Canada’s economy and could support competitiveness in the global clean-energy economy. It offers a constructive, science-based framework that would help Canada to attract public and private finance for renewable energy and to build resilience and establish energy sovereignty.

The act would operationalize climate alignment through five concrete regulatory mechanisms: strengthening fiduciary and governance duties; tying capital adequacy requirements to climate risk; mandating auditable transition plans for federally regulated financial institutions; mandating a national action plan to phase out high-carbon financial instruments and promote genuinely sustainable ones; and mandating timely public review of progress on these actions, to ensure iterative learning and enhanced accountability.

Notably, CAFA establishes climate alignment as a duty for directors and executives of federally regulated financial institutions and state-owned Crown corporations and requires the appointment of at least one individual with climate expertise to certain boards of directors. To address the growing risk of stranded assets, the act encourages the financial regulator to ensure that financial institutions hold sufficient capital against high-carbon exposures. Furthermore, entities to which the act applies would be required to publish science-based, credible plans, targets, and reports on meeting climate commitments to ensure progress, not just promises.

We need credible and consistent policy to provide clarity and guidance to the financial sector for the biggest economic transformation we have seen since the industrial revolution. The act comprehensively provides investors with the certainty and security they need to invest in Canadian capital markets, helping to ensure investment-readiness well into the future while maintaining the competitiveness of our economy in a global market that increasingly values sustainable investment opportunities.

In January, the House of Commons’ Standing Committee on Environment and Sustainable Development released its report on the impacts of Canada’s financial system on the environment and climate change, which reflected the committee’s in-depth study conducted in 2024 during the previous parliament. The first recommendation was “[t]hat Canada’s financial system be reformed to align with climate commitments . . . the Climate-Aligned Finance Act . . . which would itself provide a robust, science-based regulatory framework for conducting transition plans and annual progress reports and address greenwashing concerns around climate action.”

Legislation like CAFA is needed now more than ever because economic competitiveness, innovation and energy independence are dependent on capital flows being directed toward renewable- and clean-energy projects, as well as community-led initiatives to build resilience. Furthermore, the act’s integrated approach to addressing the greatest existential crisis of our time seeks to tackle the root cause of the multiple cascading crises we face: biodiversity loss, affordability, climate change and health.

Advancing global sustainable finance governance

The governance logic underpinning CAFA is transferable across jurisdictions, and governments might be inspired by the process used to develop CAFA. The act was created in collaboration with dozens of national and international experts and was refined based on feedback received during Senate committee study through further consultation with climate scientists, legal scholars and financial experts.

The act is grounded in climate science, financial expertise and the best international regulatory and voluntary practices. In short, the process adopted modelled the best practices of open parliaments, which favour a holistic understanding of the interdependence of complex problems such as climate change and finance and the development of evidence-based policies.

Climate‑related financial risks are increasing. The Climate-Aligned Finance Act demonstrates that effective alignment of finance with climate objectives requires enforceable governance. For central bankers and financial regulators worldwide, the imperative is no longer whether to act, but how quickly credible, accountable frameworks can be put in place to future-proof their economies.

Rosa Galvez is a civil-environmental engineer and an independent senator for the province of Quebec.

The post Canada needs binding legislation to align climate with finance appeared first on Corporate Knights.

That’s a real disappointment, to say the least. Industrial carbon pricing is Canada’s most consequential climate policy for cutting emissions and keeping costs low, but it needs serious reform. And while the memorandum makes slight improvements to the existing system in Alberta, the deal misses the mark by a long shot when it comes to living up to the policy’s potential, and it will have knock-on effects across the country as the changes are applied in other provinces. For the moment, it puts Canada off path in terms of reaching net-zero carbon emissions by 2050.

We’ll be talking about changes to electricity and industrial carbon-pricing policy for many months to come. But there’s another moment upcoming that deserves some greater public and media scrutiny: the imminent release of the federal government’s new vehicle emissions standards, the outline of which was announced by the prime minister back in February.

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At that event, Mark Carney made a clear commitment to achieve “the equivalent emissions reductions of a 75% electric vehicle adoption rate” by 2035. Our team at the Canadian Climate Institute will be watching closely to ensure that the details of the policy package give us the tools to reach this outcome.

Some analysts have already concluded that the policy will fall short.

The Pembina Institute, for instance, has modelled the government’s vehicle emissions limit for 2035 – measured in grams of carbon dioxide equivalent per mile – and found that it is not strong enough to achieve the 75% EV sales target. Clean Energy Canada has outlined a number of additional design features that will be critical for the new standard to meet in order to achieve the government’s goals. That includes questions around speed of implementation, applying a single standard across all vehicle sizes, and limiting compliance flexibilities that can undermine the policy’s integrity and reduce its emissions impact.

This is an important test for the Carney government, and not just because transportation decarbonization is critically important. This is really the first new climate policy the Carney government has announced. Every other policy it inherited from the previous Trudeau government and has either eliminated (like the consumer carbon tax) or retained in a changed form (like industrial carbon pricing and methane regulation). The new approach to passenger vehicles is a new goal clearly outlined by the prime minister himself. For the sake of its credibility generally, it behooves the government to ensure there’s a tight relationship between its expressed goal and policy detail sufficiently ambitious to get there.

This is not just a matter of reducing emissions. It’s also about ensuring that Canada keeps pace with the rest of the world and is positioned properly to succeed economically in this new age dominated by electric technologies.

Last year, nearly 100 countries broke EV sales records, according to the latest from the International Energy Agency. Globally, one in every four cars sold on the market was electric in 2025.

In China – the largest auto market in the world and the main destination of Alberta crude exports through British Columbia – nearly 55% of new cars were electric in 2025. This past April, that number reached upwards of 60%. That level of uptake is driven by superior technology and cost: 70% of battery electric cars sold in China last year were cheaper than the average conventional car.

All of this is affecting global demand for oil. In 2025, EVs displaced between 1.7 million to 2.3 million barrels of oil per day. That could more than double by 2030 to 5.3 million barrels per day, according to BloombergNEF.

These are massive disruptions to global energy markets led by rapid technology changes that are now unstoppable. They threaten to radically alter the future of the auto sector and oil production in Canada. Simply put, Canadians can’t afford to be left behind.

Rick Smith is president of the Canadian Climate Institute, the co-author of two bestselling books on the effects of pollution on human health, and the executive producer of Plastic People, a 2024 documentary chronicling the damage done by microplastics in the human body.

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