In January, Mark Carney told the crowd at the World Economic Forum’s annual meeting that the middle powers, like Canada, have the capacity to build a new world order and that allies will need to diversify to hedge against uncertainty. For Canada, the government is partly betting on a lower-carbon economy to meet this middle-power moment. The federal government’s climate competitiveness strategy aims to leverage clean technology and the nation’s abundant natural resources to boost Canada’s economy and position itself as a climate leader.

Though there are federal actions that have undercut this ambition, such as continued oil and gas subsidies, and evidence that curbing emissions in Canada has stalled, the economic case for climate action in Canada is strong. Some 66% of investments in Canadian oil and gas infrastructure are at risk of becoming stranded, according to a 2025 report by the International Institute for Sustainable Development. Canadian pension giant La Caisse saw investments in renewable energy tripled between 2017 and 2025, from $9 billion to $27.4 billion. Jobs within the environmental and clean technologies sector have grown faster compared to the broader economy for three years straight, according to a 2026 Statistics Canada study.

It’s against this backdrop that Toronto Climate Week (TOCW) 2026 will bring together innovators, business leaders, policymakers, researchers, artists and community members from all over the world. The second annual week-long event, from June 1 to 7, aims to showcase local and Canadian innovations while connecting to global opportunities, all while tapping into the discourse around the future of the global sustainable economy.

“I think Canada has a major opportunity right now to shape the global conversation around the clean-energy transition, and how the benefits of that transition to green energy can be an economic benefit for Canada,” says Kate Johnson, regional director for North America at C40 Cities, a global network of mayors from major cities working on climate action.

Cities lead on climate

Johnson, who is attending the Toronto event, has seen several climate action weeks pop up around the world. In some ways, that’s no surprise: “[Cities are] really the first responders,” she says, when it comes to climate change impacts, which intersect with rising energy bills and housing costs. Cities want to respond holistically to these overlapping crises, but it’s challenging, she says. Cities in the C40 network share resources and clout, and they’re making the case that it’s smart to use climate-smart solutions to address broader concerns.

Toronto Climate Week is “a really great opportunity just to get a pulse of what’s happening, not just in Toronto, but in Canada more broadly,” Johnson says. The event is expected to attract around 10,000 attendees to more than 200 scheduled events across the city. On the agenda are things like carbon solutions, the circular economy, cleantech and environmental justice.

Carbon focus

One of the flagship events, Carbon Solutions: Canada’s Competitive Advantage, will look at several carbon-removal and -management solutions in Canada and global markets. Carbon removal is forecast to be a US$1.2-trillion industry by 2050, according to a 2023 McKinsey report. With 20% of the world’s fresh water, 347 million hectares of boreal forest, 62.2 million hectares of farmland, more than 240,000 kilometres of coastline and an abundance of nature, Canada has ample opportunities to leverage its resources to help support climate action – and a lot to protect, too. Several companies have already started to look to Canada’s landscapes to sequester carbon.

Brady Paron, senior vice president of carbon market partnerships at Mast, a reforestation company working on restoring landscapes after wildfires, will be on a panel at the carbon-solutions flagship event. Mast takes trees that were killed in wildfires and buries them deep underground to prevent the wood from further decomposing and releasing more carbon into the atmosphere. To fund wildfire cleanup and landscape restoration expenses, Mast sells carbon credits to companies.

So far, there has been only a pilot project in Montana, but Canada is on Mast’s radar. “We see there’s a huge opportunity for biomass burial projects in Canada, given that we’ve got tons of forests in Canada,” Paron says, “and we’re unfortunately also seeing increasing wildfires here as well.” Paron is Canadian and based in Toronto but works for a U.S.-based company. He says this hybridity affords him a useful lens for TOCW: it’s not just about highlighting the incredible innovation in Canada, but also showcasing solutions to the entire world. “Canada can be a superpower for this moving forward.”

Sequestration strategy

Undo, a U.K.-registered company, has also focused on carbon sequestration projects in Canada. Working with farmers in Ontario, Undo offers enhanced rock weathering, a method that crushes abundant silicate rocks into a powder, through carbon credits sold to companies. The crushed rock both captures carbon from the atmosphere and can improve soil health, creating a win-win for the climate and farmers.

Peggy Sue Deaven, general manager for Canada at Undo, thinks that climate-solution companies like Undo need to showcase that they can make just as much business sense as the conventional big emitters. “We are a robust, competitive, for-profit, eat-your-heart-out [business], and we do good things.” Deaven, who will also be on a panel during the flagship TOCW carbon-solutions event, adds that climate solutions is an area where Canada can already own its leadership status in the world and that there are solutions that make economic sense.

With an existential threat like climate change, it’s important to connect with others, Deaven argues. “The soaring potential for folk to come together audaciously and to think what’s next, how are we pulse-checking with one another – that kind of community coming together is exceptional,” she says. “Toronto’s such a hub for innovation, so it does bring out the best in folk there.”

Corporate Knights is a media sponsor of Toronto Climate Week. This article was produced independently by the Corporate Knights editorial team, and Toronto Climate Week did not review or approve the content prior to publication.

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A new report from the NewClimate Institute, a European think tank, finds that 35 of the world’s biggest businesses are leaning on short-term tree-planting and other forms of “nondurable” carbon removal in order to say they’ve neutralized some of their climate pollution. The handful of companies investing in more reliable carbon removal are mostly not doing so in conjunction with deep decarbonization, or the elimination of carbon emissions altogether.

There is a “dangerous mismatch between corporate climate claims and the reality of what is needed to reach global net-zero,” the organization said in a press release. Reaching net-zero by the middle of the century – a scenario where all unavoidable human-caused climate pollution is cancelled out via carbon removal – is considered necessary to limit global warming to 1.5°C.

Carbon dioxide removal, or CDR, refers to efforts to capture carbon dioxide after it’s been emitted into the atmosphere and store it in rocks, land, ocean reservoirs or human-made products. The most reliable types of carbon removal, which the NewClimate Institute calls “durable CDR,” involve injecting carbon into geological formations or turning it into rocks, where it will stay put for at least 1,000 years – about the same amount of time that carbon dioxide from the burning of fossil fuels will remain in the atmosphere.

Currently, these durable techniques don’t work at scale: they account for just 0.1% of global carbon removal each year. The rest is based on methods like planting trees, restoring wetlands and burying carbon in the soil, which are much cheaper but can keep carbon out of the atmosphere for only decades or a few centuries at most.

Government investment and regulations are needed to scale up durable CDR – experts consider the next decade to be “crucial” for developing the technology – but the private sector can help, too, by funding durable CDR projects and research. In industries like construction, for which total decarbonization is not yet possible, companies will likely need to use durable CDR to offset residual emissions as part of a credible climate strategy.

The NewClimate Institute authors looked at 35 of the world’s largest companies across seven sectors: agrifood, aviation, automobiles, fashion, fossil fuels, tech and utilities. Tech companies showed the most investment in durable CDR – Microsoft alone is responsible for 70% of all durable CDR ever contracted – but the report criticizes the sector for planning to claim “potentially significant amounts” of both durable and nondurable CDR toward net-zero targets. Tech companies can fully decarbonize without offsets, so their emissions targets should not depend on carbon removal.

Aviation was the other sector showing the greatest support for durable CDR, but only one airline – Japan’s All Nippon Airways – had a “reasonable” plan to use the technology to neutralize residual emissions by 2050. Three airlines lacked concrete plans.

Of the 15 companies across the agrifood, automobiles and fashion sectors, only H&M and Stellantis are investing in durable CDR. Two of the five utilities in the report, Eon and Ørsted, are supporting durable CDR projects, but it’s unclear whether Eon intends to use removals to count toward its net-zero goal, and the NewClimate Institute says some of Ørsted’s removals are being double-counted in the emissions-reduction targets of both Denmark and Microsoft. The five fossil fuel companies analyzed – Equinor, ExxonMobil, Shell, Sinopec and TotalEnergies – are focusing mostly on carbon capture and storage, which intercepts carbon dioxide at the point of emission, before it escapes into the atmosphere, and does not reduce atmospheric carbon dioxide concentrations.

Silke Mooldijk, an expert with the NewClimate Institute and the lead author of the new report,  says she wasn’t surprised to find limited support for durable CDR, except from some tech companies. What did surprise her was that companies investing in durable CDR projects did not publicly report any information on these projects’ environmental and social risks. Some CDR methods, for example, may jeopardize biodiversity, while others require large amounts of renewable energy that would have to be diverted from other uses. “Not a single company in our report disclosed details on potential risks of projects they support and how they mitigate those,” Mooldijk tells Grist.

Grist reached out to all 35 companies included in the report. Adidas, Amazon, Enel, Google, H&M, Inditex, Microsoft and TotalEnergies responded by describing their net-zero commitments. Adidas and Enel, which are not currently investing in durable CDR, said they would use “high-quality” carbon removals to offset their residual climate pollution after taking actions to decarbonize; Inditex said it is “exploring” durable CDR to offset residual emissions, and its use of the technology “will be determined by the evolution of reference scientific frameworks.”

Amazon, Google, Microsoft and H&M are currently investing in durable CDR. A spokesperson for H&M described the fast-fashion company’s purchase of 10,000 metric tons of durable CDR from the Swiss company Climeworks, one of the largest purchases to date, and said H&M plans to use them to neutralize residual emissions. The tech companies affirmed their commitment to reduce emissions first and then use carbon removal to offset residual emissions, though none of them addressed NewClimate Institute’s concerns that they would use large amounts of durable and nondurable CDR to claim progress toward net-zero.

A statement provided to Grist from TotalEnergies did not address CDR. It instead described the company’s support for carbon capture and storage and “nature-based solutions.” The latter refers to short-lived offsets, such as tree-planting, that the NewClimate Institute does not believe are appropriate for offsetting fossil fuel emissions.

Apple, Duke Energy and Shein declined to comment after seeing the report. The remaining 24 companies did not respond to inquiries from Grist.

Jonathan Overpeck, a climate scientist at the University of Michigan and the dean of its School for Environment and Sustainability, says the NewClimate Institute report is timely. “Right now the whole idea of CDR . . . is kind of a Wild West scene, with lots of actors promising to do things that may or may not be possible,” he says. He adds that companies appear to be using CDR as an alternative to mitigating their climate pollution. “The priority has to be on reducing emissions, not on durable CDR at this point,” he tells Grist.

In the near term, durable CDR is doing virtually nothing to offset emissions. As of 2023, only 0.0023 gigatons of carbon dioxide were removed from the atmosphere each year using these methods. That’s about 15,000 times less than the annual amount of climate pollution from fossil fuels and cement manufacturing.

According to the NewClimate Institute, voluntary initiatives are no substitute for government-mandated emission-reduction targets and investments in durable CDR. To the extent that these initiatives exist, however, the organization says they should provide a clearer definition of what constitutes “durable” carbon removal; determine companies’ responsibility for scaling up durable CDR based on their ongoing and historical emissions, or – perhaps more realistically – on their ability to pay; and require companies to set separate targets for emission reductions and support for durable CDR. The last recommendation is intended to reinforce a climate action hierarchy that puts mitigation before offsetting. Companies should not “hide inaction on decarbonization behind investments in removals,” as the report puts it.

Mooldijk says voluntary initiatives can incentivize investments in durable CDR by recognizing “climate contributions.” These might manifest as simple statements about companies’ monetary contributions to durable CDR, instead of claims about the amount of carbon dioxide that they have theoretically neutralized.

Some of these recommendations were submitted earlier this year to the Science Based Targets initiative, the world’s most respected verifier of private-sector climate targets. The organization is getting ready to update its corporate net-zero standard with new guidance on the use of CDR. Another standard-setter, the International Organization for Standardization, is similarly preparing to release new standards on net-zero, which could curtail some of the most questionable corporate climate claims while also drumming up support for durable CDR.

John Reilly, a senior lecturer emeritus at the MIT Sloan School of Management, says that ultimately, proper regulation of corporate climate commitments – including of durable CDR – will fall on governments. Companies “are happy to throw a little money into these things,” he says, “but I don’t think voluntary guidelines are ever going to get you there.”

This article originally appeared in Grist. It has been edited to conform with Corporate Knights style. Grist is a non-profit, independent media organization dedicated to telling stories of climate solutions and a just future.

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Paul Hawken, the author of the new book Carbon: The Book of Life, argues that the climate movement is thinking about its work, and messaging, all wrong. “Those who call carbon a pollutant might want to lay down their word processor,” Hawken writes. Carbon, he notes, is, after all, the building block of life, the animating force behind trees, rhinos, eyelashes, hormones, bamboo and so much more. Without it, Earth would just be a lonely, dead rock. So much for decarbonizing.

Hawken has come to believe that treating carbon as something to tackle, liquefy and pump into geological formations not only reflects the same mindset that caused climate change in the first place, but also further alienates people from the living world. There is no “climate crisis,” he argues, but a crisis of human thinking and behaviour that’s degrading the soil, wiping out entire species and changing the weather faster than people can adapt. “From a planetary view,” he writes in Carbon, “the warming atmosphere is a response, an adjustment, a teaching.”

Shifting the frame: From fix to flow

The book records a shift in his thinking. In 2017, Hawken published Drawdown: The Most Comprehensive Plan Ever Proposed to Reverse Global Warming, a book that ranked 100 climate solutions by how much they could reduce carbon emissions, from refrigerant leaks to food waste. The non-profit Project Drawdown, which he launched, continues to implement these kinds of fixes around the world. But now, Hawken is forgoing straightforward metrics to focus on what he sees as a deeper cultural problem. “The living world is a complex interactive system and doesn’t lend itself to simple solutions,” he said.

The core of it is about care, and kindness, and connection, and compassion, and generosity. That’s where regeneration starts.

– Paul Hawken

The new book frames carbon as a flow – a cycle that moves through the atmosphere, oceans, soil, with the element absorbed by growing plants and exhaled in every animal breath. Hawken’s book is a lesson in what’s sometimes called “unlearning,” or letting go of old assumptions, like the idea that nature is something to fix or control. The book explores ways to repair a broken relationship with the natural world, drawing inspiration from Indigenous cultures and new scientific discoveries. Hawken marvels at how much remains unknown about carbon, which he dubs “the most mysterious element of all.”

The book’s poetic language offers a stark contrast to the warlike terms climate advocates tend to use to describe carbon. Hawken argues that the typical metaphors are not only inaccurate – how exactly do you battle an element? – but also provide fuel for right-wing narratives that carbon has been unfairly demonized. Last week, E&E News reported that the Trump administration is planning a federal report making the case that a warming world would be a good thing, a pretext for weakening climate regulations.

“Carbon dioxide is not an evil gas,” David Legates, a former Trump official, said in a recent video put out by the Heartland Institute, a conservative think tank. “Rather, it’s a gas beneficial to life on Earth. It’ll increase temperatures slightly, and warmer temperatures are certainly better than colder temperatures.”

A radical rethinking of the language of climate change

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Forests

While one study suggested that planting half a trillion trees could draw down a quarter of the world’s carbon, monoculture tree plantations aren’t the answer. Protecting existing forests, combined with rewilding, may be the ticket. A 2020 study said rewilding 15% of farmland could sequester 299 gigatonnes of CO2 per year.

Soil

Many studies estimate that the wold’s croplands could sequester four to five gigatonnes of carbon per year. Others say more realistic estimates are a fraction of a gigatonne each year. Researchers are working to find ways to measure this at scale, as soil can vary dramatically, even from one part of a farm to another.

Bunkers

Researchers say captured CO2 can be stored underground, in oil and gas reservoirs, un-minable coal seams and geological formations (including Albertan caves). The U.S. Geological Survey estimates the United States could store approximately 3,000 gigatonnes of carbon dioxide this way.

Cement

Cement is responsible for 8% of global carbon emissions, but the building material isn’t something we can transition away from. Researchers estimate we can sequester 0.1 to 0.4 gigatonnes of CO2 from the sector by 2050, but so far carbon-capturing cement technologies provide limited gains.

Plastic

Up to 8% of global oil supplies go to making plastic. Can we swap that out with captured CO2? A handful of companies are piloting “low-carbon plastics,” such as polyurethane foams made of 20% CO2. Critics caution against injecting CO2 into single-use plastics mostly destined for landfill.

Consumer products

A growing number of consumer goods are using recycled carbon. One vodka brand claims to convert a pound of air-derived CO2 into pure ethanol. Unilever is piloting laundry pods made with sudsing surfactants partly derived from CO2 captured from a factory. Scaling potential: to be determined.

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The technology, known as direct air capture, has lately gathered steam as climate scientists warn that, without it, humanity stands little chance of limiting global warming to acceptable levels. In its latest report, the Intergovernmental Panel on Climate Change said that using carbon removal – which also includes measures such as planting trees or enriching the soil with minerals – will be “unavoidable” if the world wants to hit net-zero emissions.

Buoyed by those predictions, the industry has already gathered serious momentum. U.S. President Joe Biden’s infrastructure package allocated $3.5 billion for several direct-air-capture hubs last year, and plans are underway to build the first truly large-scale plant in the southwestern United States, which will eventually trap up to one million tonnes a year.

Private investors have also piled in: Climeworks, a Swiss company that is one of the burgeoning industry’s biggest players, bagged US$650 million in its latest round of fundraising. And corporations from tech giant Alphabet to payments company Stripe recently committed close to US$1 billion to buy removals from innovative start-ups in the space.

That is not to say direct air capture is without its critics. Some point out that the vast amounts of energy needed to draw heavily diluted carbon out of the air is better used elsewhere. Others fear that relying on so-called negative emissions technologies is merely giving high-emitting companies an excuse to keep on polluting, with catastrophic consequences for the climate.

Although it may sound high-tech, drawing carbon from the air is surprisingly straightforward in practice. At Climeworks’s flagship facility in Iceland, the largest in the world, stacks of giant fans suck in the ambient air; inside, it passes over a filter that collects the carbon dioxide, which is then released under high heat. (Other companies separate the carbon by passing air through chemical solutions instead.) Nearby, another plant run by the Icelandic company Carbfix mixes the concentrated carbon with water inside a group of pentagonal spheres that lend the site the eerie look of a space colony. The mixture is then pumped deep underground, where it reacts with basalt rock and turns solid within a few years.

That the plant sits in Iceland is no accident: the country has plenty of clean geothermal energy for the power-hungry process, as well as suitable geological storage to permanently sequester the carbon. Under those conditions, direct air capture can have a much higher impact than capturing emissions from factories or power plants, since it traps CO2 without releasing any emissions in the first place.

That promise and the potential to use the captured carbon for a range of low-carbon technologies – mixing it into cement or producing jet fuel and feedstocks for plastics, for example – has attracted big names from sectors that are notoriously hard to decarbonize. United Airlines has directly invested millions in the first large-scale project being built in the United States, which is being developed by Houston-headquartered oil firm Occidental and will partly use the captured carbon to make jet fuel. Other major companies from Shell to Apple also rely on carbon removal in their net-zero plans. And 18 of the 50 countries that have submitted long-term climate strategies to the UN specifically mention technological carbon removal.

One caveat to direct air capture’s climate potential is the type of energy used. Researchers have found that rapid, large-scale deployment of the technology could require up to a quarter of global energy demand by 2100, underscoring the need to use renewable energy or waste heat.

It’s absolutely not a magic bullet; it’s absolutely not an alternative to mitigation. But we do need this … to undo the damage that we’ve done.

—Niall Mac Dowell, Imperial College London

For now, the technology is also still expensive: Occidental estimates that it will cost between US$300 and $425 to sequester each tonne of carbon at its plant. Companies throughout the industry are confident that successive projects will drive costs down quickly. Nevertheless, even some of the industry’s champions are skeptical of the slew of start-ups that have sprung up.

“You are seeing lots of people making big promises right now, and they don’t quite know how to keep them,” Klaus Lackner, the director of Arizona State University’s Center for Negative Carbon Emissions and a pioneer in direct air capture technology, told the MIT Technology Review.

Perhaps the most common criticism of carbon removal, and one that has dogged direct air capture for years, is that it could afford companies a fig leaf to keep pumping out CO2 by relying on technology that is not guaranteed to become commercially successful.

Executives at direct-air-capture companies are quick to echo what experts have long emphasized, however: that cutting emissions first should be every company’s priority. “The best way is not to clean up your mess; the best way is to not cause the mess in the first place,” says Andreas Aepli, Climeworks’s CFO.

Aepli thinks the relatively high cost of direct air capture means most companies still have every incentive to prioritize emission cuts. But he also points to growing scientific consensus around carbon removal, with most assessments estimating that we will ultimately need to remove between five and 15 billion tonnes of carbon a year by 2050 to keep global warming to 1.5°C. Under the International Energy Agency’s net-zero scenario, direct air capture alone is projected to sequester close to one billion tonnes a year.

Nature-based carbon removal, such as planting trees, is certain to play a larger role, too. But there are limits to growing forests, and wildfires can quickly release all that trapped carbon. That means technological carbon removal will likely be necessary to compensate for emissions from hard-to-abate sectors like aviation or heavy industry, as well as to draw down already accumulated emissions in the atmosphere.

“It’s absolutely not a magic bullet; it’s absolutely not an alternative to mitigation,” says Niall Mac Dowell, a professor at Imperial College London who studies carbon removal. “But we do need to do this … to undo the damage that we’ve done.”

That also leaves the companies that are championing carbon removal with a daunting task. For now, Climeworks’s flagship plant in Iceland traps only about 4,000 tonnes of carbon per year; altogether, the roughly 20 direct-air-capture pilot plants operating around the world have capacity for around 10,000 tonnes – far from making a meaningful impact.

You are seeing lots of people making big promises right now, and they don’t quite know how to keep them.

—Klaus Lackner, director of Arizona State University’s Center for Negative Carbon Emissions

Another question is what to do with the captured carbon. Early projects have focused on selling it for use in a wide range of consumer goods, from fizzy drinks and vodka to diamonds and watches, and start-ups focusing on niche applications now abound. But experts and executives at direct-air-capture companies agree that the most effective pathway will be storing it away permanently.

“We can make yoga pants out of carbon,” says Lori Guetre, head of business development at British Columbia–based Carbon Engineering, which is providing the technology for Occidental’s plant. “But each one of those markets is small. And what we find, even when we talk to cement production plants, is they only need a really small amount of CO2 per plant.”

That’s not to say the explosion in so-called carbon tech is not useful to help kickstart the industry. Lauren Riley, head of sustainability at United Airlines, says sustainable jet fuel will play a large role in the company’s reaching its net-zero goal. But since it could be decades until that is available at the necessary volume and price, financing carbon removal in the meantime makes sense. “It’s a very practical solution to enable that transition,” she says.

“Obviously, if you’re talking about battling climate change, you’re going to ultimately need some level of sequestration,” says Fred Moesler, chief technology officer at Global Thermostat, another direct-air-capture company that is building its own plant in Colorado. “But I really think we should be doing everything at this point in time to encourage technologies like ours to develop.”

Despite the explosion in corporate interest, companies in the industry say direct air capture will take off only if governments incentivize it by creating mandatory markets. Occidental’s plant in the Permian Basin, which combines carbon sequestration with jet fuel production and enhanced oil recovery, is taking advantage of tax credits and low-carbon fuel standards. Incentives have also ramped up in Canada, where the most recent budget proposed a 60% tax credit for direct-air-capture projects. Most promisingly, recent bills introduced by Democratic lawmakers at the U.S. federal level and in New York State would see the government directly procure carbon removal.

“We’re super excited about the voluntary market, but we see it as a means to accelerate how quickly we can get going,” says Guetre. “It’s not going to do the heavy lifting over time for these projects.”

Jennifer Wilcox, principal deputy assistant secretary for the Office of Fossil Energy and Carbon Management at the U.S. Department of Energy, acknowledges that available tax credits are still “a drop in the bucket” for direct-air-capture projects. But she says it’s still premature to discuss public procurement of carbon removals, since metrics for measuring the sustainability of emissions savings still need to be ironed out.

“I think we still have a lot of work cut out for us with the investments that we’ve already been making,” Wilcox says.

In the meantime, Occidental is already planning dozens of plants alone and Carbon Engineering has struck similar partnerships with developers in Canada, the United Kingdom and Norway. Climeworks is planning to use its own design in a series of larger installations over the coming years, ultimately reaching its own megatonne plant. That’s not to mention all the smaller companies waiting in the wings.

With many experts now saying that direct air capture will be necessary to rein in climate change, the biggest challenge for the technology, arguably, is growing quickly enough before it is too late.

“There’s really no way to get to net-zero without carbon removal, both natural and technological,” says Katie Lebling, a carbon removal expert at the World Resources Institute. “And the need for it will only increase.”

Yannic Rack is a journalist based in London and mainly writes about business, climate change and the environment.

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Some might assume that a higher carbon price reduces the need for other policy approaches. Commentator Andrew Coyne has taken the market-fundamentalist position that a higher carbon price should be Canada’s single climate policy, and governments should do little else. However, the plan to increase the carbon price creates an urgent need for a robust “green industrial policy.”

That’s the approach in which governments actively guide the economy toward net-zero greenhouse gas (GHG) emissions (or beyond). Rather than simply sending signals to the market, industrial policy recognizes that governments co-create development pathways with the private sector through strategies customized to unique regional and sectoral contexts. Green industrial policies include the Energiesprong project to transform building retrofits, the U.S. SunShot Initiative and the role public investment banks play in deploying sustainable energy.

Lack of explicit industrial policy doesn’t mean state direction is absent – it often means incumbents with the greatest political power have captured government decision-making, which maintains a status quo rather than producing activist industrial policy. The persistence of fossil fuel subsidies is an implicit industrial policy, just not a transformative or environmentally friendly one.

A green industrial policy is urgent because without it, the carbon price is unlikely to receive enough political support to reach its 2030 level or to induce the changes required for a net-zero economy. Here are five reasons why.

1. Political support depends on economic security and access to new services

While commentators like Andrew Coyne hope to see right-wing parties propose a market-fundamentalist position with a carbon price higher than $170 per tonne, we are more likely to see conservative movements exploit people’s economic insecurities by directing their anger against carbon pricing (as we’ve seen in Ontario, Alberta, France and the U.S.).

The federal government will issue quarterly “rebates,” promising to put more money in the pockets of average Canadians paying the carbon tax. This does not prevent people from worrying about how they will pay their monthly bills, however, especially if they have precarious incomes.

Inequality and precarious economic situations also make “the average” a poor indicator. For instance, rural and low- to middle-income households can consume more energy because they live in inefficient and substandard housing – or worse, they’ll avoid heating and cooling at healthy levels to make bills affordable.

The ultimate distributional consequences of carbon pricing depend not only on rebate policies, but on the availability of carbon-reducing services – which often are not adequately provided by markets. There is an urgent need for the government to support universal access to a new suite of carbon-cutting services like building retrofits customized for low- to moderate-income earners and public transit.

Consider that supporting large-scale building retrofits will require a transformation of business models in the sector. Rethinking service provision in a low-carbon economy also demands a renewal of the public sector to be more responsive to citizens’ needs and agile in creating new designs. This is the domain of industrial policy.

A green industrial policy should also guarantee that “good jobs” are available for anyone who wants to build a career in the net-zero economy. Market forces or untargeted pricing and subsidy policies do not create jobs for the people and places that need them most. Active labour-market policies that focus on what individuals need to transition to new careers, and customized technological advice and barrier elimination for firms, work best.

We cannot let carbon pricing become the lightning rod for legitimate anger over inequality and economic insecurity. An industrial policy that creates green services and good jobs will promote economic security, which will give people the tools they need to react to the carbon price by reducing emissions. The alternative is political mobilization against the carbon pricing policy.

2. We need more information

The carbon price conveys information to consumers and businesses about what choices to make in existing markets through prices, but economic decisions require more information.

Pricing information is insufficient because a net-zero-emissions economy requires doing things we have never done before. This concerns not only new technologies, but figuring out how to deploy existing technologies (e.g. insulation and electric vehicles) at unprecedented scales. Such an endeavour requires information about local economic structures, supply chains, cultures and transformative combinations of technologies. This information is conveyed by people and organizations sharing complex ideas in networks rather than prices.

Governments provide valuable information to these networks about things like new technological potentials and regulations. And if governments do not actively participate alongside private sector firms and civil society in these networks, they will lose the ability to understand economic change processes and how to direct them toward net-zero emissions.

There is a caricature of “industrial policy” involving an all-knowing state setting rigid directions. A modern industrial policy approach understands that economies are beset by fundamental uncertainty, requiring governments to lead a process of discovery that taps information from markets and society.

While carbon pricing is a great tool to convey important information through markets, we must recognize that it is a one-dimensional signal about what to do (don’t buy or produce things with high emissions). It offers little guidance about the best way to do this. Industrial policy facilitates the sharing of more complex information about net-zero solutions, which will create a stronger reaction to any carbon price.

3. Carbon pricing pushes, while industrial policy steers

Carbon pricing pushes toward reducing emissions, but it does not steer toward the most promising social and technological futures. There is a danger that economic decisions that pass a cost-benefit test with a carbon price (e.g. a pipeline or new highway) are legitimized, when they could pull us toward dead ends that put net-zero emissions out of reach. If we are moving toward a dead end, the political interests dependent on carbon pollution are likely to more strongly mobilize to weaken carbon prices. Industrial policy concerns itself with the direction of economic change – it can navigate and steer while carbon pricing pushes.

An industrial policy approach also gives policy-makers more tools and greater flexibility, which will be particularly useful during unanticipated shocks. Note that governments stalled planned carbon-pricing increases in reaction to the pandemic. But the pandemic also created opportunities to invest in active transportation infrastructure and a green recovery strategy. Future shocks are inevitable, and when they come, we will need public sector institutions with diverse solutions readily available.

Also, while carbon pricing provides a push, we need zero-carbon strategies to take flight – deploying solutions like building retrofits, renewable energy and industrial decarbonization at scales never before achieved. The history of transitions shows that such take-offs are not created by price changes alone. They require new combinations of technologies, changes in regulatory systems to complement new technologies, and a new “common sense” about how to produce things and what constitutes a good life. Such systemic changes are not triggered by risk-averse firms, acting independently. The public sector has the role of monitoring larger systems and creating new societal bargains, and it has the ability to take the risks associated with pushing technological and organizational frontiers.

4. While carbon pricing is broad, industrial policy is targeted

Carbon pricing works best when it provides a broad and uniform price signal; however, the price will have unique impacts on different sectors and regions.

While a high carbon price may create major changes in sectors like electricity, it may have minimal impact in decentralized and less coordinated areas such as housing or agriculture. An industrial policy approach will introduce new technologies and business models in strategic sectors and enable them to react to the carbon price by producing less carbon instead of opposing the policy change.

In Canada, we will also see a variety of regional transitions instead of a national one. Quebec’s history with hydroelectric power creates different net-zero pathways compared to Alberta’s history of oil and gas development. A regionally differentiated policy is important because we cannot escape the politics of federalism, and opposition to carbon pricing is coming from regional political interests. The more a green industrial policy can identify and support promising net-zero pathways that build from pre-existing regional assets, the better the chance of building supportive political coalitions for more climate action in the regions themselves.

5. Industrial policy defines the Canadian role in a net-zero economy

Democratic deliberations about what type of society we want should be more comprehensive than the decision to change prices and let markets figure it out. There are many reasons why Canadians might desire a different bundle of net-zero solutions than the ones induced by a higher carbon price. Perhaps we want to avoid the risks associated with nuclear waste, or we wish to deploy clean energy in a way that also encourages reconciliation with Indigenous Peoples? Good industrial policy considers how societal aspirations should influence the direction and character of economic development.

In addition, market-based policies do little to ensure Canada benefits from a net-zero transition. Finding the areas where Canadians can make the greatest contribution is important for the global transition, and to reinforce political support for the transition at home. While carbon pricing sends a signal for Canadian solutions-providers to search in new directions, an industrial policy leads this search by creating the space for learning, experimentation and scale-up. We should consider, for instance, how Canadian capabilities in areas such as software and battery systems could create a less dependent relationship with international automakers; how Canadian oil and gas capabilities could promote the development of geothermal, advanced materials and green hydrogen; and how to make energy-efficient housing for our cold climate.

There are parallels here to Canada’s free trade debate. Free trade opponents were concerned that market processes, left to themselves, would exacerbate Canadian dependence on natural resources and foreign technology (a trajectory that has strengthened Canada’s carbon lock-in). A proposed middle path (not taken) was to ensure a robust Canadian industrial policy alongside freer trade. Today, we need a green industrial policy to make sure Canada thrives under a carbon price.

An urgent need for green industrial policy

Environment Minister Jonathan Wilkinson described the new climate plan as an “industrial policy.” This seems to refer to building Canadian manufacturing capabilities in low-carbon supply chains. The concepts outlined above are broader – concerning the government’s role in directing and shaping markets, and embedding market processes in society’s need for economic security and democratic participation.

The new carbon-pricing regime will not launch until 2023, and the $170 price will come into effect in 2030. There are several elections and unexpected events likely to occur between now and then.

To reinforce the carbon-pricing commitment, we need action on developing a more robust green industrial policy this year. This means a bold commitment to long-term public investment to support economic security and the green recovery. It also means developing more specific challenges and missions to set the right direction, such as zero-carbon retrofits of all buildings – with specific focus on low- to moderate-income households. Canada also needs to renew its public sector capabilities and institutions to effectively implement an industrial policy.

Carbon pricing and green industrial policy are complements rather than substitutes, and a meaningful rise in a carbon price makes the need for a well-informed, equality-enhancing, targeted and democratic Canadian green industrial policy only more urgent.

A version of this article first appeared at broadbentinstitute.ca.

Brendan Haley is a Broadbent Institute Policy Fellow. He wrote a PhD thesis on low-carbon transitions in the Canadian context and is the author of a Broadbent Institute report on a Green Entrepreneurial State in Canada.

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This rule-of-thumb breaks down for electric vehicles (EVs), partly because it takes extra energy to manufacture their batteries but mainly because electricity can vary from ultra-clean to uber-dirty.

To help readers determine how much cleaner plug-in cars would be over their petroleum counterparts based on where they live, Corporate Knights has compiled the grid emissions intensity for every Canadian province and American state (and the District of Columbia). We then compared the per-mile emissions for the Nissan Leaf – the world’s best-selling EV – and its combustion cousin, the Nissan Versa, based on government fuel-efficiency figures.

Click on the image to enlarge:

Highlights

For the United States as a whole, and taking into account that coal powers one-third of the U.S. grid, the Nissan Leaf delivered a 40 per cent emissions savings over the Versa, per mile. For Canada, where the grid is two-thirds clean hydroelectricity, the savings double to 80 per cent.

Moreover, almost 80 per cent of Americans live in states where the Nissan Leaf offers better than 25 per cent per-mile emissions savings – a difference big enough to give us solid confidence that the plug-in is less polluting than its petroleum partner. And that’s before considering the bamboo-like growth rates that renewable energy is experiencing worldwide.

The aforementioned states include California, Washington, New York and Georgia, home to the five cities responsible for more than half the United States’ plug-in EVs thus far: San Francisco, Los Angeles, Seattle, New York City and Atlanta. Indeed, Nissan recently announced that Atlanta had become the Leaf’s top-selling city. So it seems that EVs are generally being purchased where they’re most effective.

In contrast, only 5 per cent of Americans live in states or districts where the Leaf’s transportation emissions prove worse than the Versa’s. This represents residents of West Virginia, Indiana, Kentucky, North Dakota, Wyoming or the District of Columbia.

While state-by-state EV sales figures are hard to come by, the District of Columbia does hold the distinction of being the first state/federal district hosting more public battery-charging stations than gas stations. At time of writing, the margin was 121 to 85 for the plugs versus petroleum.

Continuing with the 80-20 theme, 80 per cent of Canadians live in provinces or territories where the Leaf’s per-kilometre emissions reductions amount to 60 per cent or more. And fully 40 per cent of the country live in five renewables-dominated provinces where per-km emissions are reduced more than 98 per cent: Quebec, British Columbia, Manitoba, Newfoundland & Labrador, and Prince Edward Island (though because these figures don’t include electricity imports, the numbers are deceiving for P.E.I., which imports a lot of coal power). These two-fifths of Canadians are responsible for three-fifths of the country’s EV purchases.

Meanwhile, the 11 per cent of Canadians who reside in Alberta would be creating more emissions if they charged EVs by plugging into the province’s coal-dominated grid. This explains why only 3 per cent of Canada’s plug-ins are sold there.

Curiously, Canadian consumers are adopting plug-in vehicles much more slowly than their American counterparts, with electrics representing about 0.1 per cent of the Canadian new car market in 2013, versus about 0.6 per cent in America. While Canada lacks federal incentives, the three largest provinces offer provincial rebates.

One possible explanation is that Canadians tend to buy less expensive vehicles than Americans, while manufacturers tend to price plug-in vehicles higher in Canada than in the United States.

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Fresh off of Alibaba’s record-breaking IPO-dominating headlines this week, co-founder Jack Ma was interviewed by Chelsea Clinton at the Clinton Global Initiative’s annual meeting yesterday. Ma spoke at length about his desire to put his swollen bank account to charitable use, returning repeatedly to ongoing environmental problems in China. “If we don’t give up, in 15 years China will have a change,” he said. “We will have blue air, blue skies, clean water.” Former President Bill Clinton, for his part, hailed it as a potential catalyst for increased civic engagement in China.

The freshly signed Canada-China Foreign Investment Promotion and Protection Agreement (FIPPA) remains a hot-button issue. Andrew Nikiforuk is worried that clauses in the 31-year treaty would empower it to supplant decisions made by Canadian provincial, judicial and First Nations on issues of resource development. The treaty goes into effect on October 1.

Corporate Knights contributor Stephen Lacey wrote about new California-based startup Local Motion, which is working to make fleets more efficient. The sharing platform helps companies make the most of corporate vehicle fleets, working with large companies such as Google and Verizon. On Greentech Media’s The Energy Gang podcast, Lacey went into detail on New York State’s ambitious plans to incorporate more entrepreneurship and choice into the state grid. It’s well worth a listen.

The United States government has launched its largest conservation program to date to restore the Great Lakes and clean up 10 contaminated rivers and harbors. The five lakes represent the largest group of freshwater lakes in the world, but the growing cities along their shores have chased away wildlife. Farming is also responsible for filling rivers with fertilizers result in massive algae blooms that cover parts of the Great Lakes, while mussels and other invasive species are killing native fish and other species. The Environmental Protection Agency aims to treat eight times more urban runoff and restore twice as much wetland and wildlife habitats. It will also double the area that it is attempts to control for invasive species and reduce fertilizer runoff by more than 1,400 tons by 2019.

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The Montreal Carbon Pledge launched today at the PRI conference in Montreal, which will encourage institutional investors to measure and publicly disclose how much carbon is contained within their investment portfolios on an annual basis.

The pledge adds to existing measurement tools, reporting standards and low-carbon investment options that have created a “perfect storm” for building a low-carbon economy, says Toby Heaps, Chief Executive Office of Corporate Knights.

This comes only days after Ban Ki-Moon, Secretary General of the United Nations, called on the private sector at Tuesday’s Climate Summit in New York City to “redirect investment commensurate with the scale of the challenge,” including disclosing carbon asset exposure.

“Climate change is a risk to businesses and financial markets everywhere,” said Ki-moon on Tuesday. “It threatens to undermine financial resilience, and efforts to alleviate poverty and maintain sustained economic growth.”

While he said carbon pricing was a critical first step, it would be insufficient if not complemented by urgent direct action. And with over $75 trillion (U.S.) in investable assets, institutional investors play a leading role in the transition to a climate resilient economy.

That is why the Montreal Carbon Pledge is aiming to get commitments from portfolios worth $3 trillion before the United Nation climate meeting in Paris in December 2015.

The PRI – an international network of investors supported by the United Nations, which represents more than $45 trillion (U.S.) in assets under management – will manage the online portal where investors can endorse the Montreal Carbon Pledge, report the size of their portfolio’s carbon footprint and list their carbon-reduction targets.

These actions will not only help to mitigate the climate crisis, they also have the potential to generate new markets and new employment opportunities, as well as generate economic growth while meeting our social and environmental needs, said Ban Ki-moon on Tuesday. But, in order for this to happen, investors need to enter a new era of global cooperation, he said.

The Montreal Carbon Pledge will bring institutional investors together so that they can “translate climate talk into walk,” said Fiona Reynolds, Managing Director of the Principles for Responsible Investment in a statement.

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