By Bob Weber

Prime Minister Mark Carney’s Major Projects Office is now six months old, just a baby in government years. But those gathered around the newborn’s crib already have plenty of ideas on how they’d like the infant to grow up.

Some look for an umpire—a neutral agency that simply evaluates big proposals and advises cabinet. “I hope they want someone who’s there to call balls and strikes,” Andrew Leach, an energy and environmental economist at the University of Alberta, told The Energy Mix. He said the MPO’s role should be to advance such projects, but also to ensure proponents have covered the environmental and consultation bases.

“You want someone in the room that when a company comes in and says, ‘Our project’s just not moving forward,’ (asks) ‘Have you done the work right?’”   Others want something more activist, pushing projects that further decarbonization, such as linking interprovincial electricity grids. “It needs to be a ramp up for renewable energy projects,” said Mark Kalegha, energy finance analyst at the Institute for Energy Economics and Financial Analysis. “Interconnectedness seems to be on their priority list and the MPO is able to help with the regulatory hurdles.”

A giant lab on regulatory reform would be welcome, say some. “What we’re hoping comes out of the Major Projects Office is learnings on how to accelerate reviews and processes without denuding them or making them any less stringent,” said Fernando Melo, public affairs director with the Canadian Renewable Energy Association (CanREA). “I’ve been out to many a project site where you ask, ‘How many permits are you filing?’ and the answer comes ‘Oh, five or ten’ … And I go, ‘One field.’”

Others expect it to serve an overall policy goal. “They’ve been focused on resources and infrastructure, in particular, trade facilitating infrastructure,” said University of Calgary economist Trevor Tombe. “That, to me, really speaks to the priority on trade diversification that the government has laid out.”

And some will be grateful if the whole thing doesn’t just turn into another deadening layer of lobbyist-ridden government bureaucracy. “

It does signal to investors that (their proposal) won’t be one of those Canadian proposals that takes 12 years. That’s the generous side of it,” said Heather Exner-Pirot, senior fellow at the Macdonald-Laurier Institute. But she asks, if excessive regulation is the problem, why not just reduce regulation?

“They’ve listed all these regulations that the MPO can bypass—why don’t they work on fixing those if they can be bypassed safely?”

But all say that attempts to assess the MPO’s direction need context. The office is just one part of a policy package aiming to reduce Canada’s dependence on increasingly unreliable United States trade, boost the country’s economic self-reliance, and move its economy toward a low-carbon future—all at once.

“Just as important, if not more important than the major projects themselves, is the policy,” said Janetta McKenzie, oil and gas director at the Calgary-based Pembina Institute. She said industrial carbon pricing, methane regulations, clean electricity regulations, and federal investment tax credits are just as big an influence on where investment goes as anything the MPO does. “

If the goal is to build a future-proofed Canadian economy that is more resilient to ongoing geopolitical shocks and volatility, then the investment signals need to be strong,” McKenzie said.

The Signals So Far

The signals, so far, haven’t been encouraging for climate goals. The federal government has junked consumer carbon pricing, tossed oil sands emissions caps, and weakened EV sales mandates. Tough economic times have proved tough for environmental policy, too, said Leach.

“Once people became convinced, rightly or wrongly, that Canadian environmental policy was the source of all their woes, there wasn’t much ground there left for the PM. “Voters are very keen on environmental policy as long as it doesn’t cost them anything.”

For example, the memorandum of understanding now being finalized between Alberta and Ottawa includes a promise of industrial carbon pricing—but also support for a new pipeline, which a Pembina analysis concluded would increase Alberta’s carbon emissions even if that oil was “decarbonized” through capture and storage.

Leach said national security concerns may now support the project. “All our pipelines in the U.S. are subject to a presidential permit the president can revoke at any time at our expense,” he said. “It’s still a conversation that’s in a dark corner, so to speak, but it’s a conversation we should be having.”

A Pipeline Full of Obstacles

But any new line faces considerable obstacles.

There’s neither a route nor a proponent, and the increased production needed to fill one would require massive upstream investment.

The MOU signed between Alberta and the feds rules out public financing, but former Alberta energy minister Sonya Savage recently told a CBC podcast that without public support a private proponent is, at best, highly unlikely.

Still, there may be a financial case to be made, suggested Leach, pointing to 2010, when pipeline bottlenecks forced producers to discount Canadian oil. If that happened again, the discount would now be on roughly twice as much oil.

“This is the math that people miss,” he told The Mix. “Even if you said this (pipeline) would reduce the differential by a buck, that’s four million barrels a day, 365 days a year times 15 years. (The investment) doesn’t look terrible.” Price, he said, is far more important than sheer volume.

But Canada will likely need to reduce that discount and squeeze out every petrodollar it can, and sustain it over a longer haul that may not be realistic. Before the current war launched the price of oil, it was languishing around $60 a barrel, with most experts predicting further falls. That market is likely to eventually return once the U.S.-Iran conflict ends. When the missiles stop flying, so will the value of oil.

Diversified Trade Could Boost Climate Goals

But the Carney objective of diversifying Canada’s trading partners could also advance climate goals. The projects currently before the MPO suggest at least some emphasis on clean energy, with wind power and minerals critical to electrification in the mix.

There’s also a proposal to link electricity gids in northern British Columbia and the Yukon.Climate and energy transition advocates say that is exactly the sort of thing the MPO should be doing to move Canada towards electrons and away from molecules.

“The more we integrate provinces and (make them) able to call on each other’s resources, it’s going to be better,” said CanREA’s Melo. “Having more connectivity will help enable greater decarbonization of the grid.”

In fact, grid ties are probably the only electricity-related projects big enough to appear on the MPO’s “nation-building” agenda. Solar panels and wind farms are also regulated provincially, putting them outside the MPO’s purview.

“The barriers to renewable penetration of electricity generation are provincial policies,” said the University of Calgary’s Tombe.

Trade diversification could provide another decarbonization prod. Canada will have to meet the environmental standards of those it seeks to trade with. Europe, for example, implemented its carbon border adjustment program in January. The policy imposes a tariff on imports of carbon-intensive products such as steel, cement, and energy that don’t meet EU standards. Melo said if Canada wants to play in those markets, it will have to comply.

“With the Canadian government’s stated goal of 50% of exports reaching alternative markets— the European Union, Japan, and China, which everyone forgets has an industrial carbon price— there’ll be more and more demand that the goods they import have low-carbon attributes built in.”

Weighing the Consequences

It’s unlikely that Mark Carney, once the UN’s special envoy on climate action, has forgotten the need to reduce carbon emissions. But he’s a central banker, too, used to weighing consequences of action against each other.

“The end game is going to be overall policies on consumption and overall policies on production,” Leach said. This may mean a little water in the wine of carbon cuts. Rather than absolute targets—the meeting of which has failed dismally—Canada may instead focus on simply being better than our competitors, some analysts say.

“Sustainability includes financial sustainability,” said Exner-Pirot. “The goal is not to kill Canadian production, but to make it better. Trying to square the circle involves making Canadian products competitive on carbon intensity, aiming for the good rather than the perfect.”

The Carney government must now make tough choices in the face of a new world order different than the one we were told to expect, Tombe said. “Reality has just thrown a few curve balls at Canada.”

“I do not see the government having abandoned any consideration at all about climate objectives,” he added. “But it also keeps in mind other criteria like trade diversification, economic and productivity growth … (Government) could achieve a lot more if it was singularly focused on climate goals. But it is not. It is balancing lots of objectives.”

The MPO itself has offered few clues as to its direction and intent. Although CEO Dawn Farrell is a longtime fossil energy executive who shepherded the controversial Trans Mountain pipeline expansion project, she has a non-partisan and even-handed reputation. Still, in testimony last fall before a Senate committee, she spoke approvingly of the carbon intensity of Canadian LNG. She also suggested a new oil pipeline to the west coast would have climate benefits, since much if that oil is used to make components for electric vehicles.

Some other senior staff bring past background in renewable energy and in reconciliation with Indigenous communities, but staffers have provided little information about where the office is going. Federal officials have told The Mix that Farrell maintains close contact with Carney and his senior staff, and that “all the major calls” will be made by the Prime Minister’s Office.

It’s early days for the MPO and the baby is barely walking. Where its first steps take it will be determined as much by the paths other policies have opened for it as its own inclinations.

But like any infant, observers broadly agree that it will take a while to mature. A $3.3-trillion economy does not turn around overnight.

“This process of diversifying trade, of boosting investment and growth, is going to be a multi-year, potentially multi-decade road that we’re on,” Tombe said. “We’re only at the very, very beginning. There’s so much left to do and so many unanswered questions still that need resolving.”

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Canada and Luxembourg have maintained diplomatic relations since 1945 and share membership in key multilateral institutions such as NATO, the United Nations and the Organization internationale de la Francophonie. Luxembourg also opened its embassy in Ottawa in 2025 — a symbolic step in strengthening bilateral engagement.

Economic Partnerships and Investment Dialogue

At the centre of discussions was the launch of the 2026 Canada-Luxembourg Financial Sector Policy Dialogue, a new forum to bring together finance officials on issues including financial stability, sustainable finance, fintech innovation, and capital markets development. Carney and Frieden said the initiative will help align policy approaches in an era of complex global finance.

Luxembourg is one of Canada’s most significant European sources of foreign direct investment (FDI). In 2024, Luxembourg’s FDI stock in Canada was valued at approximately $22.3 billion, while merchandise trade between the two countries totalled about $249.8 million. Luxembourg also ranks among the top European investors in Canada, reflecting strong financial and commercial links.

Both leaders emphasised efforts to expand bilateral trade and investment in advanced sectors such as advanced manufacturing, infrastructure, aerospace, space technology and related technologies. The discussions also touched on opportunities to boost Canadian exports into European markets by leveraging Luxembourg’s position as a global financial hub.

Talent and Academic Collaboration

A significant educational partnership announced during the visit was the establishment of the McGill Luxembourg Centre for Finance and McGill University’s Master of Management in Finance program. The initiative aims to boost academic collaboration and broaden student and talent exchanges between the two countries — a move seen as supporting the development of a globally competitive financial workforce. Prior partnerships underpinning the Centre were established with Luxembourg’s institutional and industry partners, strengthening ties between academic research and financial market practice.

Security, NATO and Ukraine Support

As NATO allies, Canada and Luxembourg also reiterated strong support for Ukraine in the face of Russian aggression. Carney and Frieden discussed reinforcing transatlantic security and bolstering defence supply chains, including in the Arctic, where climate change and geopolitical competition have elevated strategic importance.

Both prime ministers reiterated the need for a “just and lasting peace” in Ukraine backed by robust security guarantees. They also signalled support for the proposed Defence, Security and Resilience Bank (DSR Bank), a concept intended to provide multi-year, low-cost financing for defence, security and resilience initiatives. The instrument — still in discussion — is seen by proponents as a way to strengthen defence industrial cooperation beyond traditional government procurement.

Broader Context: Canada’s Global Strategy

The Ottawa visit comes as Carney pursues an active global agenda aimed at diversifying Canada’s economic partnerships beyond traditional markets. In recent months, his government has been involved in diplomatic engagements in China, where agreements were reached on tariff reductions for key exports including canola oil and electric vehicles, and in other regions focused on investment and trade promotion.

Carney’s emphasis on reliable international partnerships reflects a broader strategy shaped by global economic uncertainty, strained supply chains and geopolitical tensions. As Canada seeks to balance economic growth with security concerns, the Luxembourg visit underscores a pragmatic approach to forging partnerships that integrate investment, talent development and defence cooperation.

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By Mitchell Beer

On the heels of a new strategic partnership with China, and with Prime Minister Mark Carney planning a trip to India later this year, the plan to reduce Canada’s trade dependence on the United States is beginning to yield closer connections with the world’s first two electrostates.

As Trump threatened a 100% tariff against Canadian products in response to a deal with China that he initially praised, at least one Chinese electric vehicle manufacturer looked to be preparing for an expansion into Canada, while a federal official said Canada wanted to be the first country in North America to build an EV with Chinese know-how.

Meanwhile, just as China is receiving wide recognition as the world’s first electrostate, a small flurry of news and analysis had India rapidly emerging as the second, advancing farther and faster than China did when it had achieved the same degree of economic development.

‘Foreign Troubles’ for U.S. Automakers

In their strategic partnership announced Jan. 16, Canada agreed to sharply reduce tariffs on electric vehicle imports from China, while China offered up tariff relief for Canadian canola, peas, pork, and seafood. Canada will slash duties on up to 49,000 Chinese EVs per year, rising to 70,000 by 2031, to a “most-favoured-nation tariff rate” of 6.1%. Within five years, as well, more than half of those vehicles are meant to be affordable EVs with an import price of less than $35,000.

At the time, CBC said Ottawa would soon release a strategy to expand the auto sector and “leapfrog” the U.S., with “preferential access to foreign automakers that manufacture vehicles in Canada.”

Scarcely a week later, the New York Times reported that the U.S. industry’s “foreign troubles” now extend to Canada, after U.S. trade policy “devastated the Canadian auto industry and pushed the country to reach an agreement that will make it easier for Chinese companies to sell cars there.” That could make the Canada-China agreement “an ominous development for U.S. automakers that are already struggling to stay relevant outside North America,” the Times wrote.

“General Motors and Ford Motor—the two largest U.S.-based car manufacturers—have been steadily losing customers in Asia, Europe, and Latin America, as Chinese carmakers have gained ground,” the news story stated. “If they lose significant ground to Chinese companies in Canada, Mexico, and other countries where they once dominated, Ford and GM could gradually become niche manufacturers.”

“There’s a real danger that the market for U.S. carmakers is going to largely be the U.S., and only that part of the U.S. market that wants big SUVs and trucks,” Erik Gordon, a professor at the University of Michigan’s Ross School of Business, told Times auto industry reporter Jack Ewing.

“Historically, U.S. trade policy regarding automotive has been mirrored in Canada,” added George Washington University engineering professor John Helveston, in an interview with the South China Morning Post. But now, “Canada is realizing that the U.S. industry is perhaps not the only one to be tied to,” a measure of both the impact of Trump’s tariff wars and the wider decline of U.S. leadership.

In Canada, the partnership has analysts arguing that lower costs will help consumers, although concerns about supply chains, industrial strategy, environmental impacts, and “strategic dependence” have yet to be resolved.

“The quota is too small to translate into a cheap-car bonanza for Canadian car shoppers,” the Globe and Mail writes. “But it is likely to increase competition among automakers, in China and elsewhere, to make $35,000 EVs fit for the Canadian market.”

The first imports will likely come from western automakers with Chinese production lines, notably Chinese-owned Volvo, Buick, and Elon Musk’s Tesla, the Globe says. But “China’s own brands won’t take long to show up in Canada,” the news story states, citing Canadian Black Book senior manager Daniel Ross, and they’ll want to build their profile “by focusing on models that meet North American expectations in terms of features, style, and size.” That will put them in competition “with compact and subcompact SUV segments, which, together, currently make up about half of the Canadian market.”

Late last week, the Globe reported that China’s Chery Automobile Co. Ltd. was laying the groundwork for a Canadian sales network, with at least three auto industry veterans saying they’d been contacted by recruiters who indicated they were working for Chery. The company is also considering building cars in a UK plant owned by Jaguar Land Rover, the Financial Times writes.

The Globe also reports on the difficulties that Chinese manufacturer BYD ran into when it tried to set up manufacturing operations in Ontario a few years ago.

The Two Electrostates

The trade deal earlier this month is just one part of an economic diversification strategy that had Carney concluding deals with the United Arab Emirates and Qatar over the last month. With International Trade Minister Maninder Sidhu now calling for closer trade ties between Canada and India, Carney is planning a visit as soon as March, Reuters reported in an exclusive this week, with indications of trade talks in Brazil and Australia later this year.

For a few years, China has been seen as the world’s first electrostate, with renewable energy and energy storage investments that far exceed the activity in any other country. Earlier this month, Carbon Brief talked to nearly a dozen leading experts in Chinese energy and climate policy to get a sense of what to expect in 2026—the year when the country will publish a set of five-year targets that “could boost—or moderate –the pace of its energy transition.”

For more than 18 months, analysis by Carbon Brief and others has shown China’s carbon dioxide emissions either flat or falling. This year, new non-binding emission targets and an expanded carbon market are expected to take effect, even as extreme weather increases the importance of climate adaptation “while also adding to the challenge of advancing clean energy.”

Already, though, renewable energy has already replaced natural gas as “the leading replacement for coal demand in China, with growth in solar and wind generation largely keeping emissions growth from China’s power sector flat,” Carbon Brief reports. Nikkei Asia says China installed three times more battery storage capacity than the U.S. in 2025.

Now India is “electrifying faster and using fewer fossil fuels per capita than China did when it was at similar levels of economic development,” Bloomberg says, citing analysis by the UK’s Ember energy think tank. “It’s a sign that clean electricity could be the most direct way to boost growth for other developing economies, too.”

The government of Prime Minister Narendra Modi “is considering new plans that would double India’s coal power capacity by 2047, and the country’s oil consumption growth was set to outpace China’s last year,” Bloomberg writes. “But the South Asian economy’s coal and oil consumption per capita is a fraction of what China’s was at similar income levels. In absolute terms, India’s fossil fuel consumption is growing at slower rates than China’s today.”

No More Engine for Oil and Gas Growth

Energi Media publisher Markham Hislop says the Ember analysis has wider implications.

“It suggests that India, the country long assumed to be the last great engine of global oil and gas demand growth, may already be bending away from fossil fuels faster than China did at a comparable stage of development,” Hislop writes. “That version of India’s energy future undermines the strategic assumptions underpinning energy policy in exporting nations from the Middle East to North America, including Canada.”

The driving force behind that shift is “simple and structural,” he adds, citing Ember. “China had to pioneer modern electric technologies at scale. India does not. It is industrializing at a moment when solar panels, batteries, and electric vehicles are abundant, cheap, and improving every year. India is not taking a fossil detour because it no longer makes economic sense to do so.”

Which in turn leads Hislop to the implications for fossil fuel exporters. “If India’s oil and gas demand really is nearing a peak, or never reaches the levels long assumed, the implications ripple outward.,” Hislop says. “For global markets. For geopolitics. And for countries like Canada that have built their long-term energy ambitions on the idea that someone, somewhere, will always need more hydrocarbons.”

In his Electrotech Revolution newsletter, Ember strategist and report co-author Kingsmill Bond cites faster solar deployment, much lower per capita coal use, rapid growth of electric vehicles, much lower oil demand in transport, and a “similar rapid electrification pathway” as factors that could make India’s “electrotech fast-track” more effective than China’s “fossil detour” en route to electrostate status.

“This energy path avoids deep fossil fuel dependency while positioning the country to supply electrotech to the world,” he writes, in what amounts to a “new path for emerging economies. India is showing other countries how to take a cheaper, faster, cleaner pathway to the electrotech future.”

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By Mitchell Beer

Alberta is demanding even faster federal approval of a bitumen pipeline to British Columbia’s west coast, even as a former provincial energy minister admits the project would have “zero” chance of attracting private investors without federal subsidies to “backstop” it.

The new demands came just six weeks after Premier Danielle Smith and Prime Minister Mark Carney signed a controversial memorandum of understanding (MOU) that envisioned an accelerated, two-year approval schedule for at least one new pipeline. Smith issued her latest letter to Carney after Donald Trump’s bombing and kidnapping raid in Venezuela became the latest pretext to demand ever-faster federal action on the pipeline plan despite a glutted global market for oil.

“Alberta intends to submit its application for a pipeline to the Major Projects Office by June—and [Smith] asked that it gets approved by this fall,” CBC reports.

“Within the current geopolitical context, timelines of up to two years are still woefully long and risk putting Canada at a disadvantage,” Smith wrote. “Any delay risks ceding market share, losing investment, and undermining Canada’s competitive position in a rapidly changing global energy landscape.”

When the MOU was signed in late November, impact assessment experts warned that even a two-year approval period would be too short to allow for thorough review of a major, new pipeline, or for engagement with Indigenous and other affected communities. Short-circuiting those steps could help land a project in court, where it would only face further delays.

Smith’s letter also sidestepped major questions about the years it would take to refurbish Venezuela’s decrepit oil production infrastructure, whether U.S. fossil companies are willing to invest, and whether there will significant global demand for new oil—from Venezuela, Canada, or anywhere else—by the time any new project could be completed.

A west coast pipeline would also need federal subsidies, Smith’s former energy minister, ex-pipeline lobbyist Sonya Savage, told a CBC podcast. Without taxpayer support, “I would say it’s not just diminishing, the likelihood of a private sector proponent.… I would almost say it is zero at this point,” she said.

While the MOU explicitly calls for any new pipeline to be built and financed by private companies, Savage said a federal “backstop” to cover cost overruns, like the massive, 584% budget increase that plagued the Trans Mountain pipeline expansion, would not be a new concept for Canada.

“The TransCanada mainline gas line in the 1950s would not have been built without federal government intervention,” she told CBC’s West of Centre podcast. “They set up a Crown corporation, they backstopped it. Enbridge’s Line 9 in the 1970s would not have been built without a federal government backstop.”

In a release Monday, the Calgary-based Pembina Institute called on both governments to “stay true” to the language about “strong regulations that will drive down oil and gas emissions” that accompanied the release of the MOU.

“Alberta using this moment to lobby in public against what it is now calling an ‘overly aggressive’ industrial carbon price raises more questions about the outcome Alberta has in mind—especially given it already agreed in the MOU to strengthen its system,” said Executive Director Chris Severson-Baker. “This is in addition to the regulatory changes Alberta pushed through in December—days after signing the MOU—that weakened its industrial carbon pricing system and effectively moved the goalposts on the negotiation before it had begun.”

Severson-Baker added that, “far from being a reason to further expedite a pipeline proposal and weaken Canadian climate policy, the Venezuela situation should give further pause for thought and reassessment about the best economic bet for Canada going forward.”

“42 days after signing the ‘grand bargain’ MOU with the federal government, Alberta is trying to change the terms of the agreement, leveraging the current situation in Venezuela,” veteran climate analyst Dan Woynillowicz wrote on LinkedIn. “Underpinning the MOU is a commitment to ‘good faith’ collaboration,” but “I don’t see how seeking any and every opportunity to change the terms of the MOU or shift the goalposts can be seen as living up to this.”

On Substack, fossil industry analyst and communicator Bill Whitelaw praised Savage for “speaking her truth” on the taxpayer backstop that private investors would expect before pouring their own money into a new pipeline project. That “loadsa dough” subsidy won’t happen, he said, as long as there’s a chance that Alberta separatists will succeed in pulling the province out of Canada—much less making it Donald Trump’s sought-after 51st state.

“Ottawa will need to pony up big bucks to bolster an already-thin business case,” Whitelaw wrote. “Fellow Canadians would never countenance Ottawa forking over billions to a province that can’t be bothered with Confederation.”

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By Justina C. Ray and Dave Poulton

Over the summer, the Canadian government announced that it’s setting up a Major Projects Office to identify and fast-track projects deemed to be in the national interest. The projects under consideration are spread across Canada and focus on mining, power generation and port expansions.

But each update to the list throws a spotlight on a persistent gap in Canada’s planning processes. The federal government has signalled it wants to see these projects move quickly — but without a clear way to help ensure they proceed without sacrificing the climate resilience, biodiversity or community trust that Canadians also value.

For example, the government has signalled interest in expanding the Port of Churchill, Man., with new shipping, road, rail and energy infrastructure to support expanded Atlantic access for Prairie industries.

These facilities would introduce industrial activity into Arctic and sub-Arctic ecosystems that have seen little prior disturbance and are already stressed by rapid climate change. The siting and design choices will be critical — raising questions about how early ecological risks are being weighed.

What Canada needs alongside its list of major projects is a principled, transparent sequence of steps that governs how those projects are planned and assessed.

Without such a strategy, the focus centres on pushing the project through. And planners and policymakers fail to consider those early, fundamental questions about ecological risk, or whether the location and design make sense in the first place.

Adopting a well-established mitigation hierarchy, as outlined in our recent report, can help Canada avoid the tangled and dysfunctional outcomes we see again and again in current planning and assessment processes.

In this context, mitigation refers to the full set of tools available to deal with environmental impacts, applied in a clear sequence or hierarchy: first avoiding impacts where possible, then minimizing those that remain, then repairing damage on site, and only as a last resort compensating for residual losses elsewhere.

Step 1: Avoid harm with early-stage planning

Too often planners focus only on reducing impacts after basic design decisions are made. This leaves decision-makers boxed into weaker options than if they had first asked what could be avoided — and it can be far costlier as late-stage fixes mean redesigns, deeper ecological damage and heightened conflict.

Effective planning requires backing up and taking in the big picture. What comes into view is a sweep of globally important, largely intact ecosystems — places that anchor our climate, support communities and sustain wildlife and their movements.

That means the first step in any sensible hierarchy is to steer development away from places like sensitive peatlands, areas important for biodiversity, cultural keystone places and headwaters that sustain vital watersheds.

Early-stage planning enables the most important questions to be asked: Is the proposed option the best means of meeting the need, or do lower-cost or less damaging alternatives exist? Are projected ecological, climate and community impacts supported by evidence of commensurate economic and social outcomes?

Answering these questions well depends on strong baseline information about ecosystems and communities — something too often missing at the outset, causing delays while data is gathered.

Governments can begin closing this gap by strengthening the evidence base needed to inform projects before they advance. This includes support for sustained regional ecological monitoring, Indigenous and community knowledge programs and fuller use of strategic and regional impact assessments. All of these measures can identify cumulative effects and landscape-level priorities and provide shared information for planning across entire regions.

Delivering on the Liberal commitment to “map Canada’s carbon and biodiversity-rich ecological landscapes … to enable a more holistic ecosystem approach to conservation, carbon accounting, and project development” would substantially advance and improve early-stage planning. Integrating existing data held by public agencies, private proponents and consultants would further clarify environmental strengths and vulnerabilities.

Step 2: Minimize harm that cannot be avoided

Only after fully considering ways to avoid impacts should the focus shift to minimizing unavoidable damage. This is where design and operational choices matter: adjusting scale, routing, timing and methods to reduce a project’s footprint and its effects.

In ecologically intact regions — places where human pressures have not yet reached levels that compromise core ecological functions — minimization also means confronting growth-inducing impacts head-on by limiting new access, managing roads and corridors and regulating the pace and scale of development to prevent cascading cumulative effects.

Done properly, minimization protects ecological function and reduces long-term environmental, social, and financial liabilities for proponents.

Step 3: Remediate to make impacts temporary

Once all feasible steps for minimization have been taken, it becomes appropriate to move on to onsite remediation — rendering unavoidable impacts temporary through progressive reclamation, revegetation and decommissioning.

Prioritizing remediation in already stressed landscapes reduces cumulative effects, restores ecological function and builds trust by demonstrating recovery during the life of a project, not decades later.

Step 4: Offsetting is the last tool, not the first

The final step in the mitigation hierarchy is offsetting — the idea of restoring or protecting habitat elsewhere to compensate for what is lost to development. In theory, this promises no net loss, or even a net gain.

In reality, it’s the riskiest and least reliable form of mitigation, which is why it must be treated as a last resort. When offsetting is used in isolation, long after a project’s design is locked in, it becomes a poor substitute for the harder, but more valuable, work of avoiding and minimizing impacts at the outset.

As we stress in our report, that kind of sequencing failure matters. Once decisions are made and footprints fixed, ecological losses can no longer be undone, and offsets are expected to carry a burden they cannot realistically bear.

Offsetting should therefore function as a backstop — not a shortcut. Yet, it is frequently looked to as if it were the first tool in the box rather than the last.

A unified federal policy framework

Deploying the mitigation hierarchy is a technically simple approach to project planning, and it can make a substantial difference in getting projects built without unnecessary delays.

It requires a planning mindset open to alternatives and a willingness to invest early in understanding ecosystems and community needs. The hierarchy also aligns with Indigenous perspectives that view natural systems as interconnected, offering pathways for more meaningful engagement.

There is nothing new about this approach. The mitigation hierarchy has guided major-project planning and financing in other countries for decades and appears — albeit inconsistently — across several federal policies. But in this moment of renewed ambition for “nation-building” projects, Canada has an opportunity to bring coherence and discipline to the management of environmental and social impacts.

This is why we are calling for a unified federal policy framework, so that the mitigation hierarchy is applied consistently across federally supported projects. A clear hierarchy — applied early, consistently and transparently — would make decisions stronger, projects more credible and our commitments to biodiversity, climate, and Indigenous rights more than words on paper.

The post Fast-tracking without foresight: Canada’s risky approach to major projects appeared first on Thoughtful Journalism About Energy's Future.

by Bob Weber

The year 1539 was a good one to be King of England.

Henry VIII, the reigning monarch, had a free hand on royal marriages, state religion, church property, and such. But those pesky Parliamentarians didn’t always move as quickly or as agreeably as he would have liked.

So he had his fixer Thomas Cromwell come up with the Statute of Proclamations, which gave Henry the power, exercised through decree, to alter any law, with those decrees having the same force as if Parliament had voted for them.

It was not popular with the commoners. The Act was repealed in 1547 and history’s verdict has been harsh. One 18th-century jurist said it “was calculated to introduce the most despotic tyranny,” and it is still considered the height of Henry’s will to power.

But legislation giving the whip hand to the executive branch of government, which scholars call King Henry the Eighth clauses, is still around. One such clause is prominent in the Carney government’s new Building Canada Act (BCA). It’s a major reason observers say the legislation marks a big shift in power to the prime minister and cabinet and away from the courts, Parliament—and the public.

“Cabinet, with cabinet secrecy, can pass a regulation that changes a law duly passed by Parliament,” Martin Olszynski, a University of Calgary resource law professor who testified before a Senate committee on the bill, told The Energy Mix in an interview. “That’s really radical.”

The Building Canada Act was hustled through Parliament last summer in less than a month. It was presented as a response to the perceived need to speed up environmental approvals for large industrial developments, responding in turn to the undoubted threats to the Canadian economy posed by the current United States government. Here, briefly, is how it works.

Project proponents who feel their idea is “nation-building” can apply to the Major Projects Office, a new agency created by the legislation. That office measures the proposal against five goals, including “whether a project will contribute to clean growth and addressing climate change,” according to the recent federal budget.

The office is to ensure both First Nations and provincial governments have been adequately consulted. It then makes a recommendation to the minister of internal trade. After 30 days to ensure the provinces and territories are onside, the minister can then declare the proposal a Project of National Interest, (PONI). Dawn Farrell, CEO of the Major Projects Office, told a House committee she hopes a decision on designation will take four or five months. The discussion will then change from whether to proceed, to how.

Who Wouldn’t Want a PONI?

Supporters say the legislation eliminates the need for companies to answer questions twice, once at an environmental assessment and again when they request permits from federal departments for specific actions—say, building a stream crossing.

“Half the job is getting through environmental assessment, getting your capital together, and announcing the project,” said Dave Nikolejsin, an adviser at the McCarthy Tétrault law firm and the former provincial deputy minister who oversaw natural gas development in British Columbia. “The other half, and sometimes the tougher half, is actually getting it built.”

Speaking on a podcast by the ARC Energy Research Institute, Nikolejsin said “What drives proponents crazy is they will go through massive expense and time to do a baseline study as part of an environmental assessment. Then they have to do it again when they turn to get their permits.”

A blog from the law firm Bennett Jones, which often represents fossil energy companies, made a similar point: “By cutting red tape and coordinating project approvals more efficiently, the MPO represents a significant effort by the federal government toward ensuring that Canadian infrastructure can be advanced to attract investors and boost the competitiveness of Canada’s project execution timing.”

Stacking the Deck

Well and good. Environmental groups and concerned citizens aren’t any keener than businesses to spend time and money in court or endless regulatory hearings. But observers suggest the Building Canada Act has stacked the deck, dealing aces to those in power and jokers to everyone else.

“Parliament has given cabinet really unprecedented power to exempt projects from environmental laws, in effect giving cabinet what are effectively law-making powers,” Anna Johnston, staff lawyer at West Coast Environmental Law, told The Mix.

Pierre-Alain Bujold of the Privy Council Office disputed this characterization in an email to The Mix. “Designation under the Act does not exempt projects from federal laws listed,” he wrote. “It provides upfront clarity and coordination, allowing projects to advance while maintaining protections for the environment and Indigenous rights, with reviews occurring simultaneously rather than consecutively”

“Once reviews are complete, the Minister responsible for the Act (the Minister of One Canadian Economy) issues a single, binding set of public conditions for the project, including mitigation measures.”

Still, questions begin with how PONIs are designated. Most projects won’t be.

Only a small minority of resource projects in Canada trigger a federal assessment. For those that might, Ottawa’s five criteria to determine which ones go through the magic gate are extremely broad. They ask if the project will improve Canada’s autonomy and security, if it will bring economic “or other” benefits, the likelihood of success, impact on First Nations, and environmental and climate effects. Opponents say they are so woolly that—except on the issue of First Nations rights—it would be extremely hard to challenge a project designation in court.

“The act was designed to give huge discretion to federal cabinet,” said Johnston. “It has such broad discretionary powers that I think the possibility of successful legal challenge would be difficult.”

An Environmental Assessment. Sort Of.

A designated PONI would still be subject to an environmental assessment. Sort of.

Before the Act, proponents were required to go through a six-month planning period before beginning their assessment. “That was an avenue for public input,” Johnston said. “That was where we were going to figure out what questions we were going to ask.”

Now, that’s gone, she said. “If you’re a PONI, you have to go through an impact assessment, but you start at the assessment phase, you don’t start at the planning phase.”

The planning period did sometimes spawn the kind of litigation that created crazy-making delays, but Olszynski told The Mix that dropping it shifts power significantly. “Removing that six-month planning period puts the responsibility for setting the terms of reference exclusively in the hands of the proponent.”

Government documents don’t address how reviews will be designed. They only stipulate they will occur. “Projects will continue to be subject to all regulatory review processes that would ordinarily apply to the project.”

The BCA hobbles environmental assessment and public involvement in other ways. Project proponents have been required by law to evaluate their proposals through certain lenses—consideration of cumulative effects, for example. Whether those lenses have been donned are often at the heart of legal disputes.

But PONI projects are “deemed” to have already met such requirements—even if we don’t know whether they have or not. And once something is deemed, it’s done, immune from judicial review.

“If we have any semblance of environmental law in this country, it’s because the courts have pushed that,” Olszynski said. “The fact they are being squeezed out of this space is not good.”

And if regulations are violated, thanks to our old friend King Henry, cabinet can simply alter them. “Cabinet can make a regulation exempting a project from any of the environmental laws,” said Johnston. Hearings may still be held, but the outcome is predetermined.

“It’s just a question of how, not whether,” said Olszynski.

Still, King Henry has his supporters. Nikolejsin sees the mechanism of deemed approval as “something huge (the BCA) has going for it.” As he sees it, that’s the scrubber which will scour away duplication and delay: “If you get through enough gates, whatever that’s going to look like, everything else is supposed to become about expediting things like permits.”

There are still some checks. Safety regulations from the Canadian Energy Regulator and the Canadian Nuclear Safety Commission aren’t subject to alteration. The BCA requires provincial consent for projects that concern exclusive provincial jurisdiction. And cabinet can remove a project’s PONI designation if, say, it’s deemed to ask for too much deeming.

Is This Legal?

You may ask yourself: is any of this legal? Well, maybe. Neither the Constitution nor common law guarantees public input into regulatory matters.

Or maybe not. Johnston said health and safety issues could provide grounds for constitutional challenges. As well, previous court rulings have found the government must consider all relevant information in regulatory decisions, something the BCA may inhibit.

“Even if the government went in and changed the regulations, that wouldn’t change the court rulings,” she said. “We’re in a legal grey area.”

The Quebec Environmental Law Centre is challenging the BCA in Quebec Superior Court. “The Act allows an excessive encroachment on provincial powers and delegates too much power to the federal government such that the population and the courts lose their ability to effectively control government decisions,” lawyer Marc Bishai told The Mix.

He said that while the BCA requires Ottawa to consult with provinces, that doesn’t mean provincial concerns will be heeded. “Consultation is one thing, but it can be set aside.” The Act also allows provinces to delegate powers to the federal government, something the Constitution forbids, he added.

Finally, he argues King Henry VIII has no place in a modern democracy. “By removing the levers that usually exist to control government decisions, this Act puts at risk the ability of courts to effectively verify whether those government decisions are legal,” he said. “That power of judicial review is protected by the Constitution. The ability of Parliament to reduce or set aside that role of the courts is limited.”

Of course, it’s early days for the BCA. So far, the government has only referred proposals to the Major Projects Office for PONI consideration, 11 of them at last count. As yet, there are no actual PONIs in the stable and no one knows what the process will actually look like. Farrell told the House committee that she expects no more than one or two projects will become PONIs. Still, she added that her office has received 500 applications and the Globe and Mail reported there are 32 projects on the potential list—a reminder that, with a law that hands such open-ended power to cabinet, anything could happen.

“How it’s going to be implemented fundamentally depends on who’s in power,” said Olszynski. “You could do radical things with this bill, if a government wanted to.”

Somewhere, King Henry is smiling.

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Alberta has introduced changes to its industrial carbon pricing that will make it harder to meet a key commitment in its new memorandum of understanding (MOU) with the federal government.

The amendments to the province’s Technology Innovation and Emissions Reduction (TIER) Regulation were announced in September but formally introduced December 5, the Canadian Climate Institute reports, scarcely a week after Premier Danielle Smith and Prime Minister Mark Carney signed the controversial MOU. In addition to—and perhaps in exchange for—laying the groundwork for a new bitumen pipeline from Alberta to British Columbia’s environmentally sensitive northwest coast, the MOU commits the two governments to increase carbon credit prices under TIER to $130 per tonne, after reaching an agreement on industrial carbon pricing by April 1.

Even though it fell short of the current federal pricing benchmark of $170 per tonne by 2030, that target was still walked back by Smith’s chief of staff, Rob Anderson, within hours of the signing. Even so, news reporting in the days after the MOU identified the industrial carbon pricing deal as the key win the federal government was looking for, even if it mean trading away hundreds of millions of tonnes of emission reductions through the federal Clean Electricity Regulations.

But days later, Smith’s government “introduced regulatory changes that will flood the province’s industrial carbon pricing market with credits and further weaken the carbon price signal for major emitters,” the Climate Institute’s Principal Economist Dave Sawyer said in a statement Friday.

“By issuing new compliance credits for direct investment and reactivating previously used credits, Alberta is adding more supply to an already oversupplied market,” he explained. “These changes work against the direction set out in [the MOU], which included commitments to strengthen Alberta’s industrial carbon pricing system. When Alberta first signalled its intent in September, TIER credit prices crashed to below $20. This change locks in that crash, and puts significant downward pressure on future prices.”

Achieving the $130 target in the MOU, by contrast, “would require immediate steps to close loopholes in the credit market and address the oversupply of credits” that drives down their value and makes the system as a whole less effective, Sawyer added. “Instead, introducing new investment credits increases oversupply, weakens the price signal, and moves Alberta further away from the path needed to reach $130 per tonne.”

“Well that didn’t take long,” veteran energy policy analyst Dan Woynillowicz wrote on LinkedIn. “When someone shows you who they are, believe them the first time.”

Although Alberta first announced the regulatory change in September, “following through was a choice, and undoubtedly one made very deliberately,” Woynillowicz added in a follow-up post. “Expect Alberta to continuously test the federal government for weakness, using moves like this to inform their approach at the negotiating table.”

In a statement to the Toronto Star, Alberta Environment Minister Rebecca Schulz said the changes would entice more companies to invest sooner in emissions reduction technology. “We’re implementing the changes announced in September to defend jobs and keep industry competitive while still reducing emissions,” she said. “This will lead to more emissions being reduced and a stronger system.”

But University of Calgary energy science professor Sara Hastings-Simon told the Star that made no sense. An oversupply of carbon credits had already brought Alberta’s “headline” industrial carbon price down to $95 per tonne, making it more palatable for companies to buy the credits rather than investing in actual emissions reductions.

“I don’t think there is a credible argument that this action is making the system stronger,” Hastings-Simon said. “It’s doing the opposite.”

Former federal environment minister Steven Guilbeault, who resigned from the Mark Carney cabinet over the MOU, agreed that the regulatory change would make it harder for Smith to keep her promises. “Is this what Premier Smith meant when she spoke of proceeding ‘with a (measure) of good faith’?” he wrote on social media.

In his Thoughtful Energy Journalism newsletter, energy transition expert Markham Hislop speculates that Smith must have known all along what she was doing.

“It is inconceivable that a policy change that directly affects a major agreement with Ottawa was brewing in the Department of [Energy and Minerals] and Smith knew nothing about it,” he writes. “A reasonable inference, then, is that she did know. And if she knew, then she negotiated the deal in bad faith.”

In the aftermath of the MOU, Guilbeault is now warning that the Carney government has put Canada’s climate targets out of reach while fuelling Quebec separatism.

“With what has been announced, there’s no way Canada can meet its 2030, even its 2035, climate change objectives,” he told the Bloomberg news agency. “And frankly, I doubt that we could even be carbon neutral by 2050.” And “there is a feeling right now that by abandoning our climate goals we are fuelling the separatist movement,” the Montreal-area MP and former Canadian identify minister warned on CBC.

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By Mitchell Beer

Prime Minister Mark Carney is preparing to release a new carbon competitiveness strategy that promises real-world outcomes over aspirational goals, but relies heavily on still-evolving carbon capture and storage (CCS) technologies to deliver those results, the PM’s recent media statements suggest.

The strategy is expected to be released this month, and possibly in the next few days. The latest speculation on timing follows a sudden flurry of anticipation late last week, with climate policy groups sending reporters their contact information for responses over the weekend.

The strategy will be released as questions swirl about whether Carney is abandoning the climate priorities he famously emphasized as a central banker, high-profile author, United Nations special envoy for climate action and finance, and vice-chair of a major renewable energy investment firm.

“I’m the same me. I’m focused on the same issues,” Carney told the Bloomberg Weekend podcast with Mishal Husain. “The question is: how do you make progress toward those issues? And particularly, how do you make progress in a way that is most effective?”

All signs points to a strategy that will “deprioritize Canada’s commitments to reduce domestic greenhouse gas emissions, in favour of focusing on ways to reap economic advantage from the global transition toward low-carbon energy,” writes Globe and Mail policy columnist Adam Radwanski.

“By all accounts, Ottawa is unlikely to officially change national emissions targets—which currently involve a reduction of at least 40% from 2005 levels by 2030—because it’s too difficult legislatively and as a matter of international process,” Radwanski reports, citing interviews with nearly a dozen sources familiar with the emerging policy. “Instead, the strategy is expected to play them down and perhaps tacitly acknowledge they won’t be reached. To the extent that it mentions those sorts of goals, it will likely be through an emphasis on net-zero emissions by 2050, not nearer-term landmarks.”

But “a subtext will be that despite the United States retreating from climate action, the energy transition is continuing apace globally, and Canada needs to embrace related economic opportunity,” he adds. That will lead into a strategy of decarbonizing existing industries and bolstering the country’s ability “to compete in growing low-carbon sectors, such as the electric vehicle battery supply chain, non-emitting electricity, mass timber, and early-stage clean technologies.”

Ottawa will attempt that manoeuvre while navigating a global trade war, seeking to “appease” Alberta and other fossil-dependent provinces, and “reassuring people—including Liberal caucus members—disconcerted by his deprioritization of climate policy since taking office despite championing it before,” the columnist writes.

Radwanski lists industrial carbon pricing, support for clean electricity, EV battery supply chains, and a focus on early-stage cleantech innovation as likely pillars of the strategy, while citing affordability as a priority the PM should connect to his climate strategy at every opportunity. “It’s in Mr. Carney’s interest to draw the connection wherever possible, if he wants to bring people along,” he writes.

Radwanski echoed continuing signals that Carney might trade away the federal government’s hard-fought, watered-down cap on oil and gas emissions, which will not take effect until 2030-32, in exchange for a stronger industrial carbon pricing system with enough heft to have an impact on emissions—a goal the Alberta government was undercutting as recently as last month. Carney didn’t dispel concerns about the fate of the emissions cap, telling Bloomberg Weekend that “a desired outcome is not a policy.”

Instead, “what makes those emissions go down will be carbon capture and storage,” he declared, while specifically name-checking the Pathways Alliance project, a $16.5-billion carbon capture hub and pipeline network that six major oil sands companies have been promoting for years, but refusing to launch without massive taxpayer support. Independent analysts have warned the project could be “scuppered” without permanent subsidies and won’t break even without efficiency gains and steadier revenue.

After multiple high-profile failures, the technology’s biggest boosters admit it won’t be ready for prime time before 2035—long after global climate agreements, and the urgency of the climate crisis itself, will dictate steep reductions in the oil sands’ massive climate footprint. Last month, a peer-reviewed paper in the journal Nature concluded that global carbon storage capacity is 10 times less than previous estimates after ruling out geological formations where the gas could leak, trigger earthquakes, contaminate groundwater, or had other limitations.

Carney previously suggested a “grand bargain” in which the massive Pathways project would enable the new oil pipeline the Alberta government has been demanding, despite a “flashing red warning light” that such a project would also need massive taxpayer subsidies in an era of low oil prices.

“All of the indicators are that he’s doubling down on fossil fuels, which is bad for the climate, it’s bad for the Canadian economy, and he should know better because he knows the climate science,” University of Toronto political scientist Jessica Green told Bloomberg. While acknowledging that Donald Trump’s trade wars have put Canada in a difficult position, she said Carney would gain credibility by showing how the country can decarbonize over the longer term.

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By Rachel Samson

Big changes are coming to the global economy and the stakes are high for Canada. Over many decades, we have built a successful, export-oriented economy where our largest-value goods exports are oil and gas, metals and minerals, and autos – all of which are primarily destined for the U.S. market.

But these sectors and our entire trading relationship with the United States face significant uncertainty over the next decades as the world undergoes a reordering of trade patterns and a realignment of markets in the face of the rise of artificial intelligence, a changing climate, the global energy transition and U.S. tariffs.

How Canada fares will depend largely on private companies. Those that anticipate, innovate, adapt and prepare will thrive, while those that stagnate will struggle.

Governments can help by encouraging choices that are in our collective national strategic interest. Industrial policy – where governments deliberately support certain economic activities and outcomes – is an increasingly important tool.

However, to achieve results and maintain public trust, industrial policy needs to be designed and executed using the highest standards of excellence. Fortunately, we have years of experience and a growing body of research to give us a better idea of what to do. That’s critical because for every success story, there is an example where industrial policy went wrong.

Significant structural change in the global economy

The rise of artificial intelligence will increasingly influence the global competitiveness of companies and countries. While there are growing opportunities in the development of AI products, the overall adoption of AI is equally important, including in stalwart Canadian economic sectors such as agriculture, oil and gas and auto manufacturing.

As Evan Solomon, Canada’s first minister of artificial intelligence and digital innovation, said at an event in Montreal this summer, “Countries that master AI will dominate the future. You’re either part of the bulldozer or you’re part of the road.”

IRPP study: How Industrial Policy Can Strengthen Canada’s Economy and Sovereignty

Only targeted industrial policy will fulfil Canada’s value-adding potential 

Industrial policy and Canada’s uncertain future

AI isn’t the only area where the global economy will face disruption. Climate change is set to play a growing role in supply chains and goods production. As drought, floods, fires and storms increase in frequency and intensity, companies will face growing challenges with their operations and with securing feedstocks, water and other supplies.

Forestry, pharmaceuticals, chemicals and mining top the list for exposure to physical climate risks. If the pace of action to reduce emissions doesn’t accelerate, losses could reach eight per cent of global GDP by 2050. Companies and countries with strong adaptation strategies will fare better than those that don’t.

The global energy transition also remains underway, despite backtracking in the U.S. While there is debate about the pace at which demand for fossil fuels will decline, there is general agreement on a downward trajectory over the rest of this century.

Change may not come with a gradual price decline as some are envisioning. Instead, it could involve an extended period of volatility with mismatches between supply and demand leading to sudden price spikes and crashes that disrupt oil and gas producers as well as consumers.

Clean energy and electric vehicles may also face periods of volatility as companies struggle to predict demand in an environment of shifting government policies.

The energy transition continues to drive change in other markets as well, such as growing demand for the critical minerals needed for batteries and renewable energy. Making the right bets with the right timing will be critical, given the role energy and mineral sectors play in our economy.

The cost of underinvestment 

Understanding trends underway is one thing, but doing something about them is another. Unfortunately, Canada has lackluster private sector investment in critical areas, such as AI adoption, clean technology adoption, technology commercialization, adaptation to climate change and critical mineral development.

Without significant action, Canada could slip out of the Top 10 global economies and see a declining standard of living in the coming decades.

It would be easy to blame the private sector, but companies often have good reasons to delay investment. Those facing an uncertain trading relationship with the U.S. may be making the right call in putting off investments in automation or AI adoption. China’s dominance of critical mineral markets keeps prices too low or uncertain to spur major investments in mining or processing.

What can be done to overcome near-term barriers to private investments that are in Canada’s long-term national interest? That’s where smart industrial policy can play a key role.

Private investment in the national interest

Canadian governments are already actively using industrial policy to drive private investment toward certain activities, such as trade infrastructure, technology commercialization, critical mineral development or agricultural technology adoption.

The governments are using tools such as investment tax credits, targeted procurement, contracts for difference, offtake agreements, below-market loans and more. The goal is to reduce the barriers holding back private investment in strategic areas and to design a policy that works at the least cost to the taxpayer.

The use of industrial policy is likely to increase as governments seek to secure a foothold in new global markets, retain high-potential companies and improve lagging productivity. But given the stakes involved, it will be critical that governments do more to ensure they get industrial policy right.

Canadian governments could learn from Australia’s approach.

For example, when it introduced its critical minerals production tax incentive in 2024, the government published an impact analysis that analyzed the policy problem which the tax was aimed at solving; the barriers the private sector faced; the sufficiency of government intervention; and the need for additional government intervention, with a cost-benefit analysis of three policy options.

It also listed a series of success metrics to ensure that the policy has the intended long-term effect.

This type of analytical rigour and transparency could go a long way toward delivering industrial policy excellence and improving public confidence in the ability of Canadian governments to deliver results.

Choosing to be the bulldozer requires a smart strategy

Structural changes to the global economy are coming. If Canada wants to maintain its place as a Top 10 global economy, governments will need bold industrial policies that enable Canadian companies to seize opportunities.

But those policies need to be smart, with careful design and implementation that achieve results without breaking the bank. Now is not the time for big announcements with little follow-through. Canada needs thoughtful, deliberate policy interventions backed by analysis and skilled teams to ensure smooth implementation.

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By Jim Stanford

Canada has long striven to be more than a mere supplier of raw resources to more developed trading partners.

From the national policy of the 1870s, to the industrial planning of C.D. Howe after the Second World War, to the Canada-U.S. auto pact of 1965, our economic development strategy tried to nurture secondary and tertiary sectors that add value to primary resources instead of just exporting them raw.

Through the latter half of the 20^th century, this strategy largely succeeded. Value-added industries were built in auto, aerospace, pharmaceuticals and technology – in some cases by Canadian-owned businesses, in others relying heavily on foreign investment.

By 2000, less than one-fifth of Canada’s merchandise exports were unprocessed or barely process primary products. We were no longer just “hewers of wood, drawers of water.”

Unfortunately, much of that progress has been undone in this century – for a variety of reasons, heightened recently by U.S. President Donald Trump’s tariffs and other economic threats. Today, primary exports make up almost half our merchandise exports.

The federal government should use every tool at its disposal to craft a targeted industrial policy to reverse the current trend toward precarious over-dependence on resource extraction and export.

More than “diggers of critical minerals”

After entering a free-trade agreement with the U.S. in 1989, Canadian governments retreated from proactive industrial strategies, instead relying on our supposedly privileged access to U.S. markets.

The commodities boom of the 2000s reinforced the focus on resource extraction – first and foremost, the massive expansion of bitumen production and export. Evolving global competition, including the rise of China and Mexico as manufacturing powerhouses, further challenged our value-added export industries.

Now, Trump is hammering more nails into the coffins of Canada’s value-adding industries with his targeted Section 232 tariffs.

It’s no coincidence these tariffs are aimed squarely at Canada’s most important high-value manufacturing. To date, his sectoral tariffs have targeted auto, aluminum, steel, copper and lumber, while aerospace, heavy trucks, pharmaceuticals and semiconductors are next in his crosshairs.

Trump’s various tariffs, including the so-called “emergency tariffs” levied under the International Emergency Economic Powers Act, are being challenged in various U.S. courts. However, the worrying erosion of the rule of law in the U.S. leaves Canadians with little confidence that his unilateral measures will be significantly constrained.

Trump is happy, it seems, to keep importing Canadian raw materials, which he treats more leniently, with lower tariffs on energy and potash, as well as CUSMA exemptions (for now, anyway) for most other primary products.

His goal is clearly to increase U.S. industrial dominance in the sectors that transform raw resources into more expensive value-added products – the very sectors Canada must defend and grow.

Otherwise, Trump’s trade war will pigeon-hole Canada as a continental resource pit – and a lucrative market for America’s more innovative (and expensive) exports.

To “hewers of wood and drawers of water” we would then add “steamers of bitumen and diggers of critical minerals.” The economic, geopolitical and environmental risks of this structural retreat from value-added industry are worrisome.

Therefore, this is the moment for Canadian policymakers to rediscover the importance of targeted industrial policy, which is essential to help our value-added industries survive Trump’s attacks and to reverse Canada’s over-dependence on resource extraction and export.

Believers in the traditional “comparative advantage” theory see little wrong with a country being so reliant on production and export of a specialized portfolio of unprocessed resources. If that’s what global markets want from a country, it should simply go with the flow, they believe. Accepted fully, this approach leads to ahistorical and fatalistic passivity in trade policy.

As Nobel economist Paul Samuelson famously quipped, the fact that “the tropics grow tropical fruits because of the relative abundance of tropical conditions” is hardly useful for a country that wants to do more than export bananas. The same warning applies to other countries that can’t see beyond the limited horizon of their immediate resource endowments.

The industrial success of Asia 

Contrary to comparative advantage theory, the most successful global examples of industrialization in the last century have been countries such as Japan, Korea, the other Asian “tigers” and China. They – more often by necessity than choice – did not focus on building industries based on what was buried beneath their feet.

Instead, they mobilized capital, skills and technology to carve out competitive (not comparative) advantages in strategically important and growing high-value industries.

Those efforts relied on powerful state-directed strategies to twist markets and alter incentives. Many tools were invoked – all with the overarching goal of expanding domestic capacities to manufacture, innovate and export higher-value products and services.

Comparative-advantage thinking says “export what you were endowed with.” Good industrial policy acknowledges it’s better to specialize in some industries than others, especially industries that are technology-intensive, export-oriented, anchor valuable supply chains and demonstrate high and rising productivity.

Instead of relying on resource endowments and private markets alone to guide a country’s specialization in global trade, these countries take deliberate action to build a presence in targeted, desirable sectors.

They have all used a wide range of industrial policy levers to become global manufacturing giants. These include channeling capital (including public or sovereign wealth) to targeted industries on favourable terms; powerful public-private missions to develop and commercialize strategic technologies; and complementary investments in skills and infrastructure to lubricate the high-value export machine.

Many European countries have followed broadly similar strategies, using public capital, planning, regulation and knowledge to nurture successful global firms and high-value domestic production.

Even the U.S., while mouthing free-market jargon, relies regularly on powerful, targeted interventions, including massive defence and energy subsidies, to buttress its presence in strategic industries.

These lessons of successful industrialization have renewed relevance for Canada as we confront Trump’s economic aggression.

Some have concluded Canada should double down on extraction and export of natural resources – facilitated by new pipelines and other export infrastructure to sell our resources to countries other than the U.S. But the urgent task of export diversification needs to take account of what we produce, not just where we sell it.

Enter industrial policy, which holds new relevance for Canada as we try to protect our economy and our sovereignty against Trump’s erratic actions. Good industrial policy draws on a full suite of policy measures applied to shift incentives, motivate investment and innovation, reinforce the vitality of domestic industry and penetrate high-value export markets.

Call it “sector-development policy” 

The tools of industrial policy are many and varied, including fiscal rules and incentives, technology supports, preferential access to capital, public investment (including public equity or co-investments), infrastructure construction, skills and training support, trade policy, government procurement and more.

These tools need to be applied creatively and flexibly, reflecting the specific challenges and opportunities of each sector. Governments need strong internal capacity to understand and manage industrial policy (to avoid being captured by rent-seeking businesses). As well, the goals and performance requirements need to be explicit and enforced.

Industrial policy doesn’t apply only to conventionally understood industry, which is often stereotyped as large-scale goods-producing facilities, such as resources and manufacturing.

Any technology-intensive, high-productivity, tradeable sector – including technology, business, digital, entertainment or education services – is a candidate for targeted attention. A better moniker for this theme might be “sector development policy,” moving past the outdated assumption that industrial policy is only about smokestack industries.

A fully capable industrial nation must do more than harvest resources. This has always been true.

The global energy transition – which will continue despite Trump’s best efforts to roll back history – gives further impetus for Canada to diversify beyond fossil fuels.

The current concern with Canada’s lagging productivity growth provides another important motive. Indeed, it’s no coincidence that the countries leading productivity growth globally (such as Korea, the U.S. and Ireland) are those with the biggest domestic presence of high-tech production.

Those industries didn’t end up there by accident or thanks to the autonomous logic of market forces. They ended up there because those countries undertook targeted efforts to attract and build them.

Trump’s trade war is forcing our governments, businesses and workers to collectively renew Canada’s historic crusade to build an economy that is more than a northern appendage to a larger, more developed neighbour.

A comprehensive industrial strategy – using every tool to add value to our resources instead of exporting them raw, and sustaining and growing a strong Canadian footprint in innovative value-adding industries – needs to play a central role in that nation-building mission.

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