Stronger industrial policies can speed Canada’s climate progress, but they won’t be enough on their own.
Canada is further from its climate targets than it was just two years ago. The Canadian Climate Institute’s assessment of the federal report on Canada’s climate progress shows that federal and provincial policies are likely to deliver around half of the emissions reductions needed to hit the 2030 target.
The new research finds that while Canada has some strong policies to reduce its emissions, the country’s climate plan depends heavily on provincial co-operation to reduce emissions from industry and electricity, and focuses on these sectors at the expense of others.
The Institute’s independent assessment of the progress report points to a clear path forward: modernize industrial carbon pricing, lock-in stronger federal and provincial agreements, and better track outcomes, not just policies.
Canada is not on track for any emissions targets
Canada has moved away from its climate targets, not towards them, including its pathway to net zero (Figure 1). Our latest modelling analysis with Navius Research shows that current and announced policies deliver about half the emissions reductions needed to achieve the 2030 climate target. Across all scenarios, only the most stringent versions of announced policies deliver substantial improvements over Canada’s past climate policies, and even these improvements fall well short of the 2030 target.
Though all scenarios come up short, there are clear differences between them. Crucially, there are substantial additional emissions reductions in scenarios where federal and provincial governments deliver policies that are tuned to match their stated ambitions, most importantly by modernizing industrial carbon pricing.
Figure 1
Getting industrial carbon pricing right is central to better outcomes
The federal government has set clear expectations around the importance of industrial carbon pricing, including a commitment for these systems to reach effective credit prices of $130 per tonne. That commitment is a key plank of Canada’s climate plan. But fulfilling it depends on how provincial systems deliver the price signal, and how the federal government enforces its minimum standards for carbon pricing.
Our assessment shows just how much those details matter. We modelled a range of policies in the progress report, including different levels of commitment to reaching effective credit prices of $130 per tonne by 2030. The first, less stringent scenario represents moderate enforcement of federal standards, where provinces commit to reaching prices of $130 per tonne but do not make substantial changes to their systems. The second, more stringent scenario assumes that systems are reformed and actively managed so that they deliver effective credit prices of $130 per tonne by 2030.
The difference is significant. Compared to today’s policies, the more stringent scenario delivers around twice the emissions reductions of the less stringent scenario (Figure 2). And the emissions reductions of modernized carbon pricing systems continue to grow after 2030. Figure 2 also shows that most of the gains come in industrial sectors, with fewer in other parts of the economy.
Figure 2
In addition to carbon pricing, the federal 2025 ERP-PR includes other powerful measures like new regulations to reduce methane emissions from oil and gas and landfills. These measures are heavily focused on industry, providing less support for consumers to adopt clean energy technologies like energy-saving home upgrades. Our assessment recommends how Canada can fulfill the potential of its industrial climate policies while also supporting consumers to make the transition to cleaner energy.
Emissions cuts depend on strong, consistent policy and more support for affordability
To deliver substantial emissions reductions, governments must ensure that industrial carbon pricing systems deliver effective credit prices of $130 per tonne, improve the alignment of climate policies across the federation, and have complementary measures that cover both industrial and non-industrial sources of emissions. The Institute’s report makes six recommendations to deliver these outcomes:
- Tightly govern industrial carbon pricing by strengthening the federal minimum standards for provincial and territorial systems, and promptly applying the federal backstop system where necessary.
- Minimize the divergence between climate policies at different orders of government by upholding minimum federal standards for both new and existing policies.
- Continue to clean up and build out electricity infrastructure by maintaining federal tax credits and the Clean Electricity Regulations, and supporting new transmission infrastructure.
- Help consumers access “safe bet” climate solutions by reintroducing targeted subsidies for clean technologies like heat pumps and low-carbon transport, as the federal government recently did for electric vehicles.
- Develop measures to reduce agriculture and land-use emissions, where there are currently few substantive policies.
- Revise and expand the government’s secondary indicators of progress, to more effectively track Canada’s progress.
Informed by these recommendations, the Institute plans to publish additional analysis and indicators showing how governments can correct course to deliver better climate and economic outcomes.
Every tonne of carbon that Canada does not release into the atmosphere makes the worst impacts of climate change less likely. Every dollar invested in clean energy rather than fossil fuels helps the country build a more competitive and resilient future. The Institute’s newest report explains how Canada can make more progress towards these goals and set the country up for further gains in the future.
Ross Linden-Fraser is a Research Lead at the Canadian Climate Institute. Dave Sawyer is Principal Economist at the Canadian Climate Institute and Head of 440 Megatonnes.