Climate action must be integral to Carney’s pro-growth agenda. Does Carney agree?

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Yrjö Koskinen is the director of research at the Institute for Sustainable Finance at the Smith School of Business, Queen’s University, and the BMO professor of sustainable and transition finance at the Haskayne School of Business, University of Calgary.

The Carney government has been focused on lowering trade barriers between provinces and building infrastructure to reach new markets in response to the Trump administration’s tariffs on Canadian goods. This has attracted criticism from environmentalists who are disappointed by the potential inclusion of fossil fuel infrastructure in priority projects and the retreat from policies such as the consumer carbon tax and electric-vehicle mandate.

I believe that climate action can and must be an integral part of the pro-growth agenda. This requires pragmatism and compromise. Does the famously climate-conscious Prime Minister Mark Carney agree? With the government’s climate plan expected soon, we will find out. Canada’s prosperity depends on the answer.

For generations, economists have lamented that Canada has drifted along as a resource appendage to the United States or a branch plant economy. To reverse this trend, we must recognize that environmental sustainability is not a concession to activists or strictly a moral imperative – it can be a powerful driver of competitiveness, investment and long-term growth.

Washington may be shrugging off climate commitments, but others are not. Europe has launched carbon border adjustment mechanisms to ensure that imports meet strict environmental benchmarks. Asian buyers, from Tokyo to Seoul, are screening suppliers for carbon intensity and climate disclosure. Sustainability is quickly becoming the price of entry for trade beyond North America. Canada must align with these trends, otherwise our exporters – in all sectors, from mining to agriculture to manufacturing – will face trade frictions, lost market access and reputational damage.

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Fortunately, Canada is blessed with the resources needed to power the global energy transition. Nickel, cobalt, lithium and rare earths – our mining sector sits on the raw materials that make electric vehicles, wind turbines and batteries possible. But possession alone is not enough.

If our metals and minerals are extracted with outdated, high-emission practices, buyers in Europe and Asia may simply turn elsewhere. To unlock our advantage, Canada must brand itself as a supplier of the cleanest, most responsibly sourced resources on Earth. That requires stringent sustainability standards, credible oversight and consistent investment in low-carbon extraction methods.

We must also face the reality that our oil and gas sector remains a cornerstone of the Canadian economy, but it is also our largest source of emissions. Pretending we can abandon it any time soon is fantasy; equally, pretending that we can kick the can down the road and ignore emissions is economic suicide.

The way forward is a “grand bargain.” Canada should continue to develop its energy resources, but only in exchange for binding commitments from producers to slash the carbon intensity of production. That means electrifying operations, deploying carbon capture and storage at scale and investing in efficiency technologies. This is the only way to reconcile our energy endowment with our trade ambitions in a carbon-constrained world.

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One key to all of this opportunity is transparency. The world’s leading countries on climate require mandatory disclosures by large companies of their carbon emissions and plans to reduce them. Canada should too. Investors, lenders and regulators demand clear, comparable information – not selective news releases or voluntary pledges.

At the Institute for Sustainable Finance, we have studied the sustainability practices of TSX-listed companies. We’ve found some growth in voluntary emissions reporting and net-zero target setting by Canadian companies in recent years. But we haven’t come far enough, fast enough. And there is evidence that what progress we’ve seen is slowing when we need to speed up.

For example, the federal government’s Bill C-59, with its provisions on greenwashing, was passed with the best intentions but has created confusion in the marketplace. This has highlighted the urgency of credible and predictable rules for firms operating in Canada. The debate is not about whether to regulate, but rather how to do so in a way that ensures consistency, accuracy and accountability.

Sustainable finance used to be one of the fastest-growing segments of global capital markets. It faces some headwinds now, but it will come back as a major force because climate change is accelerating and natural disasters are getting worse. Canadian banks, pension funds and asset managers should be positioning themselves at the forefront of this new wave. Instead of treating sustainability as a box-ticking exercise, we must view it as a product differentiator.

If we fail, we risk isolation, dwindling competitiveness and continued over-dependence on a U.S. market that is turning its back on the future.