Trump Trade War Could Be a Catalyst to Speed Canada’s Energy Transition, Experts Say

Donald Trump’s expanding trade war could be a catalyst for Canada to speed up its energy transition, diversify its trade, and reinforce its economic sovereignty—as long as federal and provincial governments embrace a “crossroads” moment and double down on the clean technologies that are already dominating global energy investments, a panel of climate finance and trade specialists has told The Energy Mix . In a series of email and online interviews Monday, just days after the Trump administration’s frontal assault on Canadian sovereignty prompted Prime Minister Mark Carney to suspend trade talks and call Canada’s negotiators home, more than a half-dozen experts in finance, industry, local government, and climate policy saw short-term risk but plenty of long-term opportunity in the deepening rift between the two countries. “In the short term, the trade war will unfortunately make Canada’s work on climate and energy transition more challenging” by increasing uncertainty, discouraging business investment, and straining government finances that are needed for the transition, said Sandra Odendahl, a venture partner at Catalyst Climate Capital and board director with the Transition Accelerator and the Canadian Climate Institute. “But in the medium and longer term, clean energy and the overall energy transition can be a key piece of Canada’s economic security and trade diversification strategy,” she added. “The trade war strengthens the case for investment in clean energy supply chains which are important as we diversify our exports to non-U.S. countries,” while clean electricity “could become Canada’s competitive edge in attracting industrial investment if we build it quickly enough, particularly in energy-intensive sectors.” Lynn Côté, executive director of the Canada Cleantech Alliance, said the trade war underlines and adds urgency to a long-standing truth: that climate and energy policy is also economic and competitiveness policy. “Many of the markets Canada needs to diversify into are putting greater emphasis on the carbon intensity of products and supply chains,” she wrote. Through that lens, the trade war should “strengthen—not weaken—the economic case for the energy transition. The question is how Canada uses it to build greater economic resilience, strengthen domestic capacity, and diversify our international relationships.” Follow the Money New Economy Canada President Merran Smith and Evan Pivnick, associate director of public affairs at Clean Energy Canada, both pointed to International Energy Agency projections that non-fossil energy will attract $2.2 trillion in global investment this year. “That’s nearly twice what’s being invested in oil, gas, and coal,” Pivnick said, while electric vehicles are on track to deliver nearly one-third of new car sales this year. “If Canada follows the money, it’s increasingly headed to clean energy technologies and the critical minerals they require,” Smith wrote. “The U.S. may be scaling back on their ambitions to lead in the clean economy, but the rest of the world is continuing in that direction. So as Canada looks to diversify trade it’s inevitable that’s where we’ll head too, and that’s good news, because we are exceptionally positioned to compete and benefit from that.” Pivnick added that electricity is now the world’s largest energy employer [ pdf ], according to IEA data, while renewable energy overtook coal power last year as the world’s largest source of electricity generation, according to the Ember climate and energy think tank. “While the pace of electrification may vary country to country, the overall direction of travel is the same,” he said. “Growing our clean energy exports and ensuring Canadian households and businesses have access to clean energy technologies will be the key to long-term economic competitiveness.” But to seize the opportunity, Canada will have to make some smart spending decisions, said Aaron Cosbey, president of Small World Sustainability Consulting and senior associate with the Winnipeg-based International Institute for Sustainable Development. “The Canadian government is going to be called on to do a lot of fiscal cushioning,” Cosbey told The Mix . “Selected businesses and workers are going to feel extreme pain if the tariffs are implemented, and many are losing orders even now because of the uncertainty.” So “we don’t have money to burn. Whatever priorities this government pursues, it will have to be cost-conscious.” If Carney and his advisors get those choices right, Cosbey added, they “should be good news for Canada’s climate and energy ambition. The poor economic case for a new oil pipeline , for liquefied natural gas (LNG) exports, and for carbon capture, utilization and storage (CCUS) to decarbonize oil and gas production should mean that Canadian taxpayers and their children don’t end up on the hook for tens of billions of dollars that can instead be invested in real avenues to prosperity and a low-carbon future.” Related: How would you spend $43.7 billion if it fell into your pocket? A Canadian Economy for Canadians Former Toronto mayor David Miller connected those decisions back to the economy Canada should want to build. “Like most Canadians, I’m very relieved that Prime Minister Carney and his negotiators didn’t surrender to the U.S. and stood up for Canadian sovereignty,” he told The Mix. But now, the first question should not be how Canada restores free trade with the United States, but “how we build a Canadian economy that is strong, that meets the needs of all Canadians from coast to coast to coast, and that works in harmony with our environment.” Just asking how the Canadian economy benefits Canadians leads into a series of other policy questions, he said: • Does investing in clean energy benefit Canadians by delivering a “resilient, reliable supply of extremely low-cost energy that isn’t subject to price fluctuations” through global events like the closure of the Strait of Hormuz? • Is it wise to spend $40 billion or more to subsidize a new West Coast pipeline when the existing one delivered no increase in jobs due to technological change and other efficiencies in the fossil industry? • Does subsidizing the oil industry make sense when the majority of its shareholders are outside Canada, and most of them are in the U.S., meaning that fossil fuel subsidies “actually cause billions of dollars in dividends to flow out of our country into the United States?” • Would it make more sense to invest $4 billion in better mass transit, at a time when “Canada’s major cities are crying out for new LRTs (light rapid transit systems), subways, buses, and more?” Shauna Sylvester, founder and lead convenor of Urban Climate Leadership, called on Ottawa to work with provincial governments and Indigenous nations to bring Canadians’ foreign investment back onshore, build domestic supply chains, and support new manufacturing and interprovincial trade, all while reinforcing the clean economy. At the same time, she said, Canada must diversify its trading relationships—with policies that recognize the global economic shift from petrostate to electrostate while strengthening “normative frameworks” for human rights, democratic development, environmental sustainability, the rule of law, and social and ecological justice. Tools in the Toolbox The panel identified electrification, decarbonization of high-emitting industries, doubling energy productivity, critical minerals, a national building retrofit initiative, and non-emitting bitumen products as areas where Canada can gain economic advantage, building on its “strong and reputable capital markets”, Odendahl said, and available expertise in science, technology, engineering, and math (STEM). “Electricity is foundational, so we need to start there, first increasing our capacity to transmit it across provincial boundaries, equaling out surpluses and deficits, and so allowing a much greater buildout of cheap, renewable energy sources,” Cosbey said. “Aside from the billions of dollars of investment and all the jobs that nation-building project entails, we’ve also seen that abundant low-carbon electricity is a magnet for foreign investment.” He added that high-emitting industries like steel, aluminum, cement, and fertilizer will be “critical to our autonomy in a world where interdependence is weaponized.” Helping those industries decarbonize would open up “an opportunity to support firms in ways that keep them viable and also equip them to capture the green markets of the future.” Sylvester pointed to a national home retrofit strategy as a $6-trillion opportunity if it extends to every community in the country, a plan that would support domestic manufacturing of devices like heat pumps, reduce Canada’s dependence on U.S supply chains, create jobs, and boost local economic development and resilience. A retrofit initiative would also support the recently-released National Electricity Strategy as long as it included home electric vehicle charging, vehicle-to-grid technology, efficient cooling, and construction methods that contribute to local climate resilience. Pivnick said clean manufacturing, “from clean steel to the electricity supply chain to critical minerals,” should take its place as a priority for the federal Major Projects Office, last seen as Ottawa’s mechanism for fast-tracking approval of the proposed West Coast Pipeline. Focusing in on clean energy development and supply chains would “support Canadian sovereignty, autonomy, and resilience, all while diversifying our trade,” he said, at a time when Canada is looking to “expand trade with a world that is rapidly decarbonizing.” Smith said doubling electricity supply, electrification, and energy productivity while connecting the country’s “provincially-siloed” power grids is “the formula for Canada to compete and prosper in the world, while ensuring Canadians and Canadian companies have access to reliable, affordable, stable sources of energy.” Tapping into that opportunity will mean building up domestic clean energy supply chains that can also seize new export markets: over the last five years, the Transition Accelerator recently concluded , clean energy exports have grown 21% faster than the average across all industries. Côté said the climate and energy transition toolbox must include measures to help Canadian companies commercialize their products and scale up, create domestic markets for Canadian solutions, mobilize private capital, diversify trade, and strengthen the communities where major projects are built. She called for: • A “commercialization and scale-up continuum” from early research and innovation through commercial deployment and scaling; • Use of government procurement and infrastructure investments to “create first customers and reference projects for Canadian technologies”; • A predictable, accessible suite of clean economy investment tax credits as “powerful tools” to attract investment and speed up deployment; • “Patient capital” that enables cleantech start-ups to stay and scale up in Canada; • Measures to diversify Canada’s cleantech trade beyond its current heavy dependence on the U.S.; • Regulatory certainty, including a stable industrial carbon price; • Better coordination across the various tools and programs in place to boost Canada’s climate competitiveness; • Consistent emphasis on Indigenous and other community partnerships. When Investors Come to Call With many of the world’s top institutional investors expected to be in the room next month, the panel saw Carney’s Canada Investment Summit in Toronto as an opportunity to embrace and finance the climate transition. “If we have a real discussion of where investment is needed to ensure future prosperity for Canada, not 100% of the opportunities are going to be low-carbon development, but most of them will be,” Cosbey said. “I hope the investment summit will go beyond the raw politics of the moment, which are constraining our political choices toward resource megaprojects, to a clear-eyed, long-term assessment of opportunity based on the compelling economics of low-carbon development.” “I’m hoping the investment opportunities that are brought forward at the summit will be selected based not only on their contribution to economic sovereignty, but also from the perspective of long-term community and environmental/climate benefits for Canadians,” Odendahl wrote. Sylvester said Carney and his team should “broaden the themes beyond traditional resource-based economies to focus on industries that can grow quickly and have a long-life cycle and benefit to Canadians,” including clean economy, energy retrofit and wider climate financing, social investment, and blended finance. She also called for changes in financial regulation to factor carbon into the risk calculations that determine the cost of investment capital, with capital relief for financial institutions that invest in areas like building retrofits. A key question, Pivnick said, will be whether the Canada’s guidance to the summit “prioritizes investments into its conventional energy resources—and focuses on addressing the near-term demand of allies—or whether we take the longer view and ensure that our industries are positioned as key players in the economic sectors that underpin economic and nation security, and are poised for growth in the years ahead.” That would include focusing on six key critical minerals—cobalt, copper, graphite, lithium, nickel, and rare earth elements—that have “the largest role to play in the energy transition.” Côté said it’ll be important for the summit to “move beyond broad statements about Canada’s potential and put concrete investment opportunities in front of global capital.” While climate and energy transition opportunities should be a “prominent” part of that discussion, she added, “they should not sit in a separate environmental conversation. They belong in discussions about investment, productivity, infrastructure, energy security, industrial capacity, trade diversification, and Canada’s long-term competitiveness.”