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A “made-in-Canada” approach can unlock the billions of dollars required for the clean energy transition

Canada can compete and succeed in the energy transition without matching U.S. Inflation Reduction Act subsidies, say experts.

21 March 2023, OTTAWA — In the lead up to next week’s federal budget, a new report from the Canadian Climate Institute makes seven recommendations on how Canada can mobilize private investment to compete in the global energy transition. Up against generous support for clean energy in the U.S. Inflation Reduction Act, the federal government faces growing pressure to accelerate the flow of private investment to fund Canada’s energy transition. 

The Institute’s research, released today, shows how Canada can compete and succeed without precisely matching U.S. subsidies and incentives in the Inflation Reduction Act, by leveraging existing policy strengths and using limited public funds to mobilize private investment.

The March 28 federal budget is widely anticipated to respond to the new direction set last August by Canada’s biggest trading partner, through measures including the Canada Growth Fund. The 2022 federal budget identified an annual financing gap for climate investment of about $115 billion. This year’s budget represents an opportunity to create supports to direct capital toward the necessary investment needed to close the gap.

Rather than trying to copy the Inflation Reduction Act, the Institute’s research recommends a targeted “made-in-Canada” response, including:

  • Orienting public support around fixing market and policy failures, to avoid over-subsidizing projects that would have been economically viable without, or with less, government support. 
  • Using financial support instruments that optimally share risks and returns between the Canadian public and private investors.
  • Building “exit strategies” for public support.
  • Ensuring the Canada Growth Fund’s governance models combine a clear mandate with political independence and strong accountability.
  • Requiring that the Fund’s investment portfolio has a minimum share of projects with Indigenous majority ownership.

The Institute’s recommendations are supported by new research papers, including: 


“The U.S. Inflation Reduction Act created a ‘sink-or-swim’ moment for Canada, and smart and targeted policy will help us keep swimming in the new global market reality, and keep up with our biggest trading partner. Canada has many strengths, but targeted policy is now needed to develop our future competitive advantage.”

Marisa Beck, Director of Clean Growth Research, Canadian Climate Institute

“The Inflation Reduction Act set the U.S. economy on a new trajectory, and Canada now has to find its own way forward as the global energy transition accelerates. While it’s tempting to copy the American template, a tailored approach is better: one that builds on our existing strengths, like the carbon price, and draws on a range of policy tools to bring certainty to investors.” 

—Rick Smith, President, Canadian Climate Institute 

“Investors will move quickly to where there is market certainty and to where expected returns are highest. The Inflation Reduction Act provides certainty for the U.S. market to be competitive in new global markets. We know firms need policy certainty to attract and keep capital investment and business needs an environment that offers certainty and clear policy direction. Canada needs to respond quickly with an approach that builds on our market strengths, ties together the strands of existing measures in transparent and cohesive ways, and adds additional policy supports.”  

—Don Drummond, Economist, Queen’s University; fellow-in-residence, C.D. Howe Institute; expert panelist, Canadian Climate Institute

“The United States and other countries are already moving quickly and aggressively to capture climate investment and provide support for their industries. Canada needs an industrial strategy that supports investment, including providing certainty on carbon pricing, to attract capital while supporting the decarbonization of vital industries. “

—Catherine Cobden, President and CEO of the Canadian Steel Producers Association


Catharine Tunnacliffe

Director of Communications, Canadian Climate Institute

(226) 212-9883