Optimizing Canada’s policy toolbox for clean growth

The author contends that while carbon pricing is Canada's primary decarbonization driver, it is insufficient alone to attract the private capital needed for a net zero economy. To remain competitive, especially against the U.S. Inflation Reduction Act, Canada needs to address market failures caused by historical fossil fuel subsidies and the high risks associated with first-of-their-kind low-carbon projects. The document recommends implementing carbon contracts for difference, investment tax credits, and a clean investment taxonomy, all integrated into a coordinated strategic framework to avoid ad hoc spending and maximize social returns.

• Carbon pricing is the primary driver for decarbonization investment in Canada, with the national minimum price scheduled to rise to $65 a tonne on April 1 and reaching $170 a tonne by 2030. To improve its effectiveness, the author suggests using carbon contracts for difference to "remove uncertainty over future carbon prices" and strengthening pricing for industry across all provinces and territories.
• Three main market failures hinder private investment in Canada's clean growth: historical fossil fuel subsidies that create a "lasting competitive advantage for fossil fuel industries", high capital costs and risks for first-of-their-kind projects where investors cannot profit from social co-benefits, and competitive pressure from the U.S. Inflation Reduction Act, which provided nearly US$370 billion in subsidies in August 2022.
• The Canadian government has introduced several mechanisms to attract private capital, including the Canada Growth Fund, an investment tax credit for clean technologies, and the Innovation and Investment Agency. The author suggests the 2023 federal budget should add a manufacturing investment tax credit for clean technologies.

APA

Canadian Climate Institute (2023). Optimizing Canada’s policy toolbox for clean growth. https://climateinstitute.ca/optimizing-canadas-policy-toolbox-for-clean-growth/

Chicago

Canadian Climate Institute. Optimizing Canada’s policy toolbox for clean growth. 2023. https://climateinstitute.ca/optimizing-canadas-policy-toolbox-for-clean-growth/.

Wikipedia

{{cite report |author=Canadian Climate Institute |title=Optimizing Canada’s policy toolbox for clean growth |date=2 March 2023 |url=https://climateinstitute.ca/optimizing-canadas-policy-toolbox-for-clean-growth/ |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{canadianclimateinstitute2023optimizing, author = {{Canadian Climate Institute}}, title = {{Optimizing Canada’s policy toolbox for clean growth}}, institution = {Canadian Climate Institute}, year = {2023}, month = mar, url = {https://climateinstitute.ca/optimizing-canadas-policy-toolbox-for-clean-growth/}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }