Canada’s 10 largest trading partners after the United States have all passed climate policies that open up opportunities for green exports, a new report has found.
Released this week, the Clean Energy Canada (CEC) report analyzed 10 economies around the world in what the authors say is an attempt to understand how Canada can lessen its reliance on U.S. markets.
The report looked at whether a trading partner has committed to net-zero emission targets; passed a carbon pricing system; and committed to phasing in electric vehicles.
It also analyzed which nations are looking to apply carbon border adjustments on imports. The tariff system applies levies on imports responsible for excessive greenhouse gas emissions. The European Union plans to introduce definitive measures in 2026, with the United Kingdom following a year later.
The upshot, write the four authors, is that all of Canada’s 10 largest non-U.S. trade partners have net-zero commitments and carbon pricing systems. Another roughly half are putting carbon border adjustments on imports and have domestic EV requirements.
Mark Zacharias, one of the co-authors and the executive director of CEC, said people are looking at the U.S. administration's moves to unravel the global economic order and thinking to themselves, how can Canada open up new markets in other countries?
“We should be focusing our economic strategy nation-wide to where our economic trading partners in the EU and Asia are going,” he said. “We’ve been beating this drum for many years now.”
Zacharias said Canada should also extend a hand to many U.S. states with big economies whose leaders appear open to pushing back against U.S. President Donald Trump's tariffs, such as California.
Canada recently signed major trade deals with the European Union and a number of Asian countries. That has boosted the country’s trade network to cover 60 per cent of the global economy, the report found.
“And yet this network is underutilized,” the authors write.
Economic forecasts suggest there's a lot of money to make.
Global markets for the six leading clean energy technologies — solar panels, wind turbines, electric cars, batteries, electrolyzers, and heat pumps — are set to nearly triple in value to US$2 trillion by 2035, according to the . That's nearly as big as the global crude oil market.
The latest report says Canada is well-positioned to take advantage of the emerging green market. But to do so, the report says the country needs to make four big changes:
- streamline regulatory and permitting processes to allow workers to move inter-provincially and align building, construction, and transportation codes;
- build-out critical trade, transportation, and energy infrastructure, so mines can properly access ports, and provincial electricity systems can be connected;
- prioritize government procurement and purchasing from Canadian-owned companies to foster an emerging domestic green industry;
- promote the country as “Clean Canada” — a low-cost, low-emissions powerhouse where international companies can set up shop with access to clean energy.
Making those changes could accelerate a 2022 projection from the suggesting Canada’s clean energy sector could support 600,000 jobs and be worth $107 billion by 2030.
Momentum in the industry is already growing.
The CEC report notes that sustainable projects attracted 29 per cent of all foreign direct investment into Canada in 2023, up from 25 per cent in 2022, 10 per cent in 2021, and five per cent in 2020.
“Clean energy now employs more people worldwide than fossil fuels, and Canada can and should carve out its fair share of the prize,” the report concluded.
'Realistic' green trade vision will require sustained political attention
Dave Sawyer, an economist at the Canadian Climate Institute, said the report shows how a shift in thinking is underway.
“For a long time it was decarbonization first with clean growth as almost a justification,” he said. “Now with [U.S. President Donald] Trump, it’s leading to a rethink in almost everything we do.”
Saibal Ray, a professor in supply chain management at McGill University, said the green diversification argument put forward by the CEC was sound. But like any talk of trade diversification, it hinges on how long it will remain a political priority.
“It is realistic. There is no doubt about it. But suppose tomorrow, next month, the tariffs go down,” Ray said. “It’s a question of how long-lasting there’s interest in diversification.”
When it comes to green energy, Ray added that Canada needs to diversify irrespective of what happens with U.S. tariffs. And that’s going to require re-considering Canada’s relations with big economies like China.
“China is a big, big player here,” he said. “The question is, are we willing to partner with countries in certain things — like green energy — when we don’t agree on other things.”
Canada needs to 'clean its own house'
Nicolas Schmitt, a professor in Simon Fraser University’s Department of Economics, said in some ways Canada has been preparing for this moment for years.
“It is one of the G7 countries with the most free trade agreements,” Schmitt said. “Now, it’s how to take advantage of those.”
Schmitt said it’s “not totally obvious” that Canada has a competitive advantage in green manufacturing.
He said Canada needs to think in terms of niches, high-value products that can overcome the barriers of long-distance, and added costs needed to reach distant markets.
To get there, Schmitt said Canada needs to continue to remove internal trade barriers, boost tax incentives to attract capital, and modernize intellectual property laws.
“What Canada needs to do is clean its own house,” he said.
Short-term green trade diversification faces challenges, says former Canada trade advisor
Julian Karaguesian, a McGill University visiting lecturer in economics and a former special advisor to Canada’s Minister of Finance, said the prospect of diversifying trade while transitioning Canada to a green economy is going to be a difficult task.
Karaguesian said the report was “overly optimistic” when it comes to expanding trade with Europe — partly because of the same carbon border adjustments cited in the CEC report. He worries up to 60 per cent of Canada’s exports could be penalized under the regime.
When it comes to economic superpowers, that leaves China — a trade relationship Karaguesian said would make or break Canada’s move to diversify its economy.
But that could come with some trade-offs. One ripe opportunity to expand trade is in agriculture. Karaguesian said Canada is in a position to take over the supply of $30 billion in agricultural exports that the U.S. at one point sent to China.
As a trade-off, China’s envoys would likely seek at least a partial removal of Canadian tariffs on Chinese electric vehicles, something that would eat into Canada’s already struggling automobile sector.
In other words, said Karaguesian, short-term expansion of trade is possible, but it’s not clear how much it will coincide with the shift to a low-carbon economy.
“Long-term, we’re talking 30 years, with the right investments, it’s possible,” he added.
“We have everything that a manufacturing superpower requires.”
