Canada's Clean Energy Transition Post-Inflation Reduction Act

Abstract

Policy-makers in major economies face the dual challenge of reducing emissions for long- term environmental benefits while maintaining economic stability in the short term. The United States’s Inflation Reduction Act marks a pivotal move for the US in that direction, offering both challenges and opportunities for Canada as it strives to meet its own net-zero emissions target by 2050. This article focuses on Canada’s federal policies, the effects of which have been underwhelming thus far. Canada is not on track to meet its emission targets and faces a growing productivity crisis. This article encourages Canadian policy-makers to consider streamlining regulations and clarifying investment tax credits to better stimulate investment in decarbonization and emissions reductions in the energy sector and surrounding industries. Canada should focus on developing a more robust national industrial strategy that directly supports clean energy development and leverages its existing strengths in areas like carbon capture and clean electricity. By aligning with global environmental movements and utilizing its geographical and existing resource strengths, Canada can build a more resilient economy while meeting its environmental targets.