Submissions January 30, 2026

Creating a strong and resilient Canadian economy

Michael Gullo – Vice President, Policy, Business Council of Canada

Climate Change and Clean Growth Economic Strategy Energy Regulation Resources and the Environment

Submission to Deputy Minister, Environment and Climate Change Canada Mollie Johnson in response to the Driving Effective Carbon Markets in Canada consultation.

Thank you for the opportunity to provide input to the department’s consultation concerning carbon markets in Canada. On behalf of the Business Council of Canada’s members, please accept our response.

Recalibrate Canada’s carbon policy to support national objectives

Canada’s policy goals now focus on creating the strongest economy in the G7, doubling exports outside of the United States, and transforming the country into an energy superpower. Canada’s carbon policy can play an important role in achieving these goals, but it needs to focus on supporting the competitiveness of the country’s natural resource and industrial base.

Export-oriented firms need to thrive in global markets, often against heavily subsidized corporations or state-owned enterprises that undervalue environmental performance and rule of law. Similarly, our manufacturing and industrial base is being retooled so that it capitalizes on the record levels of investment forecast to be made in major projects, a robust defence industrial base and housing.

This isn’t to say that Canada shouldn’t lower its ambition to reduce emissions. Rather it should pursue its climate competitiveness strategy with pragmatism and the recognition that global trade patterns have shifted greatly since carbon pricing was introduced in 2019.

Governments and businesses continue to be aligned on the need to achieve net zero emissions by 2050. Corporate strategies are driving climate action in Canadian firms, with the number of companies with an emission reduction strategy growing year over year¹. But accomplishing these goals will require Canada to reimagine its approach to pricing emissions and fostering properly functioning carbon markets. Unfortunately, the discussion paper falls short in this regard.

Businesses accept there is a price to pay for emissions they produce, and we have said so for some time². But we have to be smart about how we design a predictable price mechanism and corresponding markets so that it accomplishes our environmental objectives, builds a competitive advantage and aligns with Canada’s economic sovereignty and national security goals.

An emission reduction target applied to Canadian industry should reflect new competitive realities. Importantly, it should be set within an overall policy framework that allows profitable firms to grow their global market share while increasing their investment in new technologies to improve environmental performance.

We urge the department to work with industry to understand the competitiveness constraints Canadian firms are facing as they navigate a period of heightened global volatility. At the same time, companies can share information about the important role they can play in supporting the country’s economic growth and national security goals.

Defer your consultation

If the past several years have shown anything, it is that setting ambitious targets is meaningless without a solid consensus among governments and industry on what needs to be done.

The recently signed memorandum of understanding (MOU) between Canada and Alberta is an important step in the right direction. It underscores the need for governments to be aligned on carbon policies and strategies to invest in the most promising emissions reducing technologies.

The MOU includes ambitious timelines to achieve equivalency agreements by April 1, 2026, for carbon pricing, methane and the Pathways project and a provincial nuclear strategy to be tabled the following year. It would be prudent for the department to defer its consultation on federal carbon policy and carbon markets until after April 2026 when important details will be made available to industry.

Fix fundamentals and encourage carbon market integration

Clear policy and stable pricing is a prerequisite for enabling a market-driven approach to financing large-scale decarbonization projects. As governments in Canada work to align their carbon policies, they must ensure that no regional or sectoral disadvantages make businesses less competitive compared to global rivals. Of the roughly forty countries in the world that price their emissions, Canada’s headline price is among the highest, creating a competitive constraint.

We offer the following recommendations to bring focus to your work:

Review the schedule for the minimum price on industrial carbon pollution and corresponding stringency levels to assess their impact on Canada’s economy, energy security, and emissions-intensive, trade-exposed industries.
- The goal of this review should be to prevent carbon leakage and ensure that trade-exposed firms can compete with their global peers.
Scale up the number of offset protocols available to industry, including existing commitments to develop new protocols for direct air capture, methane emissions, forest management and soil sequestration;
Ensure that revenue raised through pricing programs supports the development of new technology and investments into emissions-generating facilities eligible for government tax credits and programs; and
Encourage synergies between existing carbon markets through credit generation and emission trading opportunities in Canada and abroad.

Closing

Business leaders remain committed to reducing their emissions. However, they are concerned about Canada’s climate policy trajectory and the implications to competitiveness of firms competing in global markets.

We urge the department to work closely with industry, stakeholders and other federal departments and agencies responsible for creating a strong and resilient Canadian economy.

The Business Council of Canada and its members stand ready to support your work.

Michael Gullo
Vice President, Policy
Business Council of Canada