Canada is bracing for a new trade war after the U.S. slapped 25% tariffs on Canadian steel and aluminum in an effort to re-shore its own industries. While it’s easy to lose sight of climate-change challenges amid trade turmoil, Canada’s decarbonizing efforts in its heavy industries can emerge as a strength that would help the sector face these headwinds.

However, fully capitalizing on these strengths would require Canada to address critical hurdles, including financing gaps for industrial-scale deployment, slow permitting for resource projects, and the need for stronger policy alignment with major trading partners. By strategically leveraging its clean-energy endowment and critical minerals supply, Canada can turn near-term economic pressures into long-term competitive advantages for its heavy industries such as cement, iron and steel, and petrochemicals.

We highlight a few of Canada’s strengths here:

  1. Late-stage startups are leading the charge: As we highlighted in Climate Action 2025: A year for rewiring, the mega deals that characterized Canadian heavy industry innovators in the early 2020s have given way to a more sober fund-raising environment, with venture deals in 2024 amounting to $158 million, a fraction of the funds raised in previous years. While funding, especially for early-stage innovations, is more challenging than ever, late-stage startups are actively deploying their carbon-reducing innovations in partnership with large, incumbent players in cement, petrochemicals, and pulp and paper.

  2. Clean power is Canada’s superpower. The country’s rich endowment of low-cost hydroelectric power has differentiated Canadian industries in several areas. Such advantages span aluminum smelting and iron and steel production. Additionally, electric arc furnaces under development in Ontario powered by clean electricity sources are set to produce low-carbon steel that would help lower the industry’s emissions.

  3. Canada is poised to leverage a critical advantage: As a leading global producer of commodities such as potash, nickel, aluminum, and uranium, Canada’s metals and mining industry could buck the economic headwinds facing other sectors. As we highlighted in Climate Action 2025, mining companies are incorporating decarbonization technologies and practices into their operations, which are being recognized by end-users keen on decarbonizing their supply chains. The key for Canada will be to bring the commodities to market faster and position itself as the West’s critical minerals hub. This will require more financing for junior mining companies and faster permitting to bring mines online. In addition, industries and government will also need to build logistics and transportation infrastructure to remote location with First Nations buy-in, consent and partnerships. Read more about Canada’s critical minerals advantage here.

Canadian industries are well positioned to deliver commodities the country and global markets need, without losing sight of sustainability. Canada would benefit from using its energy endowment to responsibly power its industries, and continue to innovate to bring new technologies to commercial reality.

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Vivan Sorab is Senior Manager, Clean Technology, at the RBC Climate Action Institute

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