Mark Carney Climate Policy: What Businesses Need to Know

Canada has ended a heated debate with big changes to climate regulation under its new Prime Minister. The Mark Carney climate approach marks a break from the polarizing carbon tax at the consumer level.

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Now, the focus is squarely on business, especially large emitters and anyone with a cross-border supply chain.

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If you’re running operations in Canada, here’s what you need to know to keep up with Carney’s climate policy and industrial changes rewriting the rulebook for Canadian enterprises.

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Carney and Trump meeting: trade focus, climate undiscussed

Prime Minister Mark Carney's post-election May 6th meeting with U.S. President Trump touched on geopolitical issues and was significantly marked by discussions around U.S. trade protectionism concerning Canada.

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Climate change, sustainability, and environmental policies were not discussed. Energy mentions focused on existing resource abundance (like ANWR) rather than a green transition, marking a significant silence given Carney's known climate policy focus.

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For businesses, the meeting highlighted:

• Persistent Trade Tensions: President Trump underscored a protectionist U.S. stance, expressing a desire to onshore manufacturing of cars, steel, and aluminum away from Canada, referencing tariffs and the U.S. trade deficit with Canada. This signals ongoing trade friction and uncertainty for Canadian exporters.
• Impending USMCA Renegotiation: Both leaders acknowledged the USMCA is due for review, with potential changes that could impact North American trade.
• Carney's Canadian Priorities: Carney focused on Canada's economy, border security, fentanyl, and an increased emphasis on defence and Arctic security.
• "51st State" Idea Rejected: Trump's suggestion of Canada becoming a U.S. state was firmly dismissed by Carney, who emphasized partnership.  

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The meeting depicted a challenging U.S.-Canada trade dynamic dominated by U.S. protectionist leanings and notably lacked any dialogue on joint climate action, a key observation in light of Carney's climate policy goals.

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Watch the meeting between Carney and Trump below:

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Now, let's talk more about Carney’s climate plans for Canada.

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Goodbye, consumer carbon tax, hello industrial accountability

Who pays now?

Mark Carney’s administration cancelled the consumer carbon tax as of April 2025. This step was as much about politics as economics. High energy prices and cost-of-living anxieties made the old model unsustainable. Key complaint: the carbon tax burden mainly landed on families, while many saw a lagging impact on industrial emissions.

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Carney’s response: shift the weight to where most emissions come from, big business. The “Mark Carney Carbon Tax” is now embedded in a revamped Output-Based Pricing System (OBPS). For heavy industry like oil, cement, steel, and chemicals, this is the new centrepiece.

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What is the Output-Based Pricing System (OBPS)?

The OBPS sets a per-industry emissions benchmark, tying your compliance obligation directly to your output. Produce less CO2 per tonne or barrel than the benchmark and you’re rewarded. Go over, and you pay.

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Example:

A cement plant in Alberta produces 1,000,000 tonnes of cement. The benchmark: 0.85 tCO2e per tonne.

• If your emissions intensity is 0.78 tCO2e per tonne, you’ve got a surplus which is sellable as credits.
• If you hit 0.92, you’re on the hook for compliance, either buying credits at market or, failing that, paying the government rate, which is $65 per tonne in 2025 and rises to $170 by 2030.

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Facilities under 50,000 tonnes per year of emissions are exempt, so small firms in light manufacturing aren’t directly affected. But if you’re upstream or downstream of big emitters, you’ll feel impacts through the supply chain.

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Why should your business care?

• For larger players, monitoring and reducing emissions intensity is now core to your financial strategy.
• Suppliers and buyers, even if not directly regulated, will face costs and competitiveness pressure as supply chain partners adapt.
• Exporters need to prepare for the planned Carbon Border Adjustment Mechanism (CBAM), where your products’ carbon cost can dictate access to the US and EU markets.

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Key Carney climate plan shifts affecting Canadian businesses

Dual incentive system: penalty and reward

Because the Mark Carney Carbon Tax now targets big emitters, it’s not just about penalties. It’s about credit markets and possible new revenue streams.

• Overperformers with lower emissions per unit can earn credits that subsidize operations or fund innovation.
• Underperformers face both direct OBPS costs and potential lost market share as buyers and investors screen for cleaner partners.

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Staying ahead isn’t just about compliance, it’s about competitiveness and value creation.

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Incentives for green choices (and how to use them)

Key incentives previously routed through household carbon tax rebates are now being offered directly:

• Rebates for electric vehicle purchases
• Funds for energy-efficient retrofits and new equipment
• Direct support for industrial decarbonization technology, such as carbon capture and storage

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These are practical opportunities. If you’re planning capital expenditures, timing them to maximize government support makes sense.

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Carbon Border Adjustment Mechanism (CBAM)

Starting in 2026, goods imported into Canada from countries with weak climate policies may face new tariffs. This aligns with EU trends and is meant to protect Canadian industry from being undercut by higher-emission imports.

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For businesses that:

• Import and reassess your sourcing strategy to minimize CBAM impacts.
• Export, promote your low-carbon record to differentiate in international markets and access price premiums.

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Sector by sector impacts: winners, losers, and strategic next steps

Oil and gas

You must invest in emissions tracking, capture, and efficiency or face large, rising OBPS costs.

But returns for innovations can be significant. For example, Alberta oil sands reduced emissions per barrel by 22 percent since 2018, earning $1.2 billion in credits.

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Manufacturing: steel, cement, chemicals

There is an intense focus on emissions per ton output. Early adopters of new technologies, such as electric arc furnaces or alternative fuels, will have the edge in both compliance cost and export market access.

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Retail and consumer goods

There is less direct impact from OBPS, but indirect costs may rise via the supply chain. You should expect increasing demand from investors and customers for low-carbon credentials.

Opportunity:

Fast adopters can capitalize on green goods certifications and marketing.

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Risks, controversies, and reality checks

Political volatility

Opposition, notably in Alberta, Saskatchewan, and the Conservative Party, promises to roll back or weaken the OBPS.

Business planning should account for regulatory uncertainty by prioritizing short-term return on green investments instead of betting solely on regulatory tailwinds.

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Equity concerns

Some argue Carney’s approach privileges large, well-capitalized firms and households able to afford big upfront investments such as EVs or retrofits.

In response, new federal programs offer low-interest loans for rural and Indigenous communities. If your business works in these markets, look into these resources to improve participation.

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Compliance costs

According to the Canadian Climate Institute, the average OBPS compliance cost is about 0.8 percent of covered sector revenue through 2030. This is much less than the 4 to 6 percent that US manufacturers face from inflation or other federal policies.

Still, costs are real. Investing in monitoring and reduction technology, staff training, and reporting is essential.

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Next steps for business leaders

Immediate actions to adapt to the Carney climate framework:

1. Audit your facility’s emissions intensity versus the relevant benchmark.
2. Invest in emissions management technology and data platforms. Early action can yield tradeable surplus credits.
3. Map supply chain carbon exposure and discuss CBAM scenarios with international partners.
4. Review all available federal and provincial incentives for green capital expenditures, retrofits, or clean energy.
5. Communicate with investors and customers about your carbon strategy. Transparency is now standard.

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Expert insight: What sets this apart?

This isn’t just political spin. The combination of OBPS and CBAM aims to make Canadian businesses low-carbon by default and price-competitive on the world stage.

It’s a sharp shift from blunt economic punishment to more nuanced incentives and accountability.

Many business leaders are skeptical. Change is costly and complex. But early movers can set the agenda and shape the market, especially as the world adopts more aggressive standards.

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Carney's climate policy, challenge, and opportunity

Mark Carney’s climate framework has retired the old carbon tax debate and introduced a more targeted approach, focusing on where emissions truly concentrate: heavy industry and industrial supply chains. For Canadian businesses, this is both a compliance hurdle and a chance to lead on efficiency, market access, and capitalizing on new incentive structures. 

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Making the shift will require investments in both technology and strategy.

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The upside: a sustainable business, better positioned for export and investment as global rules tighten.

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