Tens of billions of dollars from businesses must go toward climate action to meet Canada’s 2030 and 2050 targets, according to a report from the RBC Climate Action Institute.

In Climate Action 2024, RBC found private and public investment to climate action has increased by 50 per cent since 2021, growing from $15 billion to $22 billion. But climate spending must rise to $60 billion per year for the rest of the decade to put the country on track for net-zero by 2050.

The federal government has been contributing most of the funding to date, meaning more action is needed from other levels of government, the private sector and consumers, the report states.

It adds that Canada showed progress on electric vehicle (EV) adoption, heat pumps and wind power, but is lagging on building retrofits and capital flows into climate tech and cleantech.

RBC notes Canada recorded its hottest day, month and year on record in 2023, and faced $3.1 billion in insured losses from climate-related disasters. “To mitigate those losses and put the country on a faster track to net-zero, more action will be needed from individuals, businesses and governments.”

Government can't do it all

The report says the Canadian government has covered approximately 80 per cent of the costs of climate action since 2016. The fiscal capacity is reaching its limit, RBC concludes.

Provinces, municipalities, the private sector and consumers have to step up to cover the gap to reach $60 billion per year in investment. Public markets, private equity and venture capital have put forward only eight per cent of overall capital flows, or $61 billion, since 2021. Consumers must also chip in $13 billion more per year in spending, according to the report.

Business leaders expressed optimism in the report. Two-thirds of Canadian businesses have set a greenhouse gas emissions reduction strategy, and 96 per cent of CEOs said they are confident the targets can be achieved.

To reach the 2030 climate target, private and public markets need to invest an additional $9.1 billion per year toward green projects or cleantech companies, on top of the $14.2 billion raised in 2023.

Though current funding levels fall short of what is needed, money is being put toward a “climate-focused building boom underway in many parts of the country,” according to RBC. The report cites examples including:

• Tidewater Renewables opening Canada’s first renewable diesel refinery in Prince George, B.C.;
• the world’s biggest carbon capture and sequestration project for a cement facility in Edmonton; and
• Rio Tinto’s solar project in the Diavik Diamond Mine.

"We need a step-change in the amount of capital going into the energy transition. We've measured a 50 per cent increase since 2021, largely because of federal commitments, and that needs to double again very quickly. The private sector, with support from the provinces as well as Ottawa, needs to carry the transition from here," John Stackhouse, senior vice-president of the office of the CEO at RBC, said in the report.

RBC anticipates an expected decline in interest rates should aid in the cost of capital for climate projects, and for government support in Canada, the U.S. and European Union to continue in the short-term.

Sector-by-sector breakdown

The report also looks at the issues and opportunities facing six major sectors in Canada: oil and gas, transportation, buildings, electricity, heavy industry and agriculture.

For the oil and gas sector, $50 billion in capital is needed from 2023 to 2030 to achieve Canada’s 2030 climate target. With industry emissions rising 15.5 per cent since 2005 largely due to U.S. demand, RBC says a methane cap is the best near-term option for oil and gas to tackle its greenhouse gas emissions.

For the transportation sector, increasing EV adoption rates, more models hitting the market and over $100 billion in investment for EV batteries are identified as signs of progress.

Wind power is the fastest growing low-carbon electricity source, according to RBC. But more is needed. Only six per cent of the “necessary new wind generating capacity is under construction to meet the goal of a net-zero electricity grid by 2035.”

Heat pumps are gaining popularity in Canada, with the green premium offset by government subsidies. But homebuilders have been slow at adopting new technologies and market barriers are limiting growth, RBC says. The report urges key players to look at the Dutch Energiesprong model, which pushes for mass retrofits at a neighbourhood level to reduce costs.

Heavy industry has seen progress on cutting greenhouse gas emissions from steel, cement, chemicals and fertilizers. More progress would come from carbon capture, deployment of clean hydrogen technologies and novel manufacturing processes, RBC says.

As for the agricultural sector, the report says it is on track to meet its 2030 climate target, and may even exceed it.