Welcome to 2025, the midpoint of climate’s decisive decade—and a year that already feels an age apart from its predecessor.

Over the next 12 months, a plethora of new governments in much of the world will try to rebalance climate policy with economic, energy and national security needs, while business will come to terms with a new and uncertain investing cycle, and a frustrated public will again weigh the cost of living with the cost of climate action.

As the world approaches the 10th anniversary of the Paris Agreement, this year could indeed be a hinge moment. Will 2025 bring a reckoning for climate action or a realization that more can be done, perhaps just in different ways? And will Canada—an energy, trade and climate leader—be among those developing a new path forward or bringing about a strategic retreat in a rapidly changing and divided world?

In this, our second annual assessment of Canadian climate action, we find plenty of cause for concern, and some reason for hope. The RBC Climate Action Institute, which was created in 2023, has developed climate action models to analyze where the country and economy is at, and our team has interviewed scores of climate leaders to assess the opportunities ahead.

As we detail in Climate Action 2025, Canada is still making progress, in cutting emissions, mobilizing investment, advancing public policy and driving innovation across the economy. But that progress—along with public support—is slowing, adding to pressure for new ideas to get to net-zero in the quarter century ahead.

In this year’s report, you will find:

• our proprietary national index, which assesses policy ambitions, investment flows, business and consumer views, and emissions progress. The index shows that we may have reached a peak of policy interventions from the federal government, and in the years ahead will need more private capital and innovation.
• sector indices that measure the commitments and investments in the six heaviest emitting sectors: oil and gas, electricity, transportation, buildings, heavy industry and agriculture.
• case studies of Canadian innovators making climate progress, and what they’re learning. These entrepreneurs and businesses are engaged in industries as diverse as animal genetics and carbon capture, each making very different contributions to Canada’s climate goals that every enterprise, private or public, can draw insights from.
• a spotlight on what we call the Idea of the Year—electricity—and how it can help rewire our collective climate strategy. If Canada had to pick one priority for the next half-decade, we make the case that the best return, for emissions reduction and economic growth, could come from building out a low-carbon electricity grid. Our feature essay looks additionally at the special role of Indigenous equity, and what that could do for reconciliation.

None of this is evolving outside the context of political change, economic frustration and the many climate disasters, which continue to reshape the 2020s. In 2024, we endured the warmest year on record, coinciding with droughts in southern Africa, devastating floods in southern Europe and a wildfire that destroyed much of Jasper, Alberta. One estimate concluded the 10 worst climate events of the year killed 2,000 people and caused US$229 billion in damages.^{Endnote 10}

Here in Canada, the federal government will need to consider the fate of an unpopular retail carbon tax, and also the future of industrial policies—electricity regulations, emissions restrictions and fuel standards, among them—in the new reality of a Donald Trump-led America. Provinces, too, will be confronted with the budgetary pressures, and public demands, for more (and more affordable) electricity.

A new role for climate capitalism

There may be no greater opportunity for climate action than the private sector, especially in terms of mobilizing venture capital for some of the most daring technology projects we’re seeing anywhere. This report maps out some of the investment needs, as well as many of the successes to date, that can get us there. We tracked close to 350 climate-related emerging technology projects that are already underway, including ground-breaking work in small modular nuclear reactors in Ontario, methane capping of gas wells in British Columbia and Alberta, and industrial-scale decarbonization efforts in Quebec and the Atlantic provinces.

Our annual survey of Canadian business leaders shows a majority still see themselves as drivers of climate action in their organizations, with necessary support from governments (through regulations and subsidies) as well as institutional investors focused on the long term. By the same token, most business leaders do not seem to feel pressure, or encouragement for that matter, from their customers. That view was reinforced by our annual consumer survey that showed only one in seven Canadians now place climate among their top three concerns.

As this report outlines, the efforts of the past decade won’t likely be the flagships of the decade ahead. We’ve probably seen peak policy, with the federal government going as far as it can, and perhaps being overextended. Provinces need to step up more, in our view, as do municipalities. As you will see in our national index and public sentiment analysis, we’re also seeing consumers recoil from any climate action that costs them more, while businesses are showing more caution and government spending priorities are shifting. The brightest spot may be Indigenous equity, which continues to grow across the economy and is critical to climate, as well as economic and social progress.

As government and business consider the next half decade, they may do well to consider different models, perhaps even paradigms. Technology may be a centrepiece of a Trump economic agenda, especially to help reshore manufacturing, whether it’s low emitting or otherwise. Convenience and cost will also become more pressing for businesses and governments, if they’re to convince the public to adopt lower-emitting products and services.

More broadly, “security” could be the new watchword. A range of governments, and notably the incoming Trump administration, have entered the year with an enhanced focus on national security—and a view that economic security and energy security are twin pillars of that new paradigm. Climate security may soon be part of that model if climate policy and practice can be viewed as essential to our collective economic and energy needs.

In some ways, that has always been the imperative of climate action—to ensure emissions reduction can be achieved without damaging the prosperity of nations and of people. The year ahead may just demonstrate how that can be done.