Decarbonize or Electrify?

That is the only energy policy question Canada should be discussing in 2026

Should Canada decarbonize the old economy or engineer a new electrified one? That’s the question we should be asking. Instead of asking it and having a vigorous discussion about the country’s best response during a time of significant global disruption and turmoil, Canada is sticking with the status quo. Building a massive bitumen pipeline to the West Coast. Subsidizing carbon capture and storage for the Alberta oil sands. Chasing massive LNG expansion. A cleaner version of the 20th century hydrocarbon economy. Meanwhile, other parts of the world are building the electrified economies of the 21st century.

The irony is that Canada is unusually well positioned to build an electrified economy.

It has abundant clean power potential—a grid that is already about 84 per cent clean, anchored by hydroelectricity and nuclear, with wind and solar growing quickly. It has critical minerals and the expertise needed to build battery supply chains. It has deep engineering and manufacturing capacity and a highly educated workforce. It has clean energy technologies, like advanced geothermal, that are ready to scale. It even has higher-value alternatives for many of its hydrocarbons, such as turning bitumen—a uniquely valuable molecule—into carbon fibre or advanced asphalt binders instead of burning it.

Canada also has political stability and a legal system that supports the orderly conduct of business, two attributes in increasingly short supply globally. It has governments capable of supporting sophisticated economic policy with serious financial resources. It has extensive infrastructure and, historically at least, a willingness to build what is missing. And it still has abundant natural resources, the historic source of its wealth and a plausible foundation for its next economic chapter.

In short, Canada is unusually well positioned.

What it lacks is conceptual clarity. You do not gradually decarbonize your way into a new industrial system. You engineer one. Deliberately. At scale. Ahead of demand. Or someone else does, and you buy it from them.

That is the choice Canada has been avoiding. Not because it lacks ambition or intelligence, but because it has been trapped in the wrong frame.

Until Canada starts asking whether it is prepared to build an electrified economy, rather than endlessly polishing a hydrocarbon one, it will continue to pursue cleaner versions of yesterday’s system while others build tomorrow’s.

Decarbonizing Versus Engineering

Decarbonizing a hydrocarbon-oriented economy and engineering an electrified economy are not two paths to the same destination. They are different projects with different logics, different risks, and different end states.

One is about managing decline. The other is about building a replacement. Canada has spent more than a decade convincing itself these projects are interchangeable. They are not.

The dominant Canadian approach to the energy transition has been shaped by climate policy and climate finance. In that worldview, carbon is the organising variable. Emissions must fall. Intensity must improve. Risk must be managed. Capital must be redirected. Clean energy matters, but largely as a means to an end: net-zero emissions by mid-century.

Justin Trudeau and his Liberal governments from 2015 to 2025 embodied this approach. Despite Alberta’s claims to the contrary, Trudeau was no enemy of the oil and gas industry. He argued explicitly that conventional energy would fund the transition to a cleaner economy. From that perspective, Ottawa’s decision to spend $34 billion on the Trans Mountain Expansion pipeline makes sense. So do federal regulations aimed at lowering oil and gas emissions, which now account for about 31 per cent of Canada’s total.

Trudeau’s mission was to decarbonize the existing economy. His successor, Mark Carney, is taking essentially the same approach. The tone and instruments may differ, but the underlying frame has not changed.

A recent interview with Global News illustrates the point:

“First off, there’s the moral imperative — the moral obligation, the responsibility for future generations — of addressing the issue. But also the commercial reality. Climate has become less of an issue politically if you look at polling, but climate change is continuing remorselessly. And what is happening is that the importance of being lower carbon — whether it’s in energy, automobiles, aerospace, services, whatever industry — will only become more important.”

This framing was necessary. It forced climate change into the centre of economic decision-making. It made emissions visible to investors, regulators, and governments that had spent decades pretending they were someone else’s problem. Without it, Canada would still be arguing about climate science rather than climate response.

But decarbonization, as a governing frame, assumes continuity. It assumes the basic architecture of the economy remains intact, just cleaner and more efficient. Oil and gas are disciplined rather than displaced, in the hope that cleaner alternatives eventually take their place. Combustion remains central. Emissions are reduced within existing systems rather than eliminated through structural change.

Electrification starts from a different premise.

Electrification replaces molecules with electrons and inefficient combustion with highly efficient electric devices. It makes electricity the dominant energy carrier across transportation, buildings, industry, and digital infrastructure. It rewires the economy from the ground up.

Once you see the transition this way, the core question changes. It is no longer simply whether emissions are falling fast enough. It is whether the new system is being built fast enough to remain competitive with China—the world’s first true electro-state—and with other emerging economies now racing to follow.

This is where Canada and much of the rest of the world have begun to diverge.

The China Model Is Spreading

China did not approach the energy transition as a problem of cleaning up its hydrocarbon economy. It approached it as an opportunity to build a new electric one. Not incrementally, not cautiously, and not as a side effect of climate policy, but as a central pillar of industrial strategy.

That choice is visible everywhere. China built electricity generation at a scale that looked excessive until it became indispensable. It built transmission ahead of demand rather than waiting for bottlenecks to force action. It treated grid congestion as a strategic failure, not a regulatory inconvenience. It tolerated inefficiency, duplication, and waste in the short term to dominate cost curves, supply chains, and manufacturing capacity in the long term.

Batteries were not treated as climate technologies. They were treated as strategic assets. Electric vehicles were not introduced as compliance tools. They were deployed as manufacturing platforms. Solar panels were not framed as emissions reductions. They were electricity factories produced at planetary scale.

China is not winning because it became lower carbon. It is winning because it decided, early and decisively, to build a more efficient, lower-cost, higher-value electrified economy.

Canada Is Muddling Through—Again

Canada, by contrast, continues to behave as though electrification is one option among many. A pathway to be encouraged, but not insisted upon. Something to balance against hydrocarbons rather than replace them. A lever that can be eased back when costs rise or politics become uncomfortable.

That logic makes sense if the objective is to decarbonize a hydrocarbon economy. In that world, flexibility is a virtue. Optionality reduces risk. Multiple pathways hedge uncertainty. Electrification can slow if other measures compensate.

In the midst of a clean-energy technological transition, that logic is fatal.

Electrification only delivers its full economic and industrial benefits when it is treated as inevitable. When it becomes negotiable, it is always the first thing sacrificed. Timelines slip. Mandates bend. Targets soften. All of it can be justified within a carbon framework, because emissions reductions can always be found somewhere else.

From a climate perspective, this looks pragmatic. From an industrial perspective, it is drift.

Electricity is not just another decarbonization pathway. It is the platform on which the next economy is built. Once electricity becomes abundant, cheap, and reliable, manufacturing follows. Data centres follow. Advanced industry follows. Supply chains reorganize around power availability.

Low-carbon fuels do not do this. They substitute for existing energy carriers while leaving the underlying structure intact. Electricity changes the structure itself.

This is why Canada’s fixation on cleaning up the hydrocarbon economy is so consequential. Every dollar spent extending its life is a dollar not spent accelerating the build-out of the electric one. Every year spent debating how “clean” LNG might be is a year lost building transmission, generation, storage, and electrified end-use at scale.

The Moment Everything Changed

The inflection point became impossible to ignore in the spring of 2024, when the United States imposed 100 per cent tariffs on Chinese electric vehicles, followed by Canada months later. At that moment, the energy transition stopped behaving like a climate policy project and revealed itself as an industrial and geopolitical contest. Trade, manufacturing capacity, and supply-chain control moved to the foreground. Targets and pathways receded.

China responded not by slowing down, but by accelerating. It pivoted toward the Global South, expanded overseas manufacturing, and folded clean energy explicitly into its geopolitical strategy. Electrification was no longer just about emissions or growth. It was about state power and national security.

Canada has been slow to absorb what this shift means, in part because it is still asking the wrong question. The debate remains framed around how to decarbonize the economy we already have rather than whether we are willing to build a new one.

Figures like Mark Carney are best understood in this context. His worldview, shaped by climate finance and risk management, reflects the dominant Canadian framing. How do we reduce emissions responsibly? How do we manage transition risk? How do we preserve stability?

These are the wrong questions. The correct one is, should Canada be decarbonizing a 20th-century hydrocarbon economy or engineering a 21st-century electrified one? If we ask that question, then 2026 can be the year Canada finally has a rational, adult conversation about its energy future.