Introduction

We live in an age of heightened uncertainty. The rules of global trade and geopolitics have shifted dramatically following the triple shock of a global pandemic, the Russian invasion of Ukraine and the reelection of Donald Trump in the U.S. The United States president is using tariffs against friend and foe alike. Trump has also threatened Canada’s sovereignty and floated the possibility of not defending NATO allies. There is no guarantee of a return to business as usual. Canada will have to adapt. That means diversifying and strengthening our industrial, trade and defence systems to make them less vulnerable to shocks or external aggression. It is a daunting task.

At the same time, Canada faces other major external and internal challenges. The global economy is shifting in the face of the energy transition and rapid advances in artificial intelligence. There is a race underway to enhance access to markets that are likely to be the economic engines of the future.

These three external challenges – security and sovereignty, trade resilience and readying the economy for the future – aren’t Canada’s only urgent priorities. Reconciliation with Indigenous Peoples is long overdue, and empowering Indigenous economic self-determination is a critical element. Moreover, if segments of the population or regions of the country are left behind, Canada won’t meet its full economic potential (ISED, 2020). Finally, Canada is in the depths of a housing crisis that threatens the ability of young Canadians to attain the standard of living that Canadians have come to expect. To improve affordability, Canada needs to double the number of homes built annually by 2035, which will not happen without new and more productive building techniques (CMHC, 2025).

Meeting these numerous challenges will require governments to take proactive measures that will likely include applications of industrial policy. Given potential constraints on fiscal capacity, it will be important for Canadian governments to have a framework for approaching industrial policy in a way that is as effective and efficient as possible.

This report aims to inform such a framework. Its findings and recommendations are drawn from expert workshops, research and analysis, and deliberations among steering group members. We explore the challenges industrial policy could address but also focus on how industrial policy should be conducted, since this was a dominant theme of the workshops.

What Is Industrial Policy?

Industrial policy is one of those terms that people frequently use but rarely define.  There is broad agreement that it involves governments consciously steering at least a portion of economic activity toward a particular objective deemed to be in the public interest. The objective could be to stimulate innovation, productivity or economic growth, but it could also be to promote a particular region, sector or outcome (Juhász et al., 2023). How this differs from traditional economic policy and even whether it should be used at all is still hotly debated.

How it differs from traditional economic policy

Many economists advocate for governments to merely create a level playing field for all sectors and actors throughout the economy, for example, by ensuring that the tax system treats all forms of capital equally, and then relying on markets to allocate capital. Put another way, traditional economic policy tends to focus on neutrality among firms and industries (Mankiw, 2013). Government can intervene to remedy market failures, but its focus is traditionally on allocative efficiency, or how well a market uses its resources to produce the goods and services people value (Mazzucato & Ryan-Collins, 2022).

Canadian economist Chris Ragan, a steering group member, noted that while industrial policy can be used to correct market failures (such as underpriced carbon emissions or co-ordination failures), it is often also focused on other policy objectives, such as national security or the growth of infant industries. In this view, industrial policy is inherently not neutral. Its aim is to achieve an objective that market forces will not reach on their own. Another way of thinking about the difference is that, under traditional economic policy, a government might intervene to fix the market, whereas under industrial policy, the government’s aim is to shape the market (Mazzucato & Ryan-Collins, 2022). We have listed several of the most common instruments that governments use for industrial policy, including tax incentives, grants, concessional loans and procurement, in appendix C.

Juhász et al. claim that industrial policy differs from traditional economic policy in that it is a deliberate action aimed at achieving a specific goal and favours certain activities over others (Juhász et al., 2025). In other words, unlike general economic policy that sets the conditions for growth in a neutral way, industrial policy starts with a specific goal to promote certain types of economic activity deemed to be strategically important.

Varieties of industrial policy

Sector strategy is one of the more common forms of industrial policy. Economist Jim Stanford, a steering group member, describes it as “proactive efforts to support investment, employment, innovation and exports in targeted high-value sectors of the economy.” Recent public investments in electric vehicle battery production in Canada could fit that definition.

While some distinguish technology-focused industrial policies from sector-specific policies, there are close linkages between the two. Efforts to increase the adoption of artificial intelligence, biotechnology or carbon capture and storage are often linked to efforts to support high-value sectors of the economy. Investing in research and development or the scale-up of certain high-potential technologies as part of an industrial policy is often justified by the potential for widespread benefits through knowledge spillovers (Mankiw, 2013).

Picking a sector or technology to champion can, however, create perverse incentives to double down on projects regardless of the business case or the viability of the firm in question. For instance, once a government is fully committed to an industry, it can be politically difficult to halt programs that are not achieving their desired end, particularly if certain firms or regions are benefiting. On the other hand, a sector strategy for anchor industries can be used to help identify complementary policies to capture value along the supply chain. Quebec, for example, has identified an opportunity for developing critical minerals, battery-material production and battery manufacturing within the province, tapping into electric vehicle supply chains.

Another common variety is place-based industrial policy, where promoting local investment and growth are the primary goals. In some cases, it may be difficult to disentangle place-based industrial policy from sector strategy. For instance, Canada’s auto industry is clustered in southwestern Ontario, aerospace employment is concentrated in Quebec, and Manitoba specializes in transportation equipment ranging from buses to farm equipment (ISED, 2025; Job Bank, 2025). As green and digital transformations take hold, certain regions and communities are likely to face greater challenges than others. ­Place-based strategies that combine economic development and workforce training could help communities to successfully adapt to change (IRPP, 2025a, 2025b, 2025c, 2025d, 2025e; Jackson et al., 2025; More, 2025; Samson et al., 2025).

Finally, there is mission-oriented industrial policy. This is a variant of industrial policy popularized by economist Mariana Mazzucato, who pointed out that research undertaken for the NASA space program spurred innovations that led to new technologies used in products ranging from sneakers to smartphones (Mazzucato, 2013). The primary goal of this type of industrial policy is not necessarily to promote a particular industry, technology, sector or place, but a broader goal or mission. The most cited example is NASA’s Apollo mission, which not only achieved its stated aim of putting a person on the moon, but created a number of spinoff technologies (Mazzucato, 2013). A moon shot attempts to meet a large goal that the private sector either lacks the incentive or capacity to address.

Focusing on missions rather than sectors can potentially break down silos, allowing for co-ordination across departments. Yet the breadth of this approach can also be viewed as a weakness because it could require a prohibitively high number of resources. On the other hand, a mission-oriented approach could potentially focus attention on overcoming non-financial barriers to achieving an objective. For example, regulatory barriers are often as important — if not more so — than financial barriers. Addressing infrastructure gaps, such as charging infrastructure for electric vehicles (EVs) or port infrastructure for agricultural exports to growing Asian markets, could also help increase the success of sector-focused industrial policies.

Industrial policy in Canada

Industrial policy isn’t an abstract concept. Various forms of industrial policy have been part of Canada’s economic policy since Confederation, and continue to evolve. Canada has had many industrial policies throughout its history, and continues to engage in industrial policy to this day.

History of industrial policy in Canada

Canada’s industrial policy history starts with our first Prime Minister, Sir John A. Macdonald, whose National Policy – including subsidies and land grants – promoted railway development and settlement of the west.

When we look back on industrial policies, however, it is also important to consider the negative consequences. Construction of Canada’s national railway, for example, came with the loss of Métis and First Nations land, the decimation of bison herds, and the deaths of hundreds of Chinese workers and mistreatment of thousands of others (Bongiorno, 2020; Markewicz, 2017; Parks Canada, 2025).

More recent forms of industrial policy have tended to focus less on nation building but instead on the growth of certain industrial sectors. Consider the auto industry, for example.

Some important examples of sector-focused industrial policy in Canada’s postwar history include automotive manufacturing, aerospace (box 1), telecommunications equipment, and pharmaceutical development and production.

The Auto Pact was one of Canada’s best known examples of industrial policy. The agreement, concluded in 1965, allowed for tariff-free trade in automobiles and parts between Canada and the United States, while ensuring that Canadian auto production was at least proportional to domestic sales (Krikorian, 2005). The Auto Pact was an industrial policy initiative that entailed a managed form of trade liberalization, which is relevant to contemporary discussions of “friendshoring” among Canada’s allies. The pact deepened integration of the sector across the two countries, which created efficiencies that lowered prices but also made companies vulnerable to even small trade frictions (Anastakis, 2025).

Industrial policy in the auto industry has been ongoing in one form or another since the invention of the automobile. Another instance was the emergency measures implemented to support the auto industry in the wake of the global financial crisis in 2008-09. The Governments of Ontario and Canada invested $13.7 billion (in partnership with the U.S. government) to help major North American auto firms survive the crisis and maintain proportional manufacturing presence in Canada. Most but not all of those investments were recouped directly by the government; research suggests that the fiscal losses to government from the industry’s collapse at that time would have been much larger (Shiell & Somerville, 2012). This highlights the importance of analyzing the costs and benefits of public interventions with a broader and longer-term perspective.

More recently, the Governments of Canada, Ontario and Quebec have invested in helping finance electric vehicle battery plants through a combination of capital subsidies for construction of new facilities and production tax credits to reduce the cost of producing batteries (the latter are directly contingent on how much production eventually arises from the new facilities). The Parliamentary Budget Officer estimated that subsidies to Northvolt, Stellantis-LGES and Volkswagen would amount to $43.6 billion over a decade of operation (assuming full production over that period and the continuation of parallel U.S. subsidies); they estimated that it would take governments between 11 and 23 years to break even on the various investments (Giswold et al., 2023). The bankruptcy of Northvolt has already led to over $200 million in losses for the Quebec government (Dion, 2025).

Given uncertainty in future demand for EVs, changes in the parallel U.S. subsidies and changes in investment plans by the participating companies, it is unknown what the ultimate subsidies from the federal and provincial governments will amount to. While there is debate about whether the benefits of the investments will outweigh the costs, the auto sector is a key contributor to Ontario and Canada’s GDP and provides a significant number of well-paid, unionized jobs. A 2021 study by the Focal Initiative suggested that a 20 per cent increase in vehicle assembly would produce 17,200 jobs in the Canadian automotive manufacturing supply chain and an additional 17,500 jobs in other industries, and that a 20 per cent increase in parts exports would produce 12,350 jobs in the Canadian automotive manufacturing supply chain and an additional 10,500 across the broader economy (FOCAL Initiative, 2021). As the global auto sector undergoes a transition to electric vehicles, countries are competing for their share of battery and EV supply chains.

Two other examples of Canadian industrial policy that are often touted as successful are the oilsands and canola oil.

Alberta’s history of oil production dates to the 19th century but was accelerated by the discovery of Leduc No. 1 in 1947. The province enjoyed decades of prosperity built on conventional oil. But by 1974, the province’s oil reserves appeared in danger of running dry. Premier Peter Lougheed said in a speech to the Calgary Chamber of Commerce that the province had only 12 years of reserves left (Hastings-Simon, 2019). The province took a chance on what Dr. Sara Hastings-Simon of the University of Calgary noted was considered a “silly idea” at the time: steam-assisted gravity drainage, or SAGD (Hastings-Simon, 2019).

The Government of Alberta, controversially, increased royalty rates on conventional oil to fund the Alberta Oil Sands Technology and Research Authority (AOSTRA). Through AOSTRA, the provincial government invested $1.4 billion (2019 dollars) into developing and commercializing the nascent drainage technology (Hastings-Simon, 2019). It took 18 years for SAGD production to come online, and additional royalty, tax and infrastructure supports, but it now represents roughly 52 per cent of Alberta bitumen production (Alberta Energy Regulator, 2025). Though some authors highlight that the development of the oil sands came with environmental and health costs that detract from its economic benefits, it is difficult not to see these policy decisions by the Alberta government as an invaluable part of the province’s economic success (Olszynski et al., 2023; Williams, 2024).

Canola oil is another example of industrial policy with lasting, positive effects. Canola (an abbreviation of “Canadian oil low acid”) is a food-grade oil and variety of rapeseed that was developed by plant breeders in Saskatchewan and Manitoba during the 1960s and 1970s. Its production is the result of collaboration between public scientists and industry with financial support from government. Investment from the private sector into developing canola was encouraged by the establishment of the Plant Breeders Rights’ Act in 1990, which awarded private firms the resulting intellectual property (Carew and Devadoss, 2005). Canola is now a lucrative crop in all three prairie provinces (Agriculture and Agrifood Canada, 2024).

The success stories above do not prove that industrial policy is a foolproof solution to developing new sectors. Indeed, it is easy to find examples of industrial policy that have failed spectacularly, such as the Bricklin SV-1 – a car that was briefly produced in New Brunswick with the aid of the provincial government (Webb, 2020). Newfoundland’s financial support for the development of hydroponic cucumbers in the 1980s is also illustrative of industrial policy that failed (CBC News, 2018).

Any meaningful discussion of industrial policy requires learning from the successes and failures of the past, in Canada and around the world.

Current industrial policies in Canada

Canada has many industrial policies at the federal, provincial, territorial and municipal levels of government. An overview of the largest federal and provincial industrial policies included in the OECD’s Quantifying Industrial Strategies (QuIS) database for Canada reveals a significant reliance on tax expenditures as well as loans and guarantees (table 1). In comparison with other OECD countries, Canada tends to rely more on export insurance and guarantees that primarily benefit manufacturers (OECD, 2023).

Statistics Canada’s Business Innovation and Growth Database surveys federal departments and agencies annually to provide data on recipients of funding, grants and awards from departmental growth and innovation program streams. The data for 2022 show significant federal support for manufacturing, professional services, education services and accommodation and food services (figure 1).

There are examples of institutional learning that have led to adjustments to industrial policies. For instance, the federal government cancelled its Digital Adoption Program after less than two years. The program, which aimed to help Canadian businesses become more efficient by improving their technological capabilities, proved too rigid and failed to adequately take into account the needs of end-users (Zon, 2024). While the program was a failure, the fact that the government cancelled the program in response to poor outcomes is a positive sign.

Another example of the evolution of industrial policy in Canada is the Global Innovation Clusters program. The original Innovation Superclusters program launched in 2018 focused on creating five regional innovation ecosystems (ISED, 2018). Based on various reviews of the program, the federal government decided to renew funding in 2022 but refocus the program on helping companies across Canada scale their business internationally. Under the Global Innovation Clusters program, the clusters adopted common objectives to expand their global presence, collaborate among themselves to deepen their impact, fight climate change, build more resilient supply chains, and support the growth and scale-up of Canadian companies. The clusters also increased their focus on industry  co-investment (ISED, 2023b).

Industrial policy has also expanded beyond sector-focused approaches. The Global Hypergrowth Program, for example, aims to accelerate the creation of large, globally oriented anchor firms that have more than $1 billion in annual revenue, spend a lot on research and development, and are committed to growing in Canada. The program currently supports eight companies with advisory services, access to networks, and funding aimed at accelerating their growth trajectory (ISED, 2024b). The Strategic Innovation Fund also has flexibility to support large projects across a range of sectors, with a broad mandate to encourage and de-risk private investments in large-scale transformative projects to help Canada prosper in a low-carbon and knowledge-based global economy (ISED, 2024c).

Another evolution of industrial policy in Canada has been an emergence of arm’s-length entities. Investissement Québec has become one of the largest providers of venture capital and loans in Canada (Investissement Québec, 2025; OECD, 2025b). The Canada Infrastructure Bank helps to leverage and catalyze private-sector investment in infrastructure projects that align with priorities identified by the federal government (CIB, 2025). The Canada Growth Fund – managed by PSP Investments – aims to catalyze private-sector investment in Canadian businesses and projects to help transform and grow Canada’s economy at speed and scale to net zero (CDEV, 2025a). The Business Development Bank of Canada and Export Development Canada also continue to be among the largest sources of support to Canadian companies (OECD, 2025b). Similarly, the recently established Canada Indigenous Loan Guarantee Corporation provides tailored, arm’s-length support for Indigenous investments, strengthening Indigenous participation in major projects. Indigenous-controlled entities such as First Nations Financial Authority and the First Nations Bank of Canada have also demonstrated the value of Indigenous leadership in highly regulated, complex economic sectors as a vehicle for improved Indigenous economic participation.

The use of investment tax credits as industrial policy has also grown in popularity at the federal level. There are now a range of tax credits available for eligible capital investments in carbon capture and storage, clean electricity, clean manufacturing, electric vehicle supply chains, clean hydrogen and other technologies (PwC, 2025).

Governments also use trade policies, regulations, patent laws, procurement and other tools to influence private behaviour, but many of these policies are not included in industrial policy databases.

While there have been many evaluations of the programs, it is difficult to assess the effectiveness and efficiency of the various approaches without consistent criteria, data collection, and comparative analyses over an extended period of time.

Should we use industrial policy?

During our workshops, there were robust debates about the role of industrial policy in Canada. Many participants were skeptical that industrial policy is a necessary, let alone effective tool to meet public policy goals. They felt that it was more important for governments to focus on lower corporate tax rates or on building trade-related infrastructure. Others argued that there are many policy goals that will simply not be addressed by private markets without public intervention, because the incentives often don’t line up for private companies to address large, complex priorities in the public interest such as vaccine production or greenhouse gas emission reductions.

Some participants noted that the goals of industrial policy interventions are often nebulous. They can be about productivity, job creation and any number of non-economic rationales, making it difficult to evaluate whether the interventions efficiently met their goals. Narrow political considerations can also create poor incentives for politicians overseeing industrial policies. Laurent Carbonneau, director of policy and research at the Council of Canadian Innovators, noted that “there’s a reason why there’s five superclusters and not one,” in reference to the decision to spread the program across five Canadian regions. One participant used the analogy of “spreading the peanut butter too thin” to refer to the provision of limited funding across many different priorities, reducing its ability to achieve meaningful outcomes. Economist Don Drummond remarked at a workshop that industrial policy is sometimes used for “softening the blow of decline” instead of promoting emerging industries or tackling pressing societal challenges.

While there was some skepticism of industrial policy as an ideal approach, many workshop participants also recognized that it might be a “second-best” approach to achieving pressing social objectives. Take climate change, for example. Without long-term certainty on tax and regulatory policies in Canada and other major trading partners, private investment in capital-intensive, low-emission projects will be limited without government support. Moreover, there are issues such as Indigenous economic participation where a lack of access to private capital is a barrier that is difficult to overcome without public investment.

On a more pragmatic front, many participants in our workshops recognized that governments consistently engage in industrial policy, making theoretical debates over the role of governments in industrial policy rather pointless. They suggested that Canada should focus on ensuring that we get value for money rather than debating whether industrial policy is inherently desirable.

Many of the concerns raised about industrial policy link to a general lack of trust in the ability of governments to execute the policies effectively. Whether or not one believes that industrial policy is necessary, there was broad agreement that governments can improve how industrial policy is done.

Where Industrial Policy Could Help

We laid out eight areas where well-designed and carefully targeted industrial policy might offer a partial solution in our October 2024 report, Should Governments Steer Private Investment Decisions? Framing Canada’s Industrial Policy Choices. Recent developments compelled us to reorient our focus to three imperatives thrust upon Canada by the outside world, and three domestic priorities.

External imperatives

1. Defending Canadian sovereignty
2. Diversifying Canada’s international trade
3. Creating a future-ready, sustainable economy

Domestic priorities

1. Advancing Indigenous Economic Reconciliation and self-determination
2. Promoting full economic participation
3. Accelerating innovation to address Canada’s housing crisis

Defending Canadian sovereignty

Canada’s sovereignty has become an urgent issue in the wake of President Donald Trump’s assertion that Canada should become the 51st state, his claim that the border between the two countries is an “artificially drawn line,” his threats to use economic force on Canada to achieve his goals and his musings that the U.S. might not live up to the mutual defence commitments of NATO’s Article 5 (Cecco, 2025; Hunnicutt & Brunnstrom, 2025; Reuters, 2025). There are many possible responses to these threats, such as increasing Canada’s military spending and deepening diplomatic and economic ties with other allies. In the 2025 election campaign, the Liberal, Conservative and New Democratic Party leaders all suggested establishing a larger presence in Canada’s North to guard against possible threats from Russia, China and others while also developing critical mineral resources (Sarkisian, 2025; Simpson, 2025).  Industrial policy could play a role in leveraging private investment for infrastructure that has both defence and civilian purposes (dual-use infrastructure), and for mines and other production facilities that face challenges operating in the Arctic.

The Government of Canada has committed to boost core defence spending to 2 per cent of GDP this fiscal year and has endorsed NATO’s new commitment to invest 5 per cent of GDP annually by 2035  (Brewster, 2025; Prime Minister of Canada, 2025a). As part of the new pledge, Canada will spend 3.5 per cent of GDP on core military capabilities, and 1.5 per cent on investments in critical defence and security-related expenditures such as new airports, ports, telecommunications, emergency preparedness and other dual-use investments.

Given that the pledge entails a massive increase in expenditures, it is important that the government focus on generating significant economic and societal benefits within Canada. Part of this can be achieved through the “dual use” objective, where a northern road and port, for example, are used for both defence and local economic development. The other part can be achieved by using spending to strengthen Canada’s defence production capacity and domestic supply chains. In 2022, the Canadian defence industry reported over $14.3B in revenues from nearly 600 firms (ISED, 2022). Prime Minister Mark ­Carney has promised to prioritize made-in-Canada manufacturing and supply chains, shifting away from an approach that led to an estimated three-quarters of Canada’s defence capital spending going to the United States (Canadian Press, 2025).

Canada has the potential to expand its production of aircraft, ships and military vehicles, using Canadian-made steel, while also developing capabilities in cybersecurity, drones, sensors, and warning systems (figure 2). To accomplish this, defence procurement will need to be overhauled with an industrial policy mindset and other industrial and innovation policies will need to expand to include defence technologies. Business Development Canada, for example, has indicated it will expand its support to defence companies (Norman & Van Praet, 2025).

DIVERSIFYING CANADA’S INTERNATIONAL TRADE

Reducing the economic leverage that the United States has over Canada will require a concerted effort to increase exports to other countries. In June 2025, 70 per cent of Canada’s goods exports went to the U.S. (Figure 3; Statistics Canada, 2025b). Diversification will be challenging, given the degree of sector integration and the proximity of the large U.S. market. It will require redirecting existing exports to other markets and developing the types of exports that are most likely to be in demand globally (Samson & Chejfec, 2025). Selling more Canadian-made products within Canada, including through enhanced interprovincial economic and infrastructure linkages, will also be important in responding to the disruptions resulting from Trump’s tariff policies.  There are significant export opportunities in critical minerals, battery materials, agriculture and agri-food, and emerging technologies. ­However, investors interested in many of these opportunities face a range of barriers. These include policy uncertainty, market dominance by foreign incumbents, infrastructure gaps and technological risk. Industrial policies are likely to be part of any government strategy aimed at addressing these barriers.

Global supply chain vulnerabilities can also present significant risks to Canada’s economy and security, as evidenced by shortages of personal protective equipment, semiconductors, and other strategic products during the COVID-19 pandemic. It is estimated that around 40 per cent of industries, accounting for 25 per cent of Canada’s output, are highly vulnerable to both external demand and supply shocks (Boileau & Sydor, 2020). Diversifying supply chains and developing domestic production capacity for critical inputs could buffer Canada against external shocks. However, private companies may not have the incentive to invest in the capacity to produce these goods without government support.

There are also areas where supply chain risks facing our trading partners could represent an opportunity for Canadian companies. There is significant international concern, for example, that China’s dominance of critical mineral production represents a security and economic risk (CIPE, 2025). The European Union now requires that no more than 65 per cent of the EU’s annual needs of each strategic raw material should come from a single third country (EC, 2023). However, capturing these opportunities by developing extraction and processing capacity is likely to require industrial policy intervention, in co-ordination with allied countries.

CREATING A FUTURE-READY, SUSTAINABLE ECONOMY

While many private companies may be focused on the next quarter, governments must look further ahead and anticipate structural shifts in the global economy that may have implications of national significance. Some of the most disruptive changes expected in the coming decades include a changing climate, the global energy transition, and the rise of artificial intelligence (Amin & Bhardwaj, 2024; Georgieva, 2024; Kyriakopoulou, 2023). Anticipating the economic implications of these epochal changes, and ensuring that Canada is positioned to navigate disruption in ways that maintain the standard of living of Canadians, are critical roles for our governments.

When it comes to a changing climate, which will increase the frequency and intensity of storms, heat waves, droughts, wildfires and floods, and alter historical temperature and precipitation patterns, the potential for supply chain disruption, food and water scarcity, and humanitarian crises is significant (IPCC, 2023; NRCan, 2023). The public and private sectors in Canada will need to invest in adaptations that both fulfil Canada’s commitments to global emissions reduction and also reduce risks to the economy and the health and safety of Canadians that come with climate change. There may also be export opportunities in food production or technologies that help other countries adapt to climate change. Industrial policies could, for example, help to scale technologies for flood and fire mitigation, expand the production of wildfire-resistant building materials, accelerate water bomber production, or develop drought-resistant crops.

The global energy transition will also bring risks and opportunities for Canadian companies. Regardless of shorter-run swings in politics in various jurisdictions, it is clear that the trajectory toward cleaner energy and emission reduction will continue, driven not only by climate policy, but perhaps more fundamentally, by enormous improvements in the technology and competitiveness of renewable energy and batteries (IEA, 2025). This transition will mean that demand for fossil fuels will decline over the century, with the potential for market volatility and uncertainty through the period of transition (IEA, 2024). To strengthen trade ties with Europe and Asia and be well positioned for the future global economy, Canada will need to further develop export capacity in sectors that will benefit from the rapid energy transition taking place in those markets. However, clean energy, manufacturing and critical mineral projects often involve large-scale capital investments that take decades to generate returns (van den Heuvel & Popp, 2023). Policy uncertainty can mean the investment risk is too great for the private sector to bear on its own. Industrial policies can help address barriers that may be limiting private-sector investment.

The use of artificial intelligence is also rapidly expanding across the global economy. It has the potential to bring productivity and innovation benefits to companies that can successfully develop or leverage its capabilities, but it also has the potential to upend business models (Filippucci et al., 2024). Industrial policies may have a role to play in helping to scale promising AI companies in Canada, or in helping businesses adopt AI tools that could enhance their competitiveness.

ADVANCING INDIGENOUS ECONOMIC RECONCILIATION AND SELF-DETERMINATION

Indigenous communities and businesses often lack access to capital because of both historic injustices and ongoing barriers imposed by the Government of Canada, for instance, through the Indian Act.

Indigenous communities often lack the infrastructure or administrative capacity required to fully participate in the economy. In some cases that means lack of access to highways to enable business, or intercity transportation to allow community members to access necessary services in larger centres. In many cases, it also means a lack of access to electricity – particularly in the North, where many communities are not connected to electricity grids. It may also mean a lack of running water and a lack of internet access. These deficiencies often place Indigenous businesses and communities at a major disadvantage. It’s difficult to undertake basic municipal tasks such as applying for grant programs and complying with reporting requirements for funding without reliable internet or adequate staffing, for instance. And it’s hard to envision starting a business without affordable and stable electricity, let alone running water or internet.

Northern Indigenous communities often face their own unique challenges. For instance, much of the land in Inuit Nunangat isn’t accessible year-round by roads. Shipping to communities in the Arctic or Sub-arctic is challenging and expensive, and in some cases is susceptible to disruptions caused by climate change, such as low water levels preventing barge shipments. Moreover, much of the North is not connected to power grids, meaning they are reliant on expensive and often unreliable diesel shipments for electricity.

Moreover, Indigenous Peoples face socio-economic challenges that aren’t well understood by most non-Indigenous Canadians, including the ongoing impacts of residential school trauma, intergenerational poverty and high rates of addiction and suicide that prevail in communities that don’t have the resources to provide opportunities most Canadians take for granted.

Despite the barriers facing Indigenous communities, expanding Indigenous economies in Canada is a nation-building opportunity. Closing long-standing socio-economic gaps and empowering Indigenous Peoples and their communities to be meaningful partners in the country’s economic future will help to unlock significant growth potential. Indigenous businesses and workers contribute over $60 billion to Canada’s economy annually — a figure that has almost doubled in the last 10 years alone (Statistics Canada, 2025c). Indigenous Peoples are the fastest growing and youngest demographic in Canada (Statistics Canada, 2006; 2011; 2015; 2021). Indeed, Indigenous entrepreneurs create new businesses at nine times the rate of non-Indigenous entrepreneurs (CCIB, 2019). Notwithstanding this significant contribution, Indigenous individuals earn 70 cents on the dollar compared with non-Indigenous individuals and there is a staggering $349 billion basic infrastructure gap between Indigenous and non-Indigenous communities across the country (Atjecoutay, 2024; Conference Board of Canada, 2025).

According to the 2022 National Indigenous Economic Development Strategy published by a coalition of Indigenous organizations, “closing the productivity gap would lead to an increase of $27.7 billion to Canada’s gross domestic product each year” (NIES, 2022).Additionally, the Conference Board of Canada projects that closing the basic infrastructure gap will generate $635 billion in incremental economic output and create nearly 300,000 jobs, representing an 82 per cent return on each dollar invested that would deliver benefits for the entire Canadian economy (Conference Board of Canada, 2025). Finally, with Canadian governments focused on fast-tracking projects of national interest that will impact Indigenous rights and interests, engaging in genuine partnership with Indigenous Peoples is crucial.

Industrial policy can help accelerate Indigenous-led economic growth by improving access to capital and procurement opportunities for Indigenous communities and businesses. Recent examples such as the Canada Indigenous Loan Guarantee Corporation and the Canada Infrastructure Bank’s Indigenous Equity Initiative show that industrial policies can play a role in addressing capital constraints (CDEV, 2025b; CIB, 2023a). Innovation in industrial policy can also help to improve the well-being and economic capacity of Indigenous communities by catalyzing investments in infrastructure and removing other barriers to Indigenous economic participation. Of course, these efforts will need to be made in concert with broader reforms.

PROMOTING FULL ECONOMIC PARTICIPATION

Achieving full economic participation requires ensuring that no community or group is left behind – because we are only as strong as our weakest link. To unlock the full potential for innovation and growth, we must deliberately develop and reach all innovators, regardless of where they live or the barriers they face.

Inclusion regardless of gender and race is essential to this vision. Members of ­under-represented groups, particularly Black entrepreneurs, often face unique and persistent barriers such as discrimination and limited access to capital. Addressing these systemic challenges requires targeted measures, such as the federal Black Entrepreneurship Loan Fund, which works to close financing gaps and level the playing field for Black business owners (FACE, 2025; Ratté & Galliot, 2025). Removing these obstacles is not just a matter of fairness – it taps into talent and perspectives that can fuel broader economic and social innovation.

Rural and regional inclusion is equally critical. Entrepreneurs in rural, remote or otherwise disadvantaged regions often contend with obstacles stemming from distance from urban markets, inadequate infrastructure and challenging geographical or environmental conditions. Federal regional development agencies play a vital role in diversifying local economies, strengthening community resilience, and ensuring these regions can fully contribute to – and benefit from – national growth (ISED, 2024d). In the European Union, cohesion policies that empower underperforming regions are even described as the glue that holds the union together (Schwab, 2024).

Governments already use industrial policies to promote both inclusivity and regional equity. Applying these lenses to all economic strategies ensures that growth is not concentrated in a few places or among a few people but instead mobilizes untapped potential across the country. As the Business Development Bank of Canada notes, ­promoting greater participation strengthens the entire economy by drawing on resources and talent that might otherwise remain underused (BDC, 2025).

Accelerating innovation to address Canada’s housing crisis

Canada is in the grips of a deep housing crisis. According to an OECD report, “real house prices have outpaced the growth of real disposable incomes by about 60% since the Global Financial Crisis” (OECD, 2025a). The magnitude of the affordability crisis is so enormous that the Canada Mortgage and Housing Corporation recently decided to abandon its target of restoring 2004-level housing affordability in favour of using 2019 as its benchmark (Younglai, 2025). In other words, instead of the current 245,000 housing starts per year, we will need to increase that number to 480,000 by 2035. That represents millions of homes more than what is currently planned (CMHC, 2025).

Increasing the productivity of construction will have to be part of the equation. Tools such as prefabrication and 3D printing might help, but the costs and risks of scaling up small businesses and new innovations in the industry are steep. Governments can use industrial policy to reduce risks for investors in the nascent industry.

What We Heard

During our workshops and consultations, we heard from Canadian and international experts from academia, government, the non-profit sector, private industry, trade unions and Indigenous organizations. Some were long-standing proponents of industrial policy; others were long-standing critics. The conversations, held over the course of full days, were frank and insightful. We drew lessons from the wide range of views expressed and from recent literature on industrial policy in Canada.

Among the central themes that emerged was that industrial policy does not take place within a vacuum. It can be hindered or helped by other government policies. Participants highlighted past problems and existing weaknesses that governments should consider when formulating new industrial policies. And we received valuable feedback about how to think about industrial policy. The advice covered what goals to set, which methods to use and the potential biases to be aware of when contemplating its use.

The following are some of the key takeaways from our expert workshops, which have helped inform our overall recommendations in the final two chapters of this report.

Invest in infrastructure

A consistent piece of feedback was that successful industrial policy requires investments in complementary infrastructure. The two main infrastructure deficits identified were the lack of transportation networks to get products to markets outside the United States and the lack of sufficient clean electricity to support growth sectors.

Given the uncertainty of U.S. trade policy, there is greater urgency to invest in new transportation infrastructure like ports, roads and rail to enable swift movement of goods to new and existing markets. One workshop participant suggested creating a national transportation strategy aimed at improving supply chains and facilitating interprovincial and international trade.

The other main infrastructure deficit mentioned was the lack of a reliable and sustainable electricity infrastructure. One participant remarked that, contrary to popular belief, there is not energy abundance in Canada. For example, Quebec was unable to approve all the applications for new industrial projects it received in 2025 because it could not supply all of them with electricity (NRCan, 2025a). Critical mineral processing, liquefied natural gas exports and other manufacturing processes place a heavy burden on the existing electricity grid. Artificial intelligence is another energy-intensive industrial shift on the horizon, with a rapid growth in data centres. Alberta’s, Ontario’s and Quebec’s electricity usage will increase as technological change permeates different sectors (NRCan, 2025a). Complementary investments are needed in electricity transmission lines and generation to enable investments in these sectors. Infrastructure to support housing construction, including wastewater and energy infrastructure, will also be a critical enabler of accelerated home building.

While infrastructure is often not seen as industrial policy, the approach of the Canada Infrastructure Bank, which leverages both public and private capital, is arguably a form of industrial policy.

Be realistic and transparent about fiscal constraints

Potential fiscal constraints on the horizon will require Canadian governments to be strategic about spending, advancing priority projects first and leveraging private investment to the greatest extent possible. Many participants argued that alternative policy tools, such as regulatory reforms, should be explored before governments commit to new program spending. While not all industrial policy initiatives entail large fiscal outlays, those that do need to be considered within the overall fiscal context.

Governments need to balance fiscal constraints with policy goals and be realistic about what is achievable and what investments make the most sense. This isn’t simply a matter of the fiscal capacity to finance programs, but also the necessity to maintain public support for industrial policy investments. Investments that lead to tangible positive outcomes and leverage significant private-sector capital are more likely to be viewed favourably.

Do not equate industrial policy with spending

While there are indeed many examples of ambitious industrial policy initiatives with large price tags, industrial policy is not inherently about increased spending. For instance, prioritizing Canadian companies in government procurement can help to strengthen domestic industries without entailing net new spending (Council of Canadian Innovators, 2024). The use of loans or guarantees – rather than grants – may also limit the fiscal impact. Leveraging ­private-sector investment in infrastructure projects that might otherwise be publicly funded could offer savings.

Moreover, as Jim Stanford has emphasized, “Using other policy levers (including regulation, patent laws, trade policies, and training mandates) can also shift private behaviour in ways that do not entail more expenditure of public funds.”

Industrial policies can also be seen as investments that lead to economic and societal gains that go beyond specific projects. For example, investment in the early adoption of a new technology could lead to learning-by-doing benefits that lower adoption costs in the future (OECD, 2024a). Similarly, investments in northern infrastructure could open up mining and other investment opportunities for decades.

Ignore state capacity at your peril

We heard that having fiscal capacity is just the first step. Governments must also have the internal capacity to implement industrial policy interventions effectively and efficiently. There are constraints on state capacity at every phase of the delivery of industrial policy (design, implementation, monitoring, governance and evaluation). Industry associations told us that it can take up to 18 months to get approvals for contracts with government programs. A lack of state capacity can also lead to unspent or misspent funds and a subsequent reduction in program budgets. Capacity is a function of the systems and processes people work within, the number of people administering the program, and the resources and skill sets available to the team.

Non-state capacity is also important when engaging with partners and arm’s-length entities. For instance, Indigenous communities and organizations are often better placed to deliver services than the state. Ensuring that they have the capacity to participate in program development and administration can provide a more tailored approach to achieving Indigenous priorities than relying on decision-makers hundreds or thousands of kilometres away.

Identify clear priorities

Participants want governments to be clear and specific about their policy objectives. Many expressed concerns that spreading resources too thin means that sectors with the greatest growth potential will not receive sufficient resources to succeed in the global market. There should be cohesiveness in government industrial policy, with clear objectives determined from the start. One criticism from multiple participants is that government spending programs often do not have an overarching objective that is clearly and consistently communicated to the public. Projects that are particularly important to public policy objectives or face barriers to commercialization should be given priority.

Reduce or mitigate investment risks

There are significant barriers to commercialization in some strategic sectors, making it difficult for firms to attract capital. Some projects are capital-intensive and could take a long time to be profitable. Others face a high degree of market and policy uncertainty.

Some participants argued that Canadian investors tend to be risk averse, and would rather focus on relatively safe investments with modest returns, rather than on investments in high-risk, high-reward opportunities in more innovative sectors.

Governments have many options when it comes to de-risking the investment environment. They may choose to create predictability of demand by acting as a first buyer for whatever product or service will be produced. They may provide procurement contracts to ensure that there is some degree of price certainty. This would encourage investors. Other options include providing low-cost loans, offering tax-investment incentives, taking equity stakes and strengthening infrastructure. In selecting which projects to support, governments will have to weigh the riskiness of the venture and the potential benefit for society. Not all risks will make sense. Some industries may seek to portray themselves as strategic when they are not, and governments need to be able to objectively assess these claims.

Consider arm’s-length delivery

Several workshop participants referred to examples of successful industrial policy that relied on arm’s-length delivery. The Alberta Oil Sands Technology and Research Authority (AOSTRA) referenced earlier had the expertise and authority to direct investment decisions (Hastings-Simon, 2019). The Canada Infrastructure Bank, which is provided with a mandate by the government with identified priorities, has relative autonomy in selecting specific projects and structuring agreements with private companies (CIB, 2023b). Investissement Québec is another contemporary example.

Build on Canada’s existing strengths

We heard about the need to identify and leverage Canada’s existing strengths and advantages, at the same time as working to diversify the economy (including its global trade interactions) and establish footholds in strategic new industries. There was a spirited debate about whether it is possible to build successful new sectors that do not currently have a major presence in Canada, or whether policies should focus on strengthening and expanding existing sectors. Much of the debate revolved around the pitfalls associated with picking winners. Chris Ragan remarked that “all the things we need to do well to pick winners are stuff that historically the government has been bad at.” Others argued that governments can make smart bets in areas where there are barriers to private-sector investment, and that purely private profit-led decisions are not necessarily efficient from the perspective of the long-term public interest.

Some participants suggested that governments should target sectors that are “export-oriented, technology-intensive and highly productive” (Stanford, 2023).  Large anchor firms can create spillover benefits for local economic development through higher incomes for workers and fiscal flowbacks for governments (Stanford, 2023).

Several participants stressed that Canada does not necessarily have to be the cheapest source of exports to be competitive. It is challenging to compete on cost with China in critical mineral processing, for example. However, Canada could potentially compete by offering other advantages such as the cleanest and most sustainable processes, or by reducing supply chain risks associated with overreliance on China.

Support emerging rather than declining industries

We heard that Canada has had much more success with industrial policy when its goal was to accelerate the growth of emerging industries rather than slow the decline of dying industries or firms. Dani Rodrick, an academic economist who has worked extensively on industrial policy, once noted that, “What determines success in industrial policy is not the ability to pick winners, but the capacity to let the losers go” (Rodrik, 2013).  Rodrick said that some of the worst cases of industrial policy occur when a government keeps putting good money after bad (Armstrong & Wu, 2024).

This point was illustrated in a study on the impact of Canadian industrial policy on the auto, steel, aluminum and aerospace industries (Sargent, 2024). The paper found that the aluminum industry performed better than comparable industries in both output and productivity, while steel had a similar or worse performance than comparable industries. A key difference was that the policies in the aluminum industry were offensive, aimed at luring new companies and investment into the sector. Policies in the steel sector were defensive, aimed at staving off competition from foreign firms. There may, however, be other policy reasons beyond raising output and productivity that justify support for a domestic steel sector, such as strategic and defence motivations.

Provide policy and regulatory certainty

A lack of policy certainty can make it difficult for firms to commit to large investments that may take decades to produce a return. A recent example of the consequences of political uncertainty is the 2025 decision by the Federated Co-operatives Limited (FCL) and AGT Foods to pause their proposed Integrated Agriculture Complex in Regina. The complex included a renewable diesel facility and joint venture canola crush projects. FCL pointed directly to “regulatory and political uncertainty, potential shifts in low-carbon public policy, and escalating costs” in the press release announcing the cancellation (FCL, 2025).

Encourage commercialization of intellectual property

Several workshop participants noted that commercialization of innovations where Canadian companies own the intellectual property will likely lead to greater long-term social benefits than expansion of foreign-owned branch plants. The example of canola provided above is one where intellectual property was a key part of the industrial policy. Investment from the private sector into developing canola was encouraged by the establishment of the Plant Breeders Rights’ Act in 1990, which awarded private firms intellectual property rights (Carew & Devadoss, 2005).

At several workshops, participants noted that companies with innovative technologies often exit Canada because they run into the “valley of death,” the time between when academic and government funding drops off and private-sector investment for commercialization and scale-up kicks in. At one workshop, a panellist remarked that firms may retain intellectual property rights without trying to commercialize them. “We’re functionally giving it away in a lot of cases,” Kyle Briggs argued. The Dalhousie Battery Lab is an example. It is a world leader in battery tech, but some critics have argued that the technology was essentially given away to foreign companies, despite the knowledge that there would be a market for it (Southin et al., 2025). When a battery manufacturing plant is built using this Canadian technology, the foreign purchaser of the intellectual property rights gets most of the benefit.

Briggs suggested Canada could learn from the Bayh-Dole Act in the United States. While he stressed that a direct import of the policy to Canada is unlikely to be effective given contextual differences, he suggested that the core idea — that government funders should take an active hand in shaping intellectual property (IP) policy by prescribing target outcomes with respect to the IP arising from publicly funded research and providing guidelines and resources to support their realization — should be adapted to the Canadian context. Tying funding to target outcomes gives universities a much stronger incentive to commercialize research, and the resources required to accomplish it.

Briggs said that a policy like the Bayh-Dole Act could benefit small and medium-sized enterprises (SMEs). Unlike large firms, smaller enterprises cannot afford to retain IP rights without using them. They must be strategic about the rights they own and use them to stay afloat. Policy could play an important role in helping SMEs make the most of their intellectual property.  Other participants noted that university technology transfer offices can also play a critical role.

Facilitate meaningful Indigenous participation and access to capital

We heard that industrial policies have historically led to negative outcomes for Indigenous Peoples. Many industrial policy programs were not accessible to Indigenous Peoples or communities due to their scale or because of competition from larger applicants with more capacity. Smaller communities or businesses often lack the administrative capacity to promptly fill out grant applications or to meet reporting requirements. Even well-intentioned programs have not always been successful due to a failure to work with Indigenous Peoples in their design and implementation. Participants felt that a lack of Indigenous representation among decision-makers made it more challenging for Indigenous applicants to succeed. More recent initiatives, such as the federal Indigenous Loan Guarantee Program, help Indigenous groups acquire equity ownership in major projects.

The difficulty Indigenous communities face in accessing affordable capital to fund economic development projects is a huge barrier to economic growth in Canada. The Indian Act, first passed in 1876, bears part of the blame. It prevents First Nations communities from accessing the same level of investment and funding as non-Indigenous people. ­According to one workshop presenter, two things must happen to improve Indigenous access to capital: a reduction in transaction costs (the cost of bringing a good or service to market) and a reduction in switching costs (the cost of changing the supplier of a good or service). Governments can help with both.

Improved access to capital is not enough on its own. Workshop panellists concluded that the most important factor in unlocking Indigenous economic potential is self-governance. We heard how federal legislation in the United States recognizing self-governance unlocked the power of tribal economies. The resulting benefits flowed not only to Indigenous communities but to neighbouring communities through job creation and tax revenue. The standard of living within these communities is higher now than in surrounding areas. The same has been true in Canada, where Indigenous communities with self-government saw a 35 per cent increase in household income after two censuses (Kalt, 2024).

We also heard that a lack of infrastructure within and around Indigenous communities in Canada makes it difficult to implement industrial policy, and can restrain Indigenous economic participation and economic development in rural and remote regions. For example, there is limited infrastructure in the Ring of Fire, an area with mining potential in Northern Ontario. Building transportation and electricity transmission capacity in collaboration with Indigenous communities would unlock economic potential.

Analyze distributional impacts

A final theme that emerged from the workshops was the importance of analyzing distributional impacts in forming an industrial policy strategy. Some groups and regions may be left out of a strategy focused solely on increasing national economic growth. Considering the impacts of policies by race, gender and other socio-economic characteristics can reveal opportunities to broaden the societal benefits of industrial policies. For example, in an environment where there is a shortage of skilled workers, firms who hire people who are underemployed or lacking post-secondary education, and provide them with opportunities for training and upgrading, could help to reduce rates of poverty. Saskatchewan’s labour market strategy, for example, emphasizes training for Indigenous people given the anticipated long-term societal and economic benefits of developing a skilled local workforce while reducing unemployment (Government of Saskatchewan, 2024).

We heard that the lack of disaggregated data in Canada makes it hard to determine the full distributional impacts of policy interventions. National labour market and economic data, for example, often do not reflect Indigenous realities.

Evaluations are essential

Industrial policy often has weak or non-existent impact evaluation metrics according to many workshop participants. This means the benefits of a policy are not always clear. This is borne out by a horizontal review of business innovation and clean technology programs conducted by the Treasury Board Secretariat. The review found that, of the 96 clean innovation programs included, 30 per cent did not include performance indicators to measure the impact (Schwartz, 2018). Workshop participants noted that performance-measurement frameworks should connect the strategic public policy objective with the results reported on the ground. The consequences and costs of forgoing performance evaluation are high. Evaluation allows governments to learn from their mistakes or successes and helps demonstrate the results to the public.

Focus on proper co-ordination

Industrial policy often involves co-ordination between multiple departments and levels of government. According to the OECD’s QuIS database, half of government spending on industrial policy in Canada in 2021 came from the provinces (OECD, 2023). One workshop presenter noted that Canada’s model of federalism has pros and cons when it comes to industrial policy. On the positive side, federalism allows different levels of governments to focus on policies that are tailored to their local economies. On the negative side, Canadian political scientist Jörg Broschek noted that weak intergovernmental co-ordination, can result in “too many ad hoc programs, [and] no encompassing approach.”

Co-ordination problems do not exist only between governments. Several participants felt that there was a lack of co-ordination across departments and even within departments when it comes to synchronizing investments under a common strategy and performance framework. The Treasury Board review of federal business innovation and clean technology programs found that 70 per cent of the programs reviewed had potential for significant or moderate overlap with other program mandates (Schwartz, 2018).

Participants said there were instances when the federal, provincial and territorial governments demonstrated strong co-ordination. Regional energy and resource tables established by the federal government in 2022 allowed the provinces and territories to identify and advance regional economic opportunities in the energy, resource and clean technology sectors. The governments of Ontario and Quebec also co-ordinated well with the federal government on public investments in electric vehicle and battery manufacturing facilities.

How to Do Industrial Policy Well

Governments never have the luxury of starting from zero. They are complex entities with many different functions and long institutional histories. Recognizing this needs to be the first step when engaging in industrial policy.

Past governments have experimented with many different measures to advance industrial policy goals, with mixed results. Peter Wallace, former secretary of the Treasury Board, noted during one of our workshops that failed industrial policies are often forgotten and then proposed again as institutional memory fades.

Any successful industrial policy initiative requires learning from experience. There needs to be a feedback loop to ensure that governments learn from success and avoid repeating failures. Having a sound process is key.

This starts with a strategy with clear priorities, or missions, and viable approaches to meet identified challenges. Rigorous evaluation is the next step. Finally, there needs to be good governance. Without good governance, even sound ideas can fail. Sound strategy, evaluation and governance are the three legs of a successful industrial policy, as shown in figure 4.

Developing a sound strategy

Any government considering the use of industrial policy should start by asking itself a series of questions to help define the strategy behind the policy. The answers will help determine the role of industrial policy, and if complementary policies are needed. Here are the main questions to ask:

What are our priorities?

We listed six areas ripe for industrial policy earlier in the report. Each is an objective in the national interest and unlikely to be achieved through market forces alone. Within these areas, governments will need to set priorities and identify strategic projects, sectors and technologies within them. Given resource constraints and the governance challenges associated with having too many priorities, selecting and designing policies that address multiple challenges is one way to maximize scarce public dollars. For instance, a policy aimed at fortifying Canada’s Arctic would encompass the issues of sovereignty, diversifying trade, Indigenous Economic Reconciliation and promoting full economic participation.

Finding ways to address multiple objectives could ensure that Canadians are getting value for money and help win buy-in for nation-building projects from a broad array of stakeholders. Table 2 provides some illustrative examples of how certain initiatives, projects, sectors or technologies could help to address multiple priorities. An Arctic Security Corridor, consisting of all-weather roads, ports and airports in northern territories that can be used for military and civilian purposes, could help to develop critical mineral potential while expanding Canada’s defence capabilities (box 2). An Indigenous economic development bank could help to close gaps in the ability of Indigenous Peoples, communities and businesses to access capital for economic development, which could help to further Indigenous Economic Reconciliation and lead to expansion of economic activity in rural, remote and northern communities across Canada (box 3).

In certain areas, intentional design features or complementary policies might be required to achieve additional objectives. For example, expanding clean electricity generation can support a future-ready economy by enabling electrification and investment in electricity-intensive projects such as data centres or liquefied natural gas terminals. It might also help to diversify trade if it replaces the need for imported electricity or fossil fuels, and it could advance Indigenous Economic Reconciliation if the project is led or co-led by an Indigenous community or business.

What type of approach should be used?

Upon establishing priority objectives and identified strategic projects, sectors and technologies that can help achieve them, a government must then select the type of approach best suited to achieving the desired outcomes. Should it use a sector or technology approach? A place-based approach that targets a specific region? Or a mission-oriented policy with a specific goal? Or should it be some mix of strategic approaches?

Mission-oriented policies may be best suited to challenges that require action across multiple organizations and a range of industrial and complementary policy tools (Mazzucato et al., 2024). A mission-oriented policy could be something like the federal government’s commitment to quickly double the rate of home building (Prime Minister of Canada, 2025b). Achieving the goal may require technology-based strategies such as incentivizing modular and prefabricated housing, but it will also require other policies and significant collaboration with provincial, territorial, municipal and Indigenous governments.

A combination of approaches may, in fact, work best for some challenges. For other challenges, it may be easier to focus primarily on one type of approach. To expand Canada’s export of agricultural commodities, for example, it may be most practical to pursue a sector-based approach within agricultural ministries or related Crown corporations such as Farm Credit Canada. Complementary policies, such as improvements to rail and port infrastructure, could also support a primarily sector-based agricultural export strategy.

What are the gaps and opportunities?

Before designing an effective government intervention, it is important to assess why the private sector is not investing in the project, sector or technology on its own or at the scale and pace required.

Gaps might be market failures, such as insufficiently pricing pollution, or projects where the financial risk is too great because the technology is new, the policy environment is uncertain, or the market is in early stages of development. Opportunities are areas where there is not an identifiable gap, but there is a clear long-term strategic interest in expanding economic activity. For example, even with significant investment flowing into companies developing artificial intelligence solutions, the future opportunity for Canada may be so large that additional government intervention is warranted.

What are we already doing?

In many cases there are already policies aimed at addressing the government’s priorities. Evaluating whether they are working as intended is crucial before attempting something new. Layering a new intervention on top of an unsuccessful one can lead to policy incoherence and waste. In some cases, there might be related policies that could address, at least in part, the issue in question. For instance, a tax credit might be broadly aimed at spurring investment in manufacturing. Redeploying some of those resources to more targeted and strategic interventions that directly link to defence or critical mineral processing, or in ways that encourage trade diversification, might be more effective. In other cases, it may be that the best policy is already in place, but the resources provided to it are insufficient to achieve the desired objective. It might also be the case that complementary policies are missing, such as infrastructure investment or skills programming, that could help to achieve the goal.

Is this an appropriate priority for our level of government?

Canada’s system of federalism lays out a division of powers between various levels of government. Often there are grey areas. There are good reasons why different orders of government have different responsibilities. Any federal intervention requires careful consideration of how it will impact other governments, and careful planning and co-ordination with provincial, territorial, Indigenous and municipal governments. Overlapping policies, or those that work at cross-purposes, may reduce the effectiveness and efficiency of government intervention.

What is the most appropriate instrument?

Once objectives and priorities are established, governments must decide which tools to use. There are a range of industrial policy instruments that could be considered, including tax incentives, grants, loans, guarantees, procurement and other tools (Appendix C). Analyzing the barriers to private-sector investment is critical to identifying the tool that is most likely to generate results for the least public expenditure.  It is also important to understand how policies have performed in the past in achieving desired outcomes (box 4).

For example, newer technologies for clean-power generation, such as geothermal energy, may involve greater technological risk, higher capital costs and more policy uncertainty than other electricity projects. With solar and wind energy, reverse-auction production subsidies have generally been the most successful in encouraging greater production while limiting the impact on electricity rates (Hastings-Simon et al., 2022). However, earlier-stage geothermal technologies such as ultradeep geothermal might require an industrial policy approach like the one the AOSTRA program used for oil sands development, which provided direct funding for high-risk projects (Smejkal et al., 2025). Any incentives provided should be temporary and gradually reduced as technologies become established and risks dissipate.

Evaluation

Evaluating the performance of industrial policies is crucial to ensuring that strategic objectives are met and that scarce resources are allocated efficiently. Making the process and conclusions transparent can be an important aspect of building public trust in industrial policy. This is especially true when programs use public funds to provide a financial benefit to private companies. Such programs are more open to perceptions of corruption, bias or government capture by business.

At a bare minimum, governments should be able to clearly and transparently articulate the connection between the stated public policy goal of the program and the funds or tax incentives provided to companies. This can only happen through transparent, credible and objective performance evaluation (Criscuolo et al. 2022a).

The efficient use of scarce resources requires a continual process of evaluation so that governments can move quickly to terminate or adjust programs that are not achieving the desired results. Priorities change over time. When they do, evaluation can provide the evidence needed to shift resources from programs with weaker performance or that target lower-priority objectives toward stronger performers and higher priorities.

Industrial policy creates unique evaluation challenges compared with other policy fields. It often takes time to see results. Success also depends on the performance of private companies. And outcomes can often be influenced by external factors, such as complex market dynamics or policy changes by trading partners.

These difficulties have sometimes led governments to forgo proper evaluation, leaving many to conclude that its positive impacts are mixed, at best (Criscuolo et al. 2022b). There are, however, important steps governments can take to overcome the challenges of evaluation and improve its utility for decision-making.

Creating the conditions for excellence

Decision-makers require high-quality, standardized approaches to evaluation when assessing the relative merits of industrial policy programs across a range of government organizations. This is hard to achieve if each unit undertakes its own independent evaluation. Teams may lack the necessary capacity, knowledge, experience and skill sets.

Other countries have established centralized evaluation champions to promote quality and standardization. For example, Australia established the Australian Centre for Evaluation within its treasury department. The centre works with evaluation units across government to ensure that programs deliver value for money. It also works to create a culture of continuous improvement (Commonwealth of Australia, n.d. a). The Netherlands and Portugal have similar evaluation hubs housed in central agencies. These hubs co-ordinate evaluation across the government by providing advisory services and guidelines to ensure a high standard of evaluation (OECD, 2025b).

A forthcoming IRPP paper by Doug Nevison, a former senior federal public servant, argues that a dedicated, centralized industrial policy evaluation unit could be housed in the Privy Council Office (PCO). It could work in partnership with the Finance department and Treasury Board Secretariat, and be supported by Innovation, Science and Economic Development Canada (ISED) (Nevison, forthcoming). There used to be a Centre of Excellence for Evaluation based at the Treasury Board Secretariat (TBS), but it was replaced by the Results Division when the federal government’s overarching performance and evaluation policy, Policy on Results, came into effect in 2016. According to Nevison, it makes sense for the organization to be at a central agency where policy and budgetary decisions are made, which would be either PCO or the Finance department. Evaluations could be synchronized with the funding cycle.

At the provincial and territorial level, evaluation units could be housed in a central body such as the cabinet office or the finance ministry.

Establishing a framework

Standardized evaluation requires an established framework that details what evaluations need to include and what methodologies should be used. Nevison suggests an approach akin to the federal government’s Cabinet Directive on Regulations, which requires a cost-benefit analysis prior to the implementation of a regulation (TBS, 2024).

While guidance on program evaluation exists, there is no specific advice on industrial policy or on programs aimed at stimulating or guiding private-sector investment. These involve different considerations than a program providing a service to households. There is also no requirement that tax policies, such as investment tax credits, undergo evaluations that are available to the public.

Australia requires an impact analysis for all policy proposals expected to impact people, businesses or community organizations (Commonwealth of Australia, 2023). Its Guide to Policy Impact Analysis is structured around the seven questions listed in figure 5. Impact analyses provide a basis for ongoing evaluation since the objectives of the policy and metrics of success are clearly articulated.

For example, the Australian government published an impact analysis in 2024 for its proposed Critical Minerals Production Tax Incentive. It analyzed the policy problem the tax incentive is aimed at solving, the barriers the private sector faces, the sufficiency of current government measures, the need for additional government intervention and three alternative policy options. The document is publicly available and includes a cost-benefit analysis of each policy option. It suggests a preferred option. It also lists a series of success metrics that can be used to evaluate the impact of the tax incentive over time, such as the number of long-term agreements in place between producers and buyers of refined critical minerals (Commonwealth of Australia, 2024).

Performance indicators are critical to successful evaluation. Industrial policy programs often use indicators, such as the amount of private investment leveraged or the number of jobs created, but these metrics are often not sufficient to compare the performance of one industrial policy to another (ISED, 2024b). Industrial policies also tend to focus on the mandates and priorities of the department in which they are situated, rather than considering the impact of their program on other government objectives that might be affected by the program (NRCan, 2019). Program managers may also be tempted to only report metrics that make the program look successful. A standardized set of metrics across departments would make it easier to compare programs government-wide, showing both positive and negative outcomes. For example, decision-makers might want to compare the performance of the Strategic Innovation Fund to the use of investment tax credits, using metrics such as business capital expenditure investments, government administrative costs and the size and location of companies benefiting from the policies. Without consistent and comparable data, this would be challenging.

Monitoring

Evaluation should be done before, during and after implementation (table 3). Evaluations can draw on a wide range of instruments, including document reviews, interviews, surveys, case studies, focus groups, performance monitoring and structural econometric modelling (Nevison, forthcoming).

Each phase of evaluation has a different role. Impact analysis prior to the choice of policy tool can help clarify the rationale for the policy, its objectives and indicators of success.

Developmental evaluations take place while the measure is in operation. They support program adjustments. Program leads need to build the capacity for real-time monitoring to ensure there is enough information to make smart adjustments. Low data availability presents a continuing challenge. Emerging digital technologies and artificial intelligence could help. Their use could also help lower the costs and shorten the time frame for policy impact evaluations.

Evaluations undertaken every five years (or after a program is complete) can help determine whether the intended impacts are being achieved. These evaluations should be standardized to inform budgetary decisions and future policy proposals. A key criticism of existing industrial policy evaluations is the lack of consistency (Nevison, forthcoming). Ideally, they would be made public. This would help to ensure accountability and allow other levels of government and external researchers to access data and learn from the experience.

Governance

The institutions, processes and people involved in decision-making, oversight and implementation of industrial policy significantly influence the degree of success.

Institutions

There are many institutions at all levels of government involved in designing and implementing industrial policy in Canada. Some are government departments or ministries while others are arm’s-length Crown corporations.

Most arm’s-length Crown corporations report to Parliament through a government minister. For example, the federal Canada Infrastructure Bank reports through the minister of Housing and Infrastructure; the Canada Development Investment Corporation (CDEV) reports through the minister of Finance; and the Business Development Bank of Canada (BDC) reports through the minister of Industry.

Departments also manage programs that provide grants or contributions to businesses directly. For example, Innovation, Science and Economic Development manages the $18.5-billion Strategic Innovation Fund, while Natural Resources Canada manages sector-specific funds such as the $1.5-billion Clean Fuels Fund (ISED, 2024b; NRCan, 2025b).

The choice of which entity is best placed to lead on industrial policy will depend on the objective, the type of government intervention required, and the potential need for co-ordination with other jurisdictions. Arm’s-length entities may be nimbler, less risk-averse and more distanced from political influence. Government departments may be more closely focused on achieving public policy objectives. They may be better able to co-ordinate with other levels of government and respond to shifting strategic priorities (Holburn & Fremeth, 2019).

There is often a temptation to create a new entity when a new industrial policy challenge arises. It may be more effective and efficient to review and adjust the mandates of existing entities to align them with current strategic priorities. For example, when the Canada Development Investment Corporation was created in 1982, it played an active role in developing and maintaining Canadian-controlled corporations (CDEV, n.d.). Since then, its mandate has shifted. It now focuses on managing government-owned assets, such as the Trans Mountain Expansion Project (TMX), and on acting as the parent corporation for the Canada Growth Fund and Indigenous Loan Guarantee Program. This fits the changing needs of the Canadian government’s commercial interests (CDEV, 2025a; 2025b).

The Canada Infrastructure Bank has been criticized for focusing too heavily on projects that generate a return on investment instead of supporting projects critical to achieving public policy objectives (Canada, 2022). However, there are valid reasons for this approach. Subjecting investments to a market test means they have a greater chance of success. Moreover, generating returns can allow CIB to recycle capital into new projects, allowing it to achieve more social benefits with the same initial investments. For strategic projects that require additional public investment, the government could direct CIB to relax its requirements or lengthen the period of time required for generating a return.

Processes

A forthcoming IRPP paper by Anne White, a former federal public servant, argues for more horizontal and vertical strategic coherence within and across levels of government. To make progress on Canada’s strategic priorities, which are broad and interconnected, the various entities across Canada involved in industrial policy must be aligned so that they are rowing in the same direction and not duplicating efforts or working at cross-purposes. White also argues for increased partnerships with the governments of global allies (White, forthcoming). Improved coherence can be achieved by changes in governance or establishing new collaborative processes. For example, a more centralized co-ordinating body could be created. Saskatchewan developed the Crown Investments Corporation (CIC), a holding company, to oversee and advise utilities and other Crown corporations. It provides strategic alignment across the entities (CIC, 2025). Australia established Infrastructure Australia to identify and evaluate strategic infrastructure priorities across the country (Commonwealth Australia, n.d. b).

There are also examples of industrial strategies that are used to align and guide government activities. For example, several international governments have developed strategies that are used to align and mobilize several organizations. Examples include, the European Green Deal (2019), the NextGenerationEU fund (2020), the American Rescue Plan Act (2021), the Inflation Reduction Act (2022), the CHIPS and Science Act (2022), the European Industrial Strategy (2020, updated in 2021), and the EU’s Clean Industrial Deal (2025).

Effective private-sector engagement can often play a key role in success. Denmark established 14 public-private partnerships to co-develop transition plans to meet its goal of reducing greenhouse-gas emissions by 70 per cent by 2030 (Climate Partnerships, n.d.). The Italian government implemented the National Action Plan for Policy Coherence for Sustainable Development. It encourages stakeholder engagement through two bodies, the national Forum for Sustainable Development and the National Council for Development Co-operation (OECD, 2024b).

Many strategic priorities in Canada involve shared jurisdiction between the federal government, provinces, territories, municipalities and Indigenous governments. Co-ordination and collaboration could be made more systematic and integral to industrial policies. For example, the European Investment Bank (EIB) has the 27 member states as its shareholders (EIB, 2025). In Canada, different governance structures could be considered for Crown financial institutions to include a greater role for provincial and territorial governments. The federal government could create an independent body similar to Infrastructure Australia to evaluate major project proposals from provincial, territorial, municipal or Indigenous governments.

Collaborative processes at the national and international level relating to industrial policy could also be improved. At the national level, collaboration is particularly important for strategic investments that would benefit multiple jurisdictions, such as a new pipeline, an expanded port or a freight rail line. There is a forum for federal, provincial and territorial infrastructure ministers, but it might make sense to have another forum that included all the relevant players in major strategic projects that cut across jurisdictions. Private-sector engagement will also be needed. Additional processes could be established to effectively engage with relevant companies and sector associations.

Greater international collaboration can help achieve industrial policy objectives by leveraging the expertise and capacity of other jurisdictions and increasing the scale of investment beyond the level that Canada could provide. It can also be part of Canada’s efforts to strengthen ties with allies. Canada has existing partnerships with the United Kingdom on artificial intelligence and cybersecurity. The new Security and Defence Partnership with the EU is a very promising development (Prime Minister of Canada, 2025c). These types of collaborations can be built into governance structures to ensure effective collaboration at all levels.

Expertise

The skills and knowledge of the people who design and implement industrial policy are critical to its effectiveness and efficiency. A 2024 paper found that the ability of governments to implement large-scale industrial policies can be constrained by a lack of administrative capacity (Juhász & Lane, 2024). Another study, which looked at the history of export promotion programs in Korea, found that increasing the ability of program administrators by one standard deviation increased exports by 37 per cent. It also found that export promotion policy lost its effect when implemented by an ineffective individual (Barteska & Lee, 2023).

Governments may not have sufficient internal expertise in areas that require highly technical knowledge. They may be able to capitalize on their stakeholder networks or contract the expertise needed. In other cases, it may be better to rely on an arm’s-length entity with the technical expertise required. The Canada Development Investment Corporation tapped the Public Sector Pension Investment Board, the independent Crown corporation that manages the public service pension fund, to lead the management of its $15-billion Canada Growth Fund. PSP Investments had the financial expertise and the ability to implement a range of specialized tools, such as contracts for difference and offtake agreements (Canada Growth Fund, 2025).

When governments are developing the governance structure for industrial policies, they should consider the skills needed at different steps of the process. Government departments may be best placed to analyze the public policy challenge and the tools that can be used. They may not be the best choice to execute the day-to-day management of the program or evaluate specific private-sector proposals. This is especially true if specialized financial or technical knowledge, risk tolerance, agility and speed are required. Moreover, it is important that partners in industrial policy such as Indigenous communities and local governments have the capacity to participate in program development and administration. Many of our workshop participants noted that grant programs aren’t able to support communities that don’t have the administrative capacity to apply for funding, for instance.

Recommendations

Governments will undoubtedly use industrial policies as they seek to respond to a range of policy challenges. The stakes for getting it right are high. Canadians rely on governments to protect the country from external threats and to improve their living standards — or at least to maintain them in the face of serious economic challenges. Future generations should also not have to bear the financial burden of debt resulting from ill-conceived policies.

Our recommendations focus on the federal government, given its responsibilities for some of the most significant challenges Canada faces and its current commitment and capacity to quickly address them. However, much of this advice and guidance could apply to provincial and territorial governments as well.

Recommendation 1: Develop a strategy that identifies priority objectives, or “missions,” and a limited number of supporting strategic initiatives, projects, sectors and technologies to meet those objectives.

The key to successful industrial policy is for everyone involved to know what they are trying to achieve, and for that clarity of objective to be reinforced through decisions on governance and accountability as well as evaluation and metrics of success. This could be done by establishing a series of missions, similar to what the U.K. government has done. But not every strategic project, sector or technology needs to be part of a broader mission.

As a starting point, we suggest six priority objectives for industrial policies:

• Defending Canadian sovereignty;
• Diversifying Canada’s international trade;
• Creating a future-ready, sustainable economy;
• Advancing Indigenous Economic Reconciliation and self-determination;
• Promoting full economic participation;
• Accelerating innovation to address Canada’s housing crisis.

Within each of these, it will be important to drill down into the strategic projects, sectors and technologies that could help to achieve success, and to clearly define what success looks like and how it will be measured.

Recommendation 2: Analyze what is holding private investment back from the targeted areas and focus on eliminating those barriers.

The most efficient and effective industrial policies help to unlock and steer private investment. In some cases, it might be possible to unlock these investments with greater regulatory certainty or public infrastructure investment. In others, industrial policies will need to play a role to steer and catalyze private investment to attain the desired public policy objective. The starting point needs to be a thorough analysis and understanding of the barriers holding back private investors. This may require drawing on technical knowledge of specific technologies or markets, or financial sector expertise that may be outside government. In cases where there is uncertainty around near-term market demand, it may be preferable to use industrial policies that allow for price discovery, such as reverse auctions where companies compete against each other for production subsidies.

Recommendation 3: Review existing industrial policies across all departments and Crown corporations to evaluate the effectiveness of programs and, where appropriate, reallocate funds toward the priority objectives/missions and the most successful programs.

At a time when public funds are constrained, it will be important to ensure scarce resources are targeted and used efficiently. A comprehensive government-wide review of existing industrial policy programs using standardized metrics would help to identify which programs are working effectively and which can be improved and, where appropriate, reallocated toward priority objectives.

Recommendation 4: Select and design industrial policies to promote Indigenous Economic Reconciliation and full economic participation across Canada.

Industrial policies often measure success by using performance metrics focused on recipient firms, such as outputs, profits or employment. As this report has shown, many of the policy objectives where industrial policy can be a helpful tool are not solely related to firm performance or economic outcomes. Governments should intentionally design industrial policies to achieve a wider range of policy objectives wherever possible, including:

• Indigenous Economic Reconciliation: empowering Indigenous Peoples and communities to attain economic self-determination.
• Achieving full economic participation: ensuring that people are not left behind because of racial, gender or socio-economic barriers, and that people in all regions of the country have opportunities to thrive in the Canadian economy.

A sector strategy for critical minerals, for example, could incorporate approaches that favour projects with Indigenous equity participation, or provide more favourable lending terms for projects in communities with high levels of unemployment.

Recommendation 5: Establish a Centre of Excellence on industrial policy to support departments in effective and efficient design and implementation.

While industrial policy may once have been the purview solely of economic ministries, it is now a tool used by many different departments and agencies. It is not reasonable to expect that every organization will have the expertise needed to draw on lessons learned from across Canada and around the world, and to use best practices in the selection, design, implementation and evaluation of industrial policies.

A Centre of Excellence on industrial policy could be housed within a central agency such as the Privy Council Office or Treasury Board Secretariat, the Department of Finance, or at a line department such as Innovation, Science and Economic Development (ISED) Canada. It might also be possible to separate functions, with strategic co-ordination and evaluation functions held at central agencies while expertise on the design and implementation of industrial policies resides at ISED. The entity leading strategic co-ordination should be empowered to quickly identify roadblocks limiting the effectiveness of industrial policies, and to propose solutions that might include changes to policy, governance or the addition of complementary policies.

Recommendation 6: Leverage the capacity and expertise of skilled arm’s-length institutions such as Crown corporations.

Arm’s-length delivery can be more effective and efficient by drawing on financial or technical sector expertise, improving adaptability and agility, and reducing the potential for individual companies to receive special consideration from governments. Governments can still provide a clear mandate consistent with public policy priorities and guidance on the policy tools to be used, and hold arm’s-lengths institutions accountable for results. Responsibility for evaluation would also continue to rest with governments. Arm’s-length and Indigenous-led institutions and delivery systems also offer unique advantages to strengthen Indigenous economic self-determination by promoting alignment between program delivery and Indigenous priorities.

Conclusion

In this era of heightened uncertainty, when our alliances are less certain and our adversaries emboldened, we cannot afford to take our security for granted. That includes our economic security.

We entered this era with worsening problems, ranging from a deepening housing crisis to dealing with the realities of climate change and unfulfilled obligations to Indigenous Peoples. Addressing these issues while adapting to the new geopolitical realities is a daunting task.

We will need to adjust public policy on many fronts. It is hard to see a path forward for the Canadian economy that does not include governments making big investments to address important challenges and capture new opportunities.

Use of more effective and focused industrial policy will be an essential component of Canada’s strategy to confront these multiple existential challenges. Reorienting supply chains and diversifying trade is not feasible without more infrastructure, better innovation and a more competitive set of value-adding export industries. Companies making big bets on new trading partners and trade patterns will likely want some assurances from governments.

We need to ensure that existing industrial policies in Canada are being done well, so that we are not wasting scarce public resources or eroding public trust.

After undertaking this multi-year research program, we are persuaded that industrial policy is a useful tool in the economic policy toolkit. We can improve on past performance if we learn lessons from our history and from abroad.

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APPENDIX B

Workshop #1 — Crafting a Policy Framework for Canada’s Next Economic Transformation — June 15, 2023

Session #1: What economic challenges are you worried about that you think governments are not paying enough attention to?

Panellists:

• Glen Hodgson – Chief Economist, International Financial Consulting Ltd.
• Daniel Safayeni – Vice President for Policy, Ontario Chamber of Commerce
• Alison McDermott – Assistant Deputy Minister, Federal Provincial Relations and Social Policy Branch, Department of Finance, Canada

Session #2: Most people seem to agree that we should be aiming for more than GDP growth as a policy goal, but what are the right metrics?

Panelists:

• Chris Ragan – Director, Max Bell School of Public Policy, McGill
• Emna Braham – CEO, Institut du Québec

Lunch Panel: Indigenous Economic Participation as a Catalyst for Successful Economic Transformation

Moderator: Jennifer Ditchburn
Panellists:

• Jesse McCormick – Independant consultant, Jesse McCormick Legal and Consulting Services
• Dawn Madahbee Leach – Chair, National Indigenous Economic Development Board

Session #3: What could green, inclusive economic growth look like in Canada?

Panellists:

• Lise Birikundavyi – Co-founder and Managing Partner, BKR Capital
• Rob Annan – President and CEO, Genome Canada
• Marisa Beck – Research Director, Clean Growth, Canadian Climate Institute

Session #4: Where do governments have a role to play in shaping economic transformation?

Panellists:

• Réka Juhász – Assistant Professor, University of British Columbia
• Don Drummond – Stauffer-Dunning Fellow and Adjunct Professor,
• School of Policy Studies, Queen’s University

Session #5: What defines good or bad industrial policy? Is it about the policy tool, governance, design, decision-making framework or something else?

Panellists:

• Jim Stanford – Executive Director, Centre for Future Work
• Paul Rochon – Executive Advisor, Deloitte Canada

Workshop #2 —  Lessons Learned on Industrial Policy – February 6, 2024

Panel #1: Learning from experiences in other countries: where have there been successes and failures?

Moderator: Glen Hodgson – Chief Economist, International Financial Consulting Ltd.
Panellists:

• Kenneth Carlaw – University of British Columbia
• Guy Lalanne – Organisation for Economic Co-operation and Development
• Dana Peterson – Chief Economist, Economy, Strategy & Finance Center,
• The Conference Board

Panel #2: History of industrial policy in Canada: what evidence do we have of costs and benefits?

Moderator: Chris Ragan – Director, Max Bell School of Public Policy, McGill University
Panellists:

• Steven Schwendt – Innovation, Science, and Economic Development
• Peter Phillips – University of Saskatchewan
• Laurent Carbonneau – Council of Canadian Innovators

Panel #3: Current industrial policy in Canada: is a modern approach developing?

Moderator: Emna Braham – CEO, Institut du Québec
Panellists:

• David Wolfe – University of Toronto
• Alastair MacFadden – Prairies Economic Development Canada
• Rachel Doran – Clean Energy Canada

Panel #4: Indigenous economic inclusion: where should industrial policy be different or complemented with other policies?

Moderator: Jesse McCormick –Independant consultant, Jesse McCormick Legal and Consulting Services
Panellists:

• Joseph Kalt – Harvard Kennedy School
• Christopher Duschenes – CIRNAC
• André Le Dressay – Fiscal Realities

Workshop #3 — Industrial policy: opportunities, barriers and strategic considerations – May 28, 2024

Session #1: Barriers to tech adoption and investment

Moderator: Emna Braham – CEO, Institut du Québec
Panellists:

• Heather Campbell – Energy Professional, Independent Advisor
• Mike Holden – Business Council of Alberta
• Shannon Joseph – Energy for a Secure Future

Session #2: Growing (and keeping) the industries of the future

Moderator: Lise Birikundavyi – Co-founder and Managing Partner, BKR Capital
Panellists:

• Lenore Newman – University of the Fraser Valley
• Mike Brock – Square
• Andrea Johnson – Innovation, Science and Economic Development Canada

Keynote:

Moderator: Glen Hodgson – Momentus Global
Keynote Speaker: Andrew Leach – University of Alberta

Session #3: Building on successful Indigenous economic development initiatives

Moderator: Jesse McCormick – Independant consultant, Jesse McCormick Legal and Consulting Services
Panellists:

• Jason Paul Mika – University of Waikato
• Tamara Krawchenko – University of Victoria
• Douglas Sanderson – University of Toronto

Session #4: Creating resilient and diverse supply chains for an uncertain world

Moderator: Chris Ragan – Director, Max Bell School of Public Policy, McGill University
Panellists:

• Kent Fellows – University of Calgary
• Jane Bird – Bennett Jones
• Carlo Dade – Canada West Foundation

Workshop #4— Developing Policy Recommendations – October 28, 2024

Session #1: Developing a decision-making framework for industrial policy

Moderator: Chris Ragan – Director, Max Bell School of Public Policy, McGill University
Panellists:

• Steven Robbins – Canada Infrastructure Bank
• Dan Tisch – Ontario Chamber of Commerce
• Kyle Briggs – University of Ottawa

Session #2: Industrial policy for Indigenous communities

Moderator: Jesse McCormick – Independant consultant, Jesse McCormick Legal and Consulting Services

• Matthew Foss – Canadian Council for Indigenous Business
• Karen Bird – Indigenous Impact Investment Circle
• Stephen Scott – Canada Infrastructure Bank

Keynote:

Moderator: Steve Lafleur – Research Director, IRPP
Keynote Speaker: Carolyn Chisholm, Chair (Mining Association of Canada), General Manager, External Affairs (Rio Tinto Canada)

Session #3: Governing industrial policy

Moderator: Glen Hodgson – Chief Economist, International Financial Consulting Ltd.
Panellists:

• Peter Wallace – Boston Consulting Group
• Jorg Broschek – Wilfrid Laurier University
• Mark Schaan – Privy Council Office

Session #4: Evaluating industrial policy

Moderator: Emna Braham – CEO, Institut du Québec
Panelists:

• Noah Zon – Springboard Policy
• Catherine Beaudry – Polytechnique Montréal
• Derek Eaton – Transition Accelerator

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This is the final report of the IRPP’s multi-year project on industrial policy, which was guided by an expert steering group, composed of Lise Birikundavyi, Emna Braham, Glen Hodgson, Jesse McCormick, Christopher Ragan and Jim Stanford (Appendix A). Our goal was to gather research, analysis and expertise on industrial policy and use it to make informed recommendations to governments. We held four workshops over the course of 2023 and 2024 and heard from more than 100 experts from academia, government, non-profit organizations, the private sector, trade unions and Indigenous organizations (Appendix B). We want to thank everyone who contributed to our workshops as well as those who shared their expertise throughout the process. The workshop locations and themes were:

• Ottawa – Crafting a policy framework for Canada’s next economic transformation
• Montreal – Lessons learned on industrial policy
• Calgary – Industrial policy: Opportunities, barriers and strategic considerations
• Toronto – Developing policy recommendations

This report builds on a preliminary report published by the IRPP steering group in October 2024, Should Governments Steer Private Investment Decisions? Framing Canada’s Industrial Policy Choices (IRPP Steering Group, 2024).

We will also publish a series of complementary papers covering a subset of topics, including industrial policy evaluation and the use of industrial policy in advancing Indigenous Economic Reconciliation. The report will help to support an informed conversation at the IRPP’s conference on industrial policy on September 16, 2025.

This report was prepared by IRPP research director Steve Lafleur, with the guidance of the steering group members, research and insight from Doug Nevison and Anne White, and support from research associates Ji Yoon Han, Dena Abtahi, research director Ricardo Chejfec and vice president of research Rachel Samson. The manuscript was copy-edited by Madelaine Drohan, proofreading was by Zofia Laubitz, editorial co-ordination was by Étienne Tremblay, production was by Chantal Létourneau and art direction was by Anne Tremblay. French translation was provided by Patrick Déry.

The research initiative behind this report was supported in part by the University of Toronto; Innovation, Science and Economic Development Canada (ISED); Bennett Jones; and Power Corporation of Canada. The IRPP, as an independent think tank, retains control over the scope, methodology, conclusions and recommendations of its work.

To cite this document:

IRPP. (2025). Building for the Future: How Industrial Policy Can Strengthen Canada’s Economy and Sovereignty. Institute for Research on Public Policy.

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If you have questions about our publications, please contact irpp@nullirpp.org. If you would like to subscribe to our newsletter, IRPP News, please go to our website at irpp.org.

Cover: Raz Latif
ISSN 2817-8114 (Online)

IRPP Report Urges Smart Industrial Strategy to Tackle Canada’s Big Challenges

Montreal — With Canada facing economic uncertainty, global instability, a deepening housing crisis and threats to its sovereignty, it’s time to use innovative industrial policy tools to drive private sector investment in priority areas. A new report from the Institute for Research on Public Policy (IRPP), Building for the Future: How Industrial Policy can Strengthen Canada’s Economy and Sovereignty, shows how a smart industrial strategy can help Canadian governments address unprecedented challenges. 

“Industrial policy — where governments steer economic activity to address a public priority — can have a big impact when it’s used with discipline,” said Rachel Samson, the IRPP’s Vice President of Research. “Right now, our industrial policies are fragmented, which limits their ability to achieve results. But with an approach grounded in sound strategy, good governance and rigorous evaluation, governments can more effectively strengthen Canada’s economy and sovereignty — whether they’re enhancing defence capacity, diversifying supply chains or boosting housing construction.”

To make industrial policy work better, the IRPP recommends that the federal government:

• Develop an industrial strategy with clear priorities or missions and focus on a small set of high-impact interventions;
• Identify and address barriers to private investment;
• Review existing programs and reallocate funds to those that align with national priorities;
• Select and design policies to promote Indigenous Economic Reconciliation and full economic participation across Canada;
• Create a Centre of Excellence on industrial policy to guide effective and efficient policy design and implementation; and
• Leverage the capacity and expertise of arm’s-length institutions such as Crown corporations to deliver results.

The report suggests governments pursue industrial policy in key priority areas: defending Canadian sovereignty; diversifying trade; accelerating housing construction; preparing the economy for shifts from climate change, artificial intelligence and the energy transition; advancing Indigenous Economic Reconciliation; and promoting more inclusive and geographically distributed growth.

“A smart approach to industrial policy doesn’t mean taking unnecessary risks. We’re calling for careful planning, open communication with the public, and a laser focus on pressing challenges that the private sector cannot — or will not — solve without the right incentives and supporting policies in place,” said IRPP research director Steve Lafleur.

“Canadians are right to expect transparency and results. But we can’t let caution become inaction. If we focus our efforts, learn from past experience and work together, we have a real opportunity to seize on this unique moment in our history to begin building a stronger, more secure future.”

A six-member steering group has guided the IRPP’s industrial policy project over the past two years, which has gathered insights from more than 100 experts from academia, government, non-profits, business, trade unions and Indigenous organizations.

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MEDIA CONTACT

Tim Duboyce
514-604-9282 • tduboyce@nullirpp.org