With the weight of the U.S. trade war challenging key export industries, Prime Minister Mark Carney and his ministers have set up camp in Washington, D.C., hoping to convince President Trump to reduce tariffs on imported Canadian steel, aluminum, lumber and automobiles. 

At the same time, the federal government and many provinces are helping businesses seek out new opportunities in Europe and Asia, to lessen Canada’s trade dependence on the U.S., while teasing out the semblance of a domestically oriented industrial strategy. 

Often lost—or, more worryingly, buried—in the trade chaos is the ever-present burden of climate change. The need for Canada to chart a pathway to a greener future is still there, as Prime Minister Carney acknowledges when he says Canada should become an “energy superpower” in conventional and clean energy technologies, including nuclear and hydro power, hydrogen, battery storage, and carbon capture and storage.

Given calls from labour and industry for a more coordinated, economy-wide response from the government, Canada should not overlook the value of green steel and iron in national development and trade diversification plans. 

Late to the game

In their recent report, Strategic Decarbonization of the Canadian Iron and Steel Industry, Jonas Algers and Chris Bataille argue that Canada is well suited—given its resources, skilled workforce, geography and infrastructure—to become a leader in green steel and green iron for domestic use and export. Turning this potential into actual production is the hard part.

Despite dreams of clean energy leadership, Canada continues to facilitate the expansion of oil and gas, what the World Bank calls “dirty” goods. 

Canada is the world’s fifth largest energy exporter, mostly fossil fuels that contribute to climate change. Carney has promoted these industries as nation-building opportunities for growth. Media reports suggest the federal government has proposed to President Trump that the defunct Keystone XL oil pipeline be revived in exchange for U.S. tariff relief on steel and aluminum.

While Canada has no shortage of scientific achievements to help decarbonize the economy, the reality is that it has fallen behind in implementation—where new technologies are deployed, scaled, tested, and improved, leading to greater efficiency and lower costs, as Ezra Klein and Derek Thompson outline in their book, Abundance.

One indication of Canada’s laggard status is solar power, where global supply chains are dominated by China, thanks to its top-down model combining subsidies and protections with mandated targets to become a world leader. China manufactures 80 per cent of solar modules. Canada is the headquarters of one of the world’s largest solar companies, Canadian Solar, but almost all of its manufacturing is in China, Southeast Asia, and the United States.

A similar story exists in wind power, with China dominating 64 per cent of all value in global supply chains in 2023. This includes a dominant role in manufacturing turbine nacelles, gearboxes, generators, blades, power converters, towers, rare earth minerals, and steel. Canada stands out in blades, manufacturing 0.6 per cent of the global total

There is a lot of talk as well around critical minerals needed for the latest technologies, including electric vehicles (EV) and renewables. Even here China dominates, producing critical minerals far cheaper than most competitors, often in environmentally damaging ways, cornering key markets. China accounts for 95 per cent of battery-grade graphite and rare earths, 70 per cent of lithium, 65 per cent of nickel, and 75 per cent of cobalt. 

Greening trade through green innovation 

There is no simple road to clean energy “superpower” status, but the first step must be acknowledging how far Canada has fallen behind. From there, it will be possible to develop policies that strengthen Canada’s standing in key industries. This will include steel and iron.

As Algers and Bataille note in their report, these linked sectors account for 11 per cent of global CO2 emissions and two per cent of Canada’s total emissions. They also currently sustain 23,000 direct, generally well-paying jobs in Canada, and indirectly support 100,000 more. 

Iron ore, the key component in steel, is mostly mined in Quebec and Labrador. Most steel processing takes place in Ontario and Quebec, drawing primarily on iron ore imported from Minnesota. The iron sector is larger than steel, worth $5 billion in 2022, making it Canada’s fourth most valuable mined mineral. 

In 2023, Canada was the world’s third largest exporter of iron ore, producing 13.9 metric tons for domestic use and 55.1 metric tons for export largely to the European Union, China, Japan and South Korea. Canadian steel is generally cleaner than its peers, and 40 per cent is produced with scrap in low-emission electric arc furnaces (EAFs). The remaining 60 per cent, however, is produced with high-emitting blast furnaces, a major contributor to CO2 emissions. 

It is here that Algers and Bataille see a key node for intervention. Currently, iron ore is shipped, as pellets, to mills where it is combined with coke (from coal) and reduced to iron in blast furnaces, before being turned into steel. The pair argue instead that iron ore can be converted into hot briquetted iron (HBI) close to mining sites, using green hydrogen from renewable resources (hydro and new onshore wind) as a reducing agent. The result is “green iron.” 

This industrial transition is entirely feasible and the industry is already making important moves, if at an insufficient pace. Algoma and ArcelorMittal Dofasco mills in Ontario have begun transitioning to EAF steel, although it remains unclear what iron they will source and the extent to which they will draw on natural gas as a main energy source.

Algers and Bataille draw parallels between Canada and Sweden, which is emerging as a leader in green steel and iron. Despite similar conditions in both countries, “total emission reductions put forward by the three Swedish [steel] companies amount to over 50 million tonnes of CO2, while the Canadian companies have planned emission reductions totalling 6.2 million tonnes,” they write. 

Challenges and opportunities

There are challenges that need to be overcome for a just and “worker-centered” transition. Much of the current interest from corporate steel makers in EAF, after all, is based on the fact it is less labour intensive, allowing them to shed workers. 

Indigenous communities must be directly involved in the planning and equity of any expansion of mining or wind energy, based on free, prior and informed consent. Furthermore, while a shift to green iron and steel could increase employment in Quebec and Labrador, jobs could decline in Ontario (where the mills are) and Alberta and B.C. (where coal is mined). 

Algers and Bataille argue government and industry must adopt a “holistic approach” that shifts workers from declining industries into new ones, like hydrogen and wind turbine production. 

While not an easy challenge, it is something other countries, including China, the EU and South Korea, are pursuing, making the switch to green steel and iron in manufacturing and demand. 

“Canada’s natural resources and infrastructure offer significant advantages for green HBI production, enabling greater domestic value capture while helping trading partners to decarbonise their iron and steel industries,” Algers and Bataille write.

Canada can become a leader in this emerging green industry, or it could be left behind.