The 2025 federal election returned the Liberals to power under Mark Carney, but only with a minority mandate. Against a backdrop of affordability concerns and renewed US trade friction, Carney promised that Canadians could “have their cake and eat it too,” pairing prosperity with credible climate action. Whether that promise holds will shape both the pace of domestic decarbonization and the evolution of Canada’s role in voluntary carbon markets (VCMs).
The Liberal Balancing Act
Previous Liberal governments were scrutinized for how they regulated Canada’s fossil fuel industry, despite energy remaining a central concern for many Canadians. However, that debate has taken a back seat since last year as affordability concerns became front and centre and the return of Donald Trump as US President only amplified that trend. Leading up to this election, the Liberals continued to emphasize the importance of addressing climate change, as they had done under Justin Trudeau, yet their messaging changed: Canadians can now have their cake and eat it too.
The balancing act the Liberals will seek is captured in their repeated promise to “make Canada a superpower in clean and conventional energy.” Carney set the tone for a more carrot-and-less-stick strategy by scrapping the consumer-facing carbon tax on his first day in office. After projections of a Liberal majority dominated the late-campaign narrative, the reality of a minority government raises questions about how this strategy will play out, especially for instruments such as expanding the investment tax credits (ITCs) mechanism for clean technologies and the proposed carbon border adjustment mechanism (CBAM).
A United Canada
Carney and Pierre Poilievre have both indicated they will prioritize building a single, harmonized economy by reducing red tape in inter-provincial trade. With the Liberals in power, this goal will lean less toward a pipeline-oriented Conservative approach and more toward the development and transmission of clean energy. Another outcome of this approach could involve aspects of regulatory consolidation across the various carbon pricing mechanisms in Canada. The harmonization of carbon offset project requirements, for example, may send demand signals that help Canada develop into a key supplier of carbon credits internationally.
Mark Carney’s leadership in international climate initiatives, such as the Glasgow Financial Alliance for Net Zero, reinforces the collaborative approach Canada will take on the global stage. The void left by the US retreat from climate-action leadership is one Carney openly intends to fill. As Canada and other Paris-Agreement parties work toward updated Nationally Determined Contributions, even Poilievre has highlighted an interest in using Article 6 carbon trading to meet targets cost-effectively. Using this approach, while adhering to a national framework that promotes high-integrity voluntary credits, positions Canada to influence global market standards.
Divided Approaches under a Minority Government
There is also the question of how the government may pursue seemingly opposing goals, such as expanding fossil-fuel capabilities and prioritizing climate change. Much of the Liberal strategy relies on investment in industrial technology, including carbon capture and sequestration, and on market-based mechanisms like a CBAM. Expanding ITCs for CCS projects has generally received Conservative support, but otherwise, there are drastic differences between the two parties.
The New Democrats and Bloc Québécois, on the other hand, provide the Liberals with opportunities to form coalitions that align with stronger climate ambition than the Conservatives would endorse. The Liberals, unlike the NDP and Bloc, have shown greater support for Canadian oil and gas, citing economic concerns and national security, which reduces reliance on imports. With the Liberal minority government seemingly taking an overall climate and energy stance between the two aisles, it will need to form coalitions with both sides as it pursues global leadership in conventional and clean energy.
As Canadians face unprecedented near-term geopolitical uncertainty, driven by the Trump Administration’s actions, the parties may be more likely to put their differences aside and focus on the shared interests of addressing economic and national security threats. In the near future, a Liberal energy focus on national security could take precedence, even if it means a softer regulatory stance on the oil and gas industry relative to the preferences of the NDP and Bloc. The pursuit of such legislation could compel future concessions to whichever party supplies the crucial votes.
Without a central issue to bind the parties together, the Liberal strategy that combines elements from opposing climate and energy platforms could see further dilution as concessions are made to pass legislation. If shared threats fade, the Liberals could see greater erosion of their agenda as agreements are struck with Conservatives, or with the Bloc and NDP, to move bills through Parliament. For the Liberal government’s double-sided energy approach to succeed, the party could make more concessions on other issues to minimize the dilution of its overall economic and climate strategy.
Implications for the Voluntary Carbon Market
Expanded ITCs lower financing barriers for CCS, hydrogen, and nature-based projects, each capable of producing high-integrity credits that meet emerging international standards. The carbon dioxide removal (CDR) industry in Canada could especially benefit, given the uncertainties suppliers face regarding policy support. A Canadian CBAM would raise the stakes for exporters to demonstrate low embedded emissions, again pointing to voluntary offsets as a strategic hedge. Combined with the evolution of domestic regulation in carbon credit-generating projects, these measures could heighten both domestic demand for, and the global credibility of Canadian credits in emerging mechanisms such as Article 6 and the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA)
Conclusion
Mark Carney’s minority government must balance affordability, energy security, and credible climate leadership—all under the constant pressure of parliamentary arithmetic. Success will depend on skilful coalition-building and a clear value proposition for households, industry, and international partners. For the VCM, the outlook is cautiously optimistic: if Ottawa can navigate minority politics, Canada stands to become both a premium supplier of high-integrity credits and a more consistent source of demand.