Canadian technology companies are navigating an evolving regulatory landscape, focusing on tackling climate change, fostering sustainability, and ensuring corporate accountability. Key areas include the implications of rising carbon taxes, which present operational risks, and opportunities provided by the incentives for adopting non-emitting renewable energy designed to increase investment in clean technology. Further, enhanced supply chain responsibilities emphasize the need for transparency and adherence to global labour and environmental standards. These regulations impact the operations of technology companies, compelling them to align their business strategies with sustainability objectives while retaining their competitiveness in a global market. Some of these regulations are discussed below.

Canadian disclosure and standards

The Canadian Sustainability Standards Board (CSSB) finalized and released two Canadian Sustainability Disclosure Standards (CSDS) based on IFRS S1 and S2 in December 2024. CSDS 1 General Requirements for Disclosure of Sustainability-related Financial Information and CSDS 2 Climate-related Disclosure are now in effect but remain voluntary until mandated by provincial and territorial regulators.

The government is also taking steps to require climate-related financial disclosures for large, federally incorporated private companies in order to funnel more private capital into Canada’s largest corporations and guarantee that Canadian companies can remain competitive as the world rushes towards net zero. These disclosures will ensure that capital allocation aligns with the realities of a net-zero economy by giving investors a greater understanding of how large enterprises are evaluating and managing climate change risks.

The federal government plans explicitly to propose changes to the Canada Business Corporations Act to mandate these disclosures. The government will initiate a regulatory process to ascertain the scope of these disclosure obligations and the size of private federal enterprises that they would impact. The government is looking at measures to encourage small and medium-sized firms to voluntarily provide climate disclosures if they choose so, as they will not be subject to the regulations.

These developments will impact technology companies in Canada that meet the size and incorporation criteria set by the regulations. Thus, technology companies of all sizes should start preparing for these anticipated changes in climate-related reporting requirements. Timely preparation will allow companies to assess their current reporting capabilities, identify potential gaps, and develop strategies to meet the upcoming disclosure standards.

Tax incentives and clean energy programs

The Canadian federal government has implemented tax incentives for businesses investing in clean energy initiatives, aiming to achieve net-zero emissions by 2050 and facilitate a green recovery from the COVID-19 pandemic.

In 2024, the Canadian government introduced four Clean Economy Investment Tax Credits: the Clean Technology Investment Tax Credit (ITC); the Carbon Capture, Utilization, and Storage (CCUS) ITC; the Clean Technology Manufacturing ITC; and the Clean Hydrogen ITC. With the Royal Assent of Bill C-59, the Fall Economic Statement Implementation Act, eligible businesses can apply for and claim the Clean Technology and CCUS ITCs. Similarly, Bill C-69, the Budget Implementation Act, 2024, No. 1, enables eligible businesses to apply for tax credits for clean technology manufacturing and clean hydrogen projects.

The Clean Technology ITC promotes investment in implementing and utilizing clean technology assets in Canada, including wind, hydro, and solar equipment, geothermal energy systems, air-source heat pumps, and non-road zero-emission vehicles. The clean technology credits are available for eligible properties acquired on or after March 28, 2023, and before 2035. The credit rates vary depending on the year of acquisition, ranging from 30 percent (for investments made between March 28, 2023 and 2033) to 15 percent (for investments made in 2034) of the capital cost of the property. This tax credit applies only to clean technology properties of taxable Canadian corporations, which must be located and operated exclusively in Canada. This approach, consistent with the ‘Made in Canada’ strategy, reflects the global trend prioritizing domestic production and labour, similar to the US Inflation Reduction Act. Thus, this ITC would function as a refundable incentive that offsets a portion of a corporation’s capital investment expenses, an opportunity that Canadian technology companies can take advantage of.

The CCUS ITC will support taxable Canadian corporations that incur eligible expenditures for qualified CCUS projects. The CCUS ITC is available to a broad range of CCUS applications and projects across different industrial sectors.

The Clean Technology Manufacturing ITC will support Canadian companies manufacturing or processing clean technologies and their precursors. It will support 30 percent of the cost of investments in new machinery and equipment used to manufacture or process key clean technologies and extract, process, or recycle essential critical minerals.

Net Zero Accelerator Initiative

The Canadian government introduced this initiative to support projects that aim to reduce Canada’s domestic greenhouse gas emissions. One of the pillars of this initiative, the “Clean Technology and Battery Ecosystem Development,” aims to support disruptive technologies that significantly reduce GHG emissions, prioritize investment in emerging clean technologies with market potential, and support the creation of a domestic battery ecosystem and supply chain in Canada. These focus areas create opportunities for technology companies working in clean energy, battery technology, and other emission-reducing technologies.

Carbon Pricing and the Greenhouse Gas Pollution Pricing Act

Enacted in June 2018, Canada’s Greenhouse Gas Pollution Pricing Act (GGPPA) aims to address climate change through two pricing mechanisms: a federal fuel charge and a performance-based system known as the Output-Based Pricing System (OBPS), which provides a financial incentive for industries to lessen their emissions and encourages innovation to combat “carbon leakage.”

The Government of Canada removed the federal fuel charge, commonly referred to as the consumer carbon tax, effective on April 1, 2025 through a federal regulation. The tax no longer applies to fuels like gasoline, natural gas, and diesel consumed by households and small businesses in provinces and territories under the federal backstop system. The OBPS, however, remains in effect in backstop jurisdictions and continues to apply to industrial facilities, with carbon pricing still projected to rise incrementally to $170 per tonne of greenhouse gas emissions by 2030.

As the OBPS continues to affect large-scale energy consumers, technology companies that operate large data centres risk rising operational costs due to their significant energy consumption. Therefore, they are advised to invest in non-emitting renewable energy to reduce emissions and lower tax burdens. For example, Google has announced plans to build a new data centre in Québec, which will be powered entirely by clean energy. It is also exploring opportunities to bring new clean energy projects to the grid in Québec. While Québec operates its own cap-and-trade system rather than the OBPS, this investment aligns with broader carbon pricing incentives to adopt low-carbon technologies. Furthermore, Google and Amazon have also started investing in the exploration of small nuclear reactors as carbon-free electricity alternatives to meet surging demand from data centres and AI.

The e-commerce company Shopify has been investing heavily in carbon capture projects, such as direct air capture and the spreading of crushed rock on farmland, to accelerate soil absorption. The company also set up the Shopify Sustainability Fund, which supports entrepreneurs in developing technology to combat climate change. Through these efforts, Shopify is offsetting its emissions and playing a crucial role in developing and scaling carbon removal technologies to have a broader impact on climate change mitigation. Additionally, it has partnered with Alphabet, Meta, Stripe, and McKinsey Sustainability to accelerate the development of permanent carbon removal technologies.

These companies’ actions serve as a model for other technology companies looking to mitigate the impact of carbon pricing on their operational costs while contributing to Canada’s climate goals, such as its 2030 emissions reduction target.

Competition Act

In 2024, the Competition Act was amended to address greenwashing. The amendments aim to combat deceptive marketing practices and ensure environmental-related claims are truthful, not misleading, substantiated, and based on proper testing. They enable private parties to challenge environmental or climate-related claims in advertising if they lack proper substantiation before the Competition Bureau. This development highlights the growing scrutiny around sustainability claims and reinforces the need for companies to ensure their climate-related disclosures are accurate and backed by evidence. For technology companies, it adds regulatory pressure to align public environmental statements with verifiable data.

The Canada Growth Fund (CGF)

CGF is crucial in facilitating private-sector investment in clean technology, offering significant opportunities for technology companies to reduce operational costs and transition to non-emitting renewable energy sources. It is a $15 billion arm’s length investment vehicle designed to attract private capital to build Canada’s clean economy.

Technology companies can leverage CGF’s support in several ways:

1. Access to Capital: CGF’s investments aid in filling funding gaps, especially for cleantech growth-stage businesses experiencing challenges raising capital.
2. Cost Reduction: CGF assists businesses in lowering their operating expenses related to energy use and emissions by promoting the adoption of clean technologies.
3. Technology Adoption: Technology companies can more readily adopt and incorporate clean energy solutions into their operations, owing to CGF’s emphasis on scaling up key technologies.
4. Innovation Support: The fund’s emphasis on retaining intellectual property in Canada encourages technology companies to innovate and develop new clean technologies.

CGF’s investments are accelerating the transition to non-emitting renewable energy sources by supporting projects using less mature technologies to reduce emissions across the Canadian economy, including carbon capture, hydrogen, and biofuels; scaling up companies and projects across low-carbon or climate tech value chains; and enabling the domestic production of clean energy and critical materials for a net-zero economy. Through strategic investments and risk absorption, CGF fosters a favourable environment for technology companies to invest in clean technology, reduce operational costs, and transition to non-emitting renewable energy, contributing to Canada’s climate goals and economic growth in the clean technology sector.