Canada’s Energy Landscape in 2025: A Nation at the Crossroads of Fossil Fuel Power and Clean Ambition

As of mid-2025, Canada stands at a pivotal crossroads in its energy story. The country is blessed with some of the world’s largest reserves of oil, natural gas, and hydropower, and it has long been a global exporter of energy. Yet it is now grappling with a complex reality: how to balance its carbon-intensive economic engine with a growing urgency to meet climate commitments, reconcile Indigenous sovereignty, and assert geopolitical leverage through cleaner energy exports.

From the long-awaited launch of LNG Canada’s first exports, to contentious debates over gas flaring caps in Alberta, to the federal government’s attempt to fast-track major infrastructure projects, Canada’s energy sector is anything but static.

This article outlines the major forces shaping Canadian energy in 2025, providing an in-depth look at the pressures, opportunities, and dilemmas facing the nation.

1. LNG Canada: Canada Enters the Global LNG Market

Perhaps the most symbolic milestone of 2025 has been LNG Canada’s inaugural shipment of liquefied natural gas from its terminal in Kitimat, British Columbia. After years of delays, regulatory hurdles, and heated political battles, Canada has finally entered the Pacific LNG export market.

The $40 billion project—backed by a consortium including Shell, Petronas, PetroChina, Mitsubishi, and Korea Gas—marks Canada’s first large-scale LNG export facility, with initial output of around 14 million tonnes per year expected once both trains are operational.

This is significant for several reasons:

• Diversification: Historically, Canada has relied almost entirely on the U.S. as its energy export market. LNG Canada allows the country to tap into growing demand in Asia, particularly from China, South Korea, and Japan.

• Geopolitical leverage: In a world reshaped by energy weaponization, LNG gives Canada a stronger geopolitical hand and potentially reduces global reliance on Russian gas.

• Environmental scrutiny: Critics point out that LNG Canada’s upstream methane emissions and the energy-intensive liquefaction process pose climate risks. Still, proponents argue it displaces higher-emission coal in Asia.

  
  

For now, the successful launch signals Canada's long-awaited arrival on the global LNG stage—albeit as a latecomer.

2. Alberta’s Oil Dominance and the Gas Flaring Controversy

Canada’s oil sands remain a cornerstone of the national economy, especially in Alberta, which continues to produce over 3.8 million barrels of oil per day. Despite ongoing efforts to reduce carbon intensity, the extraction process remains energy- and emissions-intensive, making the oil sands a focal point of environmental criticism.

In early 2025, controversy erupted when Alberta’s provincial government eliminated its natural gas flaring cap, citing “regulatory efficiency” and a need to attract investment. Data showed that Alberta exceeded its flaring ceiling in 2024 by a wide margin.

Environmental groups have condemned the move, arguing it undermines Canada’s climate commitments, while industry groups defended the decision as necessary to support production during high global demand and geopolitical volatility.

This development deepens the tension between provincial autonomy and federal climate targets, as Ottawa pushes for stronger emissions controls while provinces like Alberta prioritize economic growth and energy security.

3. A Federal Push for Fast-Tracked Energy Projects

In an effort to streamline Canada’s notoriously slow project approval process, the federal government—under Prime Minister Mark Carney—passed a landmark Resource Acceleration Act in early 2025. The law aims to cut red tape and expedite permitting for:

• Pipelines and LNG terminals

• Carbon capture and storage (CCS) projects

• Small modular nuclear reactors (SMRs)

• Clean hydrogen production and distribution

• Transmission lines for renewable integration

The bill also includes provisions for greater Indigenous consultation, although critics argue that it prioritizes investor timelines over deep engagement.

This act reflects Canada’s new positioning as a pro-growth, pro-climate state—trying to walk a fine line between speed and inclusion. Some environmentalists remain skeptical, but business groups and international investors have welcomed the clarity.

4. Clean Energy Momentum: Progress with Caveats

While fossil fuels remain dominant, Canada has made notable progress in clean energy. Hydropower still provides the majority of the country’s electricity, especially in provinces like Quebec and British Columbia. Wind and solar continue to expand, though intermittency remains a barrier in cold-weather regions.

Key trends in 2025:

• Battery manufacturing boom: Canada has emerged as a leader in North American EV battery supply chains, with new lithium-ion factories in Ontario and Quebec coming online this year.

• Hydrogen pilots: Alberta and Nova Scotia are both trialing green and blue hydrogen production at scale.

• Nuclear renaissance: Ontario and New Brunswick are doubling down on SMRs, seen as crucial for baseload power and grid decarbonization.

However, federal clean tech investment dropped by 17% in early 2025 amid budget tightening, causing concern in the cleantech sector about long-term policy certainty.

5. Indigenous Rights and Resource Development

Indigenous engagement remains a defining feature of Canadian energy politics. In 2025, Indigenous-led equity partnerships in energy projects have increased significantly. For example:

• Cedar LNG, an Indigenous-led LNG facility also located in British Columbia, is targeting a final investment decision later this year.

• First Nations across Western Canada are participating in pipeline ownership negotiations and benefit agreements.

Yet conflict persists, especially in areas where land claims remain unresolved or where traditional governance systems resist resource extraction. Some communities are embracing energy sovereignty through renewable microgrids and independent power projects, while others continue to oppose pipeline expansion on unceded territory.

The tension between resource wealth and sovereignty will remain a central theme for the foreseeable future.

6. Carbon Pricing and Climate Goals

Canada’s federal carbon pricing system continues to be a lightning rod of political debate. In 2025, the carbon tax is set at $85 per tonne, with plans to rise to $170 by 2030. While it is supported by most economists and many corporate leaders, some provincial governments—particularly in Alberta and Saskatchewan—continue to challenge the policy.

Despite robust climate targets (net-zero by 2050, 40–45% emissions reduction by 2030), Canada remains off track to meet its near-term emissions goals. The oil and gas sector alone accounts for roughly 28% of national emissions, and progress in other sectors (transport, buildings, agriculture) has been uneven.

Carbon capture and sequestration (CCS) is expected to play a major role in closing the gap, but commercial-scale deployment remains limited and costly.

7. Energy Exports and Global Positioning

Canada remains the fourth-largest oil exporter in the world, with almost all of its crude going to the United States. However, that dynamic is beginning to shift with:

• LNG exports to Asia starting in 2025

• Growing hydrogen diplomacy with Europe

• Increasing participation in the North American Battery Alliance

Canada is also working to position itself as a trusted supplier of critical minerals, including lithium, cobalt, and nickel—materials essential to the energy transition.

In a world searching for stability, Canada’s political stability, rule of law, and ESG standards are seen as competitive advantages.

8. Regional Fragmentation and Political Polarization

One of the greatest challenges to energy coherence in Canada is the regional fragmentation of policy and ideology:

• Alberta and Saskatchewan remain fossil fuel powerhouses with strong opposition to federal climate mandates.

• Quebec has largely decarbonized its electricity grid and opposes new pipelines crossing its territory.

• British Columbia is divided between LNG development and strong environmental activism.

• Atlantic provinces are investing heavily in offshore wind and hydrogen.

This patchwork of interests makes national coordination difficult and slows down unified progress toward net-zero.

9. Public Sentiment and Investor Confidence

Public opinion in Canada remains sharply divided. A recent national survey found:

• 55% support increased investment in renewables

• 37% support expansion of LNG and oil exports

• 58% believe Indigenous consent should be required for energy projects

Investor confidence, meanwhile, is cautiously optimistic. Despite global volatility, Canada’s energy projects are attracting capital, thanks in part to strong legal institutions and relative political stability.

However, concerns remain about regulatory uncertainty, lengthy permitting timelines, and inconsistent provincial-federal coordination.

Conclusion: An Energy Superpower in Transition

Canada’s energy sector in June 2025 is dynamic, conflicted, and critically important. It is both a fossil fuel powerhouse and a climate-conscious society—two identities that often collide. From LNG exports to clean tech innovation, carbon pricing to Indigenous reconciliation, the path forward is neither straight nor simple.

What’s clear is that Canada is no longer standing still. It is moving—sometimes haltingly—toward a new energy paradigm that seeks to align economic growth, geopolitical strength, and climate responsibility.

Whether it succeeds will depend not only on markets or minerals—but on political courage, Indigenous partnership, and the ability to bridge a deeply divided energy landscape.