Canada’s AI-energy crossroads: Ambition meets disagreement
As Canada races to cement its place in the artificial intelligence boom, the country faces a mounting contradiction between its digital ambitions and its climate commitments. The explosion of power-hungry AI data centres threatens to overwhelm an already strained electricity grid, forcing policymakers to choose between economic growth and environmental responsibility. With Ottawa doubling down on AI as the cornerstone of future prosperity — even as emissions targets slip further out of reach — the collision of the “AI revolution” and the “sustainable revolution” may determine whether Canada can truly deliver on both innovation and climate leadership.
Data power centres offer a $100 billion economic opportunity in construction and IT infrastructure, according to an RBC report. ‘But there’s an even greater prize for Canadian businesses: an AI ecosystem that helps them gain a competitive edge in areas as diverse as healthcare, autos, manufacturing and clean-tech,’ says the report. / ISTOCK PHOTO
Months before running for Liberal Party leader, Mark Carney declared the world was entering “two revolutions at the same time: the sustainable revolution, and the AI revolution.” But, in his first mandate letter as Prime Minister, AI was front and centre, described as “transformative” for government and the economy. Conversely, climate change was mentioned only once, tucked at the end.
That imbalance underscores Canada’s dilemma. Canada’s artificial intelligence boom is colliding head-on with the country’s climate ambitions, as the race to power massive new data centres threatens to drive up fossil fuel use and derail progress toward emissions targets.
Electricity grid already under strain
Speaking to journalists in Dartmouth, N.S., on Aug. 22, Environment and Climate Change Minister Julie Dabrusin voiced a sense of urgency. “Climate change isn't a problem for tomorrow — it's a reality that we're living today,” she said, highlighting that record-breaking damage caused by climate disasters has cost Canada more than $9 billion annually in recent years. Her job, she said, is to fight climate change while building “a strong, sustainable economy for future generations.”
Dabrusin pointed to Canada’s electricity grid as a unique advantage, noting it’s “one of the cleanest” in the world and that’s “driving people to look to our country as a place for investment.”
Her statements align with Ottawa’s push to market Canada as an “energy superpower,” and accelerate major infrastructure projects at a speed unmatched in decades.
But, her optimism masks a looming crunch: the country’s electricity grid is already under strain, and the rapid expansion of artificial intelligence is set to make the problem worse.
AI data centres require enormous amounts of power. In a 2024 report, RBC Climate Lab revealed that Canadian regulators were reviewing applications for new data centres with a combined capacity equal to 70% of Canadian homes. The Independent Electricity Systems Operator (IESO) told Means & Ways in a statement that it projects Ontario’s electricity demand will rise by as much as 75% by 2050 — driven by electric vehicles, new supply chains and data centres.
Data centres ‘need power now’
Shaz Merwat, RBC’s energy policy lead. / RBC PHOTO
AI centres “need power now,” according to Shaz Merwat, RBC’s energy policy lead, who co-wrote the report. The economic stakes are large: data power centres offer a $100 billion economic opportunity in construction and IT infrastructure.
“But there’s an even greater prize for Canadian businesses: an AI ecosystem that helps them gain a competitive edge in areas as diverse as healthcare, autos, manufacturing and clean-tech,” says the RBC report. “That could be in the form of AI revolutionizing biotech research, accurately detecting weather patterns, or improving navigation in autonomous vehicles.”
But clean energy projects can take decades to plan and build, especially at the scale needed for AI developers, who are, in contrast, seeking immediate power hookups.
“No one's waiting for 10 years for the power for their data centre,” said Andrew Leach, economist at the University of Alberta, in an interview with Means & Ways. Instead, companies are looking to generation sources that can be scaled up quickly. Leach pointed to natural gas as a reliable baseload, or solar power paired with batteries where conditions allow.
While natural gas delivers stable power needed for the demand of AI hyperscalers, it comes with a cost for the environment. Merwat’s RBC report estimated that if six gigawatts of the new datacentres were powered by gas, Canada’s annual emissions could rise by 16 million tonnes of CO2, about a 3% increase.
“That's not going to derail us,” Merwat told Means & Ways. “But at the same time, … we're ultimately trying to drop our emissions, not increase our emissions.”
But securing a clean energy grid is becoming a second-order priority for companies, according to Leach. Instead, they are focused on finding fast, reliable connections at the lowest cost. “It's maybe a little bit depressing, but that's probably the reality at this point,” he said.
Angela Adam, senior vice president, sales and marketing at eStruxture, one of Canada’s largest data centres, says the industry is thinking about these issues “day in and day out.”
“Innovation and growth of data centre platforms and growth of compute has to go hand-in-hand with caring for the environment. There is no other way,” she told CBC’s The House. “The needs for AI compute has grown exponentially and we need to work hand-in-hand and figure out how we become more sustainable.”
Adam said that eStruxture partners with vendors and equipment manufacturers that care about the environment and energy efficiency. She said sustainability has been a corporate value from day one — part of the decision to be headquartered in Quebec using hydropower.
“Another thing that we need to be very cognizant of when we talk about sustainability, yes, power is one thing, but what about water usage? Some facilities will use water. We've never done that. So water usage effectiveness has been a really huge important factor in designing our facilities. We don't use water to cool our workloads,” she told The House.
Doubling down
The federal government, meanwhile, is doubling down on AI as a pillar of Canada’s economic future. In August, AI Minister Evan Solomon and Government Transformation Minister Joël Lightbound signed a memorandum of understanding with Cohere Inc., a Toronto-based large language model developer, to explore deploying AI technologies across the federal public service.
“There’s no better place to leverage the innovative technology of artificial intelligence than here in our own backyard, and no better use than in the service of Canadians,” said Solomon. The agreement, he added, was laying the groundwork that would ensure Canada “remains competitive in this new digital era.”
Cohere CEO Aidan Gomez described AI as a technology that will “supercharge economic productivity, fortify national security and future-proof Canada’s competitiveness.”
Additionally, Solomon announced a new AI Strategy Task Force and a 30-day consultation “to define the next chapter of Canada's AI leadership.” But while the government seeks to showcase Canada as a global leader in AI, it has yet to reconcile the energy demands of that ambition with its climate promises.
“Technological advancements in artificial intelligence and cloud computing are impacting every business in every industry around the modern world and changing the trajectory of energy demand. ”
Canada’s climate lag
Currently, Canada has decreased its emissions by 8% since 2005, falling short from its goal of reducing its 2005 levels of emissions by 40 to 45% by 2030, and 45 to 50% below 2005 levels by 2035.
According to Simon Donner, a climate scientist and government climate advisor, reaching the 2030 target will take a “really heavy lift at this point.”
Canada’s emissions may only account for just 1.4 per cent of the global total, but with less than 0.5% of the world’s population, it remains a disproportionate emitter. Speaking on the CBC’s The House, Donner stressed that climate action is a collective problem. “We all need to contribute,” he said.
“This idea that gets thrown out there — that Canada maybe doesn't need to do anything about climate change because we're only one small country — we don't apply that logic to any other collective action problem in the world, and so it shouldn't really apply here, either.”
Back in Dartmouth, Dabrusin pointed to a broader trend in Canada of decoupling emissions from growth. “We have actually put ourselves on track where our emissions are bending down even as our economy grows,” she said, describing this as a sign that climate action and economic expansion can move in tandem.
‘I think it is important that the government consider the impact of all policies, including if our focus is really increasing the use of AI and the emissions associated with it,’ says Climate and Nature Solutions CEO Catherine McKenna, a former Liberal environment minister. / CLIMATE AND NATURE SOLUTIONS PHOTO
But former environment minister Catherine McKenna, founder and Chief Executive Officer of Climate and Nature Solutions pushed back on that narrative, pointing out that Canada’s decrease in emissions is being cancelled out by the oil and gas sector.
“Emissions from oil and gas are around 27% and increasing, and every other sector emissions have gone down,” she told Means & Ways. She noted that if oil and gas emissions don’t go down, not only will Canada not meet its target, but “all the hard work that's being done by other sectors … is all for nothing.”
She added Canada made a global commitment and everyone needs to do their part to ensure success on both the environment and economic fronts.
“I think it is important that the government consider the impact of all policies, including if our focus is really increasing the use of AI and the emissions associated with it.”
Demand will only grow
During a speech to the Halifax Chamber of Commerce, Canadian Association of Petroleum Producers president and CEO Lisa Baiton said there is a window of opportunity for Canada to position itself for economic prosperity.
“Technological advancements in artificial intelligence and cloud computing are impacting every business in every industry around the modern world and changing the trajectory of energy demand,” she said. “Canada can, and should, become the world’s next energy superpower.”
She pointed out that the oil and gas sector “invests more than any other in the country in environmental protection expenditures, accounting for about one third of all spending – or nearly $4 billion.”
The way Canadians use technology means the demand for AI computing will continue to grow, Adam said. “We need increasing power. That is a fact. Every time you snap a picture of your cat and you upload it, every time you ask ChatGPT a question and perhaps you say thank you after that, you're creating more and more data and that data needs to be powered somehow,” she said. “So no, the need for electricity is not going to go down. How we collaborate with the governments, with power producers, with regulators, it's a different story. We need to come together and figure out how we power this workload in the most sustainable manner possible.”
This story is part of a series on the impacts of AI on the Canadian economy.
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