This Survey is published on the responsibility of the Economic and Development Review Committee of the OECD, which is charged with the examination of the economic situation of member countries.

Canada’s economy recovered from the COVID-19 pandemic, but inflation has since surged. Charting a path towards lower inflation without sharp disruption to economic activity and employment is challenging given the uncertainties and risks.

Canada’s economy recovered from the COVID-19 crisis, but new challenges have emerged ().The rate of unemployment declined rapidly in the aftermath of the pandemic and total output has been running above pre-crisis levels since late 2021. Consumer-price inflation, already rising, was further fuelled by the impact on energy and food prices of Russia’s invasion of Ukraine. This has dented household purchasing power and prompted policy measures to address the cost of living. The Bank of Canada has forcefully raised policy interest rates since March 2022 and is pursuing quantitative tightening.

Canada has an ambitious plan to reduce the economy’s net emissions to zero by 2050. This will require a step change in mitigation action, with deep energy savings and near economy-wide replacement of fossil fuels with clean energy. Achieving this while minimising negative impacts on activity and living standards will be challenging. Canada is already using a range of policy instruments to propel its green transition – including carbon pricing, regulations, investment incentives, and public procurement of green technology. This chapter explores reforms that could make climate policies work better together to lock in both deep emissions reductions and strong economic growth. As with important efforts to prepare communities for the impacts of climate change, Canada’s provinces and territories will play a key role in the country’s green transition.