Transformative Capacity Credits: Rethinking Decarbonization in Canada

Community submission by Sadaf Taimur, Director of Strategic Partnerships at the Centre for Building Sustainable Value (BSV) at Ivey Business School

Canada’s climate progress is often measured in tonnes. Tonnes reduced! Tonnes priced! Tonnes traded!

These metrics matter, but climate stability is not built in spreadsheets alone; it is built in communities that know how to sustain low-carbon systems long after pilot funding ends. It lives in workers who repair, reuse, and extend the life of materials every day, forming the backbone of circular economies; in Indigenous Guardians who monitor lands and waters through relationships and governance systems cultivated over generations; in coastal communities adapting fisheries as ecosystems shift; and in local institutions that coordinate, govern, and learn under uncertainty.

Canada is already decarbonizing through community energy initiatives, reuse and repair economies, stewardship-based fisheries, and locally led climate adaptation, yet much of this progress remains invisible to carbon-credit-driven incentive systems that privilege what is easiest to quantify over what actually sustains low-carbon systems over time.

Climate stability is also built in workers who repair, reuse, and extend the life of materials every day.

The Missing Pillar in Canada’s Climate Strategy

As highlighted in contemporary sustainability leadership discourse, including the growing call to value transformative capacity (which is the ability to create systemic change by addressing the root causes of sustainability challenges) alongside technical solutions, climate action ultimately depends on people’s ability to maintain, coordinate, and care for systems through change, not just on emissions accounted for on balance sheets.

This is the missing piece in Canada’s climate strategy: we reward carbon transactions — for example, in Canada’s policy mix, industrial carbon pricing systems (market based policies) are the largest driver of emission reductions. Federal modelling estimates that carbon pricing could deliver approximately 62 Mt CO₂e of reductions by 2030. When expressed across the 2024–2030 period, this corresponds to an average signal of roughly 10 Mt CO₂e per year, reinforcing how strongly Canada’s climate action is oriented around what can be priced, traded, and modelled.

By contrast, emissions reductions associated with transformative capacity, such as repair, reuse, refurbishment, and remanufacturing remain marginal in climate change scenario modelling and integrated assessment models in general, despite evidence that these activities were already avoiding ~1.6 Mt CO₂e per year in Canada as early as 2019 (within circular value-retention processes (VRPs) estimated based analysis across only 10 sectors). The study further suggests that, with stronger policy support and capacity building, such processes could deliver additional annual emissions reductions by 2030 beyond this baseline.

Crucially, the report highlights skills development (what this article frames as transformative capacity) as a key enabler of this potential: these processes are labour- and knowledge-intensive and depend on trained workers, technical expertise, and institutional capabilities to scale. While the numerical outcomes are significant and visible, they largely capture the outputs of processes, not the development of the underlying capacities that make those outcomes durable and scalable over time.

This asymmetry reveals a structural bias in Canada’s climate strategy: we systematically reward carbon transactions, while overlooking the people, governance, and institutional capacities that sustain low-carbon systems. In practice, what we choose to measure shapes what we build, and what we neglect to measure constrains what we are able to transform.

Climate Transitions are Human Transitions

This invisibility problem is not accidental. It reflects a deeper misunderstanding of how sustainability transitions actually occur.

Research on transformative learning and education for sustainability demonstrates that durable change emerges not simply from deploying new technologies, but from people and institutions learning how to change together. The sustainability outcomes persist when individuals and organizations develop new competencies, shared meanings, and collective capacities to act in complex systems.

Decarbonization, in other words, is not a technical substitution. It is a social and institutional transformation. When climate policy rewards only end-state emissions metrics, it systematically undervalues learning, coordination, governance, and skills development: the very mechanisms that allow low-carbon systems to adapt and endure over time.

People are not a side variable in climate action. They are the infrastructure.

People, Inequality, and the Social Foundations of Climate Action

The insights from the Taskforce on Inequality and Social-related Financial Disclosures (TISFD) make a critical point that is often absent from climate policy debates: economic systems are fundamentally people-based systems.

Human capital drives roughly 60 percent of global wealth, underpinning productivity, consumption, innovation, and institutional trust. Businesses depend on healthy, skilled workers to function; on communities with purchasing power to sustain demand; and on trust-based relationships with workers, suppliers, and local communities to maintain their social license to operate.

At the same time, business and financial decisions actively shape inequality. Choices around wages, procurement practices, investment allocation, supply-chain governance, and engagement with public institutions can either reinforce extractive dynamics or strengthen social cohesion and long-term resilience.

Climate policy is therefore never socially neutral: how decarbonization is financed, incentivized, and measured determines who benefits, who bears risk, and whose contributions are rendered visible or invisible.

This lens is highly relevant to Canada’s climate architecture. Climate incentive systems that value carbon outcomes alone risk reproducing inequality, by privileging large, capital-intensive actors and marginalizing community-based, care-oriented, and labour-intensive climate work, such as repair and reuse economies, Indigenous stewardship, coastal adaptation, and local governance capacity. When people and institutions are treated as externalities, incentives can erode trust, concentrate benefits, and weaken the very social foundations required for sustained decarbonization.

Conversely, incentives that recognize transformative capacity help align climate action with workforce development, equity, and social stability. This approach directly complements the intent of Canada’s Bill C-226, which seeks to address environmental racism and advance environmental justice by recognizing how environmental harms and policy benefits are unevenly distributed across communities.

By foregrounding people, place, and institutional capacity, transformative-capacity-oriented climate incentives can operationalize Bill C-226’s principles, ensuring that climate action not only reduces emissions, but also strengthens social equity, community resilience, and democratic legitimacy over the long term.

A Way Forward: Linking Canada’s Green Skills Agenda to Transformative Capacity Credits

What if Canada expanded its climate incentive toolbox beyond carbon credits to include Transformative Capacity Credits?

Transformative Capacity Credits could recognize and reward the conditions that make emissions reductions possible, persistent, and scalable over time. They are not going to replace carbon pricing or credits system. They could complement it by valuing what carbon markets cannot easily see. Such credits could recognize competencies development, skills cultivation, coordination, governance, and care that enable systems to adapt under uncertainty. This represents a shift from rewarding isolated outcomes to rewarding systemic capability.

Canada is already moving in this direction, implicitly, through its Emissions Reduction Plan (ERP) and growing investments in green skills and workforce development. What is missing is a mechanism to connect these efforts directly to climate incentives.

Here, UNICEF’s framework for green (transferable and transformative) skills offers a powerful bridge. Transformative competencies, such as anticipatory thinking, systems thinking, normative thinking, strategic thinking, implementation competence and interpersonal competence, are precisely the capabilities required to sustain (create, maintain, adapt and govern) low-carbon systems over time.

Practically, Transformative Capacity Credits could look like:

(a) Rewarding certified training and learning pathways that build transformative skills;

(b) Recognizing institutions and employers that embed these green skills in reuse, repair, energy, food, and stewardship sectors;

(c) Incentivizing long-term workforce development tied to demonstrated system resilience, not just short-term emissions outcomes.

In this way, Canada’s existing green skills investments could be translated into climate-relevant value, without forcing skills into a carbon-equivalence logic that strips them of meaning.

A Place-Based Blueprint for Canada

Canada is uniquely positioned to lead this shift. Its diverse geographies, strong community institutions, growing recognition of Indigenous governance, and emerging just-transition commitments provide fertile ground for innovation.

By formally recognizing transformative capacity as a climate asset, Canada could build a decarbonization strategy that is not only efficient, but durable, equitable, and credible. Climate action is not only about lowering emissions today. It is about valuing the people, skills, and institutions that ensure those reductions endure tomorrow.

Transformative Capacity Credits would make visible what has always been essential, and in doing so, strengthen the social foundations of Canada’s low-carbon future.

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Sadaf Taimur is Director of Strategic Partnerships at the Centre for Building Sustainable Value (BSV) at Ivey Business School and a Sustainability Scientist with over a decade of experience across academia, industry, NGOs, and international organizations. Prior to Ivey, she served as Director of Sustainability & Circularity at Goodwill Industries, Ontario Great Lakes, advancing circular economy strategies, and as a Senior ESG Specialist at Mondetta. She has held postdoctoral roles at McGill University and the University of Tokyo (JSPS). Her work has consistently bridged research, practice, and policy, from advising B-Lab’s Standards Advisory Committee (US & Canada) and the Taskforce on Inequality & Social-related Financial Disclosures (TISFD), to serving as an expert reviewer for the UNEP GEO-7 report, and consulting on the intersection of AI and ESG investments at the University of Montreal. With a doctorate in Sustainability Science from the University of Tokyo, she specializes in enabling individual and organizational transformations for sustainable outcomes.