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Institute on Governance

Look Ahead to 2026…Can we keep calm and carry on?

January 27, 2025


Happy New Year! Whether you rang in the New Year with gusto or zzz’s, we trust you are now looking ahead to all that 2026 may hold. This article shares reflections from the IOG team – Al Sutherland, Ryan Androssoff, Rhonda Moore, Catherine Waters, and Karl Salgo – on a few subjects we believe will shape public purpose governance in 2026:

  • A Reshaping of the International Order
  • One Canadian Economy
  • Quantum Computing, and Digital and AI in Government.  

Most commentators are expecting a bumpy year, whether economically, geopolitically, or in federal-provincial relations. 

A Reshaping of the International Order. The US’ decision to withdraw from 66 international agreements earlier in January signals a retreat from the new world order it worked hard to establish after the Second World War. In doing so, these actions raise big questions about diplomacy, international cooperation, and, what shape will the next world order take? What is Canada’s role in that next world order? If Prime Minister Carney’s speech at Davos is any indication, Canada “will be at the table, not on the menu”.  

In parallel, the US’s use of “economic force” through unfair application of tariffs on steel, aluminium, autos, and other sectors continues. Other sectors could be added on a whim, but the potentially bigger issue could be discussions around the Canada-US-Mexico Agreement (CUSMA).  A formal review process is expected to commence in July 2026, and Canada will need to buckle up and prepare itself for aggressive American posturing and threats throughout the run-up to these discussions.  It is disappointing to state this but American threats to walk-away from the agreement will be jarring and not unexpected.

Geopolitically, the release of the American National Security Strategy both reflects and confirms changing American foreign policy and the Administration’s world view.  The attack in Venezuela and subsequent threats to Greenland, Denmark’s sovereignty and beyond all suggest a challenging and tumultuous year ahead.

On the federal-provincial front, an election in Quebec is expected no later than October 2026.  Based on current polling and the disarray among provincial Liberals and the impending resignation of Premier Legault — the only leader that the Coalition Avenir Quebec has ever known — it appears the upcoming election is the Parti Quebecois’ to lose. The PQ has promised that, if elected, it will launch a referendum before the end of its first mandate. That may be one of two referendums on the schedule with processes underway to support a referendum in Alberta.

All of these factors threaten to blow the federal government off course from its seven missions.  Their ability to “stay on target” amid these disruptions and dislocations will go a long way to demonstrating their stewardship bona fides, which, in turn, will figure into Canadians’ calculations as to whether they are worthy of a reaffirmed mandate when the next federal election rolls around.

One such target is a move towards One Canadian Economy. In 2025, the prospect of losing access to US markets proved more motivating than 150+ years of internal trade negotiations and longstanding promises of economic growth. Under the threat of punitive tariffs from the US, Federal, Provincial, and Territorial (FPT) governments were spurred to action. The result:

  • a number of multilateral agreements (in addition to several bilateral ones), 
  • The Canadian Mutual Recognition Agreement, signed by all FPT governments in November 2025
  • The One Canadian Economy Act, passed in June 2025 and in force as of January 1, 2026, which included two others:
    • The Free Trade and Labour Mobility in Canada Act (FTLMCA), and 
    • The Building Canada Act.

The FTLMCA and its regulations are aimed at eliminating exceptions under the Canadian Free Trade Agreement. Under this framework, most goods and services that meet provincial or territorial requirements are deemed to meet comparable federal requirements. The new law also improves labour mobility by enabling federal regulatory bodies to recognize provincial and territorial licenses and certifications in a range of specified occupations.

The effect of the Building Canada Act is arguably somewhat less straightforward than that of the FTLMCA. It’s designed to enable fast-tracking of major infrastructure and resource projects that are deemed in the national interest by creating a single-window approval process for designated projects led by a new Major Projects Office. Key nation building projects (in addition to potentially receiving financial assistance), would be slated for a maximum two-year approval process rather than the more typical five-year cycle that has challenged many past initiatives. 

For instance, will the desire for speedy approvals to realize major projects threaten constitutional obligations? Central among these obligations is the duty to consult Indigenous rights-holders, a legal requirement that applies whenever the Crown contemplates decisions that may adversely affect Aboriginal or treaty rights. This duty is grounded in section 35 of the Constitution Act, 1982 and developed through Supreme Court of Canada jurisprudence. It requires consultation that is meaningful, timely, and proportionate to the potential impact on rights. Economic urgency or nation-building objectives do not diminish this obligation. Yet, the machinery of one-window approval is intriguing from a governance perspective and something we will revisit.

The result is a (still uneven) legal framework to support a more integrated economy. The framework will need to be operationalized effectively, both by governments (e.g., through regulations, procurement, and expedited approvals) and by the private sector taking advantage of the potential for new opportunities. If they do, 2026 could turn out to be as successful a year as 2025 for the century-old dream of one Canadian economy.

2025 saw advancements in the federal government’s position on digital governance, AI, and Quantum Computing. What progress can we expect to see in 2026? 

Budget 2025 announced $334.3 million over five years, starting in 2025-26, for a suite of measures (delivered via ISED, NRC, NSERC and DRDC) to help anchor quantum technology companies in Canada and provide pathways to technology adoption in defence-related applications and industries. Budget announcements were soon followed by the release of a Quantum Strategy that focuses heavily on investing in research and developing talent, it seems to pay less attention to diffusing the technology to other markets in new ways that would move the yardstick on Canada’s productivity. This theme is reinforced in the 2025 Council of Canadian Academies State of Science and Technology in Canada report, released in November.  

Digital and AI in Government

The use of AI in government featured prominently in the Liberal Party’s 2025 election platform and was reaffirmed by the appointment of the first ever Minister of Artificial Intelligence and Digital Innovation and commitments in the federal budget. We expect to soon see the launch of the government’s refreshed AI strategy, based on the Terms of Reference of the AI Strategy Task Force launched in autumn 2025. The strategy is anticipated to focus on how the private sector can scale Canadian contributions to AI research, commercialization, and infrastructure development. Those interested in the public service impacts of AI will be watching for how the AI Strategy for the Federal Public Service (also announced last year) will be implemented in practice, while the public service undergoes a significant restructure.  

The 2025 budget confirmed the creation of a new “Office of Digital Transformation which will proactively identify, implement, and scale technology solutions across the federal government”. In 2026 we look forward to learning where this new entity will be housed, its mandate, and the role it will play in an already complicated digital governance landscape in the federal government that includes Shared Services Canada (SSC), the Office of the Chief Information Officer at TBS (OCIO-TBS), and the Canadian Digital Service (CDS) housed at Service Canada.

In 2026 we also anticipate the release of the next UN E-Government report. Will Canada continue to slide in those rankings? Canada has consistently struggled to keep pace with the Digital Identity file – a core piece of Digital Public Infrastructure – that has evolved from a technical issue to a governance challenge, and now faces political headwinds, driven in part by online conspiracy theories. The lack of progress on digital identity was one of the contributing factors to Canada’s precipitous slide in the UN E-Government Development Index having dropped from 3rd in the world in 2010 to 47th in 2024. 

These investments – in quantum, AI, or broader Digital Public Infrastructure – could be a real game changer in a few ways: to create a sovereign compute capacity, to improve business efficiency, to establish how the Government of Canada will make effective use of AI, with integrity, and provide better services to Canadians. There are distinct areas of the economy that benefit from both types of investments, including but not limited to: cybersecurity, finance, and the many sectors that rely on increasingly complex logistics. Yet, over these investments hangs the cloud of Canada’s innovation problem. Will 2026 bring new approaches to technology and innovation policy and governance?