Prioritizing Canada’s investment in Arctic infrastructure
Bottom lines up front
- Canada’s new budget promises a “generational investment” in infrastructure, with significant funding earmarked for Arctic dual-use infrastructure.
- These funds advance multiple goals set by the new government: improving its military presence in the north, accessing untapped critical mineral reserves, and offering new economic opportunities to Arctic communities.
- Translating this funding into tangible projects and incorporating Canada’s climate goals into their development will be critical.
The Canadian government is making a “generational investment” in its infrastructure—including pipelines, ports, and roadways. Prime Minister Mark Carney’s first federal budget, unveiled in early November 2025, establishes Canada’s long-term prosperity as a driver for this investment and enables the new government to approach linked global challenges from a place of strength. Canada’s budget process differs from the US budget process, producing a more concrete plan with less room for deviation once the budget is set. The Canadian government budget outlines actual revenue and the government’s expenditure plans. Indeed, infrastructure investments combine two priorities in the current threat landscape: economic ambition and military necessity. To achieve the stated goals of doubling Canadian exports to non-US markets over the next decade and meeting the new defense spending pledge to which NATO allies committed at the Hague summit, Canada’s new budget begins a major effort to have infrastructure catch up to ambition.
Nowhere is this more apparent than in Canada’s Arctic, where infrastructure investment has sorely lagged. Canada’s vast and remote north is a challenging environment for building infrastructure. It is costly to build and to maintain, with prohibitively high initial costs and the “tyranny of distance” often deterring investment. Amid growing international interest in the Arctic, including pressure from the United States, Canada’s north can no longer be ignored, especially as Carney’s new nation-building agenda pushes for investment in infrastructure. Investing in Canada’s northern infrastructure addresses multiple necessities: It bolsters Canada’s military footprint in the Arctic; it contributes to NATO commitments on defense spending, particularly toward the goal of 1.5 percent of gross domestic product (GDP) spent on infrastructure; it strengthens the economic opportunities available to communities in the region; and it improves access to critical minerals.
The Canadian Arctic is facing a profound period of transformation. It is warming nearly four times faster than the rest of the globe, dramatically impacting attempts to build infrastructure in the region. Permafrost thaw, less sea ice, and rising sea levels are all challenges facing Canada’s north. Ultimately, this reality needs to be central to the development of infrastructure projects in the region. Canada seeks to become a “clean energy superpower” by supporting the development of low-emission energy projects such as nuclear reactors and low-carbon liquefied natural gas. The government is pushing for the development of carbon capture and storage technologies, as well as enhanced methane regulations. It is also affirming its commitment to the industrial carbon tax. The new federal budget’s approval by parliament was only possible with support from the Green Party. The environment must remain central to Carney’s plans for economic and infrastructure expansion in order to maintain support for his minority government.
One highlight of the new budget is the Arctic Infrastructure Fund. The government is proposing C$1 billion over four years for Transport Canada to invest in “major transportation projects in the north,” including “airports, seaports, all-season roads, and highways.” These infrastructure investments have both civilian and military uses. The Mackenzie Valley Highway is a prime example of the challenges facing major infrastructure projects in the region. The all-weather highway extension is designed to connect remote communities in the Northwest Territories. While this project’s origins date back to the 1960s, it is still several years from breaking ground. The Mackenzie Valley Highway alone is projected to cost C$1.65 billion, with the majority of the cost covered by the federal government. In this context, C$1 billion over four years—while an admirable start—is simply not enough to make a significant difference. To address infrastructure needs in Canada’s north, and to transform its portion of the Arctic so it is no longer the “soft underbelly” of the North American Arctic, this funding must be only the beginning of the Canadian government’s investments. As Carney’s large-scale projects continue to unfold, the Canadian Arctic will require more resources to meet civil and military infrastructure needs and effectively project power into the north.
In late 2025, the Atlantic Council’s Transatlantic Security Initiative hosted a workshop with government officials, academic experts, and participants from the public and private sectors of Canada, the United States, and Europe. The insights gathered from these conversations helped inform this issue brief, which assesses challenges, recommendations, and opportunities for Canada’s infrastructure in the Arctic.
Recommendations for the Department of National Defence and Canadian Armed Forces
Incorporate sustainability and climate security in Arctic infrastructure planning
Many of the Canadian government’s plans for infrastructure in the Arctic are dual use in nature, with the goal of increasing its military footprint in the region. Increased military or infrastructure presence in Canada’s north will invariably have environmental ramifications. Air- and sea-based military activities can generate excessive noise levels and air pollution, while military exercises can result in soil compaction and the destruction of vegetation. As Canada grows its infrastructure footprint in the north, it will need to include countermeasures to offset this damage—such as creating specific operational zones to protect ecosystems or paying to mitigate harm done to the environment.
Despite these challenges, Canada has extensive resources at its disposal, such as NATO’s new Climate Change and Security Centre of Excellence (CCASCOE), headquartered in Montreal. This center can coordinate best practices, act as a standard-setting body, and provide guidance for allies and partners to operate sustainably in the region. Drawing on lessons from the European Arctic and adapting them for the North American Arctic is one area in which this center of excellence can benefit dual-use infrastructure projects.
Another reason to ensure infrastructure in the Canadian Arctic meets environmental standards is to support Canada’s new Climate Competitiveness Strategy. By linking climate sustainability to economic growth, the Canadian government is building a competitive advantage at a time when other Group of Seven (G7) countries and the European Union are walking back pledges to meet green targets.
Include local communities’ expertise and experiences in infrastructure development
As investments in Canada’s Arctic infrastructure increase, environmental considerations are being taken into account—and the experiences and expertise of those living in Canada’s northernmost regions must also be integrated into planning. Indigenous and local communities are on the forefront of the challenges facing the region, from sinking roads and runways to access to healthcare. Calls to work with Indigenous and First Nation communities are integrated throughout the budget.
Starting in 2025–2026, the government is allocating C$40 million over two years to Indigenous Services Canada through the Strategic Partnerships Initiative “to support Indigenous capacity building and consultation on nation-building projects,” some of which will be in the Canadian Arctic. The Arctic Infrastructure Fund, with its C$1 billion over four years, is specifically tasked with advancing Indigenous economic reconciliation. The budget highlights that “dual-use infrastructure investments in the north will reliably meet both military and local needs, and the government recognizes that Inuit, First Nations, and other communities are best placed to identify community needs.” Spending on infrastructure in Canada’s north has military, economic, and local resilience factors. Ensuring local and Indigenous perspectives are integrated into all stages of infrastructure development—from the planning stages to design, groundbreaking, and finalization of projects—will be key to ensuring the investments successfully meet the needs of both the military and the local community. Investing in roadways, ports, and railways in the Arctic, in close alignment with the local community, will amplify whole-of-society resilience in ways not yet realized.
Recognize critical minerals’ potential as a driver of infrastructure development in the region.
The Canadian government’s decision to increase investment in infrastructure and its northern territories can be partially understood by the global race for rare earth materials heating up. At the G7 meeting in Alberta, the prime minister introduced the Critical Minerals Production Alliance—a Canadian-led initiative that leverages trusted international partnerships to enhance critical mineral supply chains for collective defense and advanced technology.
Canada is one of the top five producers of ten critical minerals, and minerals account for 5 percent of Canada’s nominal GDP. Its northern regions are home to significant deposits of iron ore, gold, diamonds, and rare earth elements. The Mary River Mine on Baffin Island is one of the world’s northernmost reserves of high-grade iron ore, producing millions of tons annually. Similarly, the Hope Bay and Meliadine gold mines contribute substantially to Canada’s mineral output. These resources are critical for economic development and for national security.
Another major priority identified in the new budget is the Port of Churchill Plus. A series of projects will upgrade the Port of Churchill—Canada’s only Arctic-region deepwater port for more than 106,000 miles of coastline—and expand trade corridors with an all-weather road, an upgraded rail line, a new energy corridor, and marine icebreaking capacity. The goal is for the Port of Churchill to become a major four-season and dual-use gateway for the region. Expanded export capacity in the north through Hudson Bay will contribute to increased and diversified trade with Europe and other partners, while more strongly linking Churchill to the rest of Canada.
While this push for access to critical minerals makes sense from an economic perspective, it has several notable roadblocks to overcome. First is the lack of processing and refinement capabilities in Canada, and in the West more broadly. China has exerted a global chokehold over rare earth materials globally, partly due to its technical expertise in the processing stage. Western companies have struggled to compete with China over environmental and regulatory concerns, which leads to the second point: Extraction of critical minerals has an environmental tradeoff. Canada’s economic expansionism and green ambitions will eventually collide—likely in the critical minerals space. In the ever-shifting global market for critical minerals, Canada cannot prioritize short-term economic gain over long-term environmental consequences.
As always, one of the core challenges facing infrastructure projects in Canada’s north lies in sustaining this momentum in the long term. The narrow passage of this budget by parliament demonstrates the challenges of minority government rule. Improving affordability for average Canadians was the main refrain of those who voted against the new budget—a challenge that will not go away in the short term. In the long term, Carney must break the chronic habit of previous governments promising on defense spending without following through. The budget also highlights upcoming sacrifices—C$60 billion in total spending cuts in the next five years—including a 10 percent cut to the public sector (amounting to roughly forty thousand jobs). Although the C$1 billion in funding through the Arctic Infrastructure Fund is a strong step forward, it will need considerably more funding to meet Canada’s ambitions in the region and must be supported by action.
About the author
Jason C. Moyer is a nonresident fellow with the Transatlantic Security Initiative at the Atlantic Council’s Scowcroft Center for Strategy and Security.
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The Transatlantic Security Initiative aims to reinforce the strong and resilient transatlantic relationship that is prepared to deter and defend, succeed in strategic competition, and harness emerging capabilities to address future threats and opportunities.
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