Key Takeaways:
Asset recycling is an infrastructure-financing strategy that allows governments to unlock capital from mature public assets through agreements with the private sector and reinvest the proceeds into new infrastructure.
It could be the catalyst Canada needs to meet its ambitious infrastructure plans.
It is distinct from privatization, offering many policy options — from rate-cap clauses to buy-back clauses — that protect public interest.
Squeezed by aging infrastructure and a strong growth imperative, asset recycling offers Canadian governments much-needed capital without increasing borrowing or taxation.
A modest asset recycling program could potentially generate $25-50 billion over five years. An even more ambitious program could potentially generate over $100 billion over five years.
Staring down a persistent productivity problem and the shifting sands of its geopolitical relationships, Canada needs to build. Many of Canada’s leaders seem clear-eyed on this, but modernizing our infrastructure and bringing these infrastructure projects to market will come with a sizeable price tag.
To avoid over-reliance on borrowing or increasing taxation, policymakers must consider another option to meet the moment: asset recycling.
Asset recycling is an infrastructure-financing strategy where governments monetize their mature public assets through agreements with the private sector and reinvest the proceeds into new infrastructure projects. While it uses some of the same tools, asset recycling is distinct from privatization. Asset recycling offers policy mechanisms like long-term leases or concession agreements that typically allow governments to retain ownership or partial control of assets while monetizing them in the short-term to fund priority infrastructure, whereas privatization involves an outright sale with no defined goal for the proceeds.
Crucially, asset recycling can give policymakers control over elements like operational responsibility and pricing rules to protect public interest. Beyond unlocking capital for new infrastructure, asset recycling generally aims to attract private capital and allocate risk more effectively toward higher-impact projects.
In Canada, existing commitments like the federal government’s $51 billion Build Communities Strong Fund are aimed at expanding foundational infrastructure needs including roads and sewer systems, which in many areas, also remains a key barrier to addressing the housing shortage. These existing commitments will compete for fiscal space with prospective landmark projects – anything from electricity-grid modernization to high-speed rail to the vast infrastructure required to access our immense critical mineral supply.
With such immense work ahead, now is the time for Canada to thoughtfully and deliberately consider new financing approaches like asset recycling.
Protecting public interest in asset recycling
If policymakers can get asset recycling right, then public interest can be advanced by attracting private capital into the nation’s infrastructure, renewing aging infrastructure, strengthening public finances and taking advantage of private sector efficiency to improve service quality.
However, the Canadian public — and key lobby groups — have historically been reluctant to do asset recycling, in part because of its conflation to privatization.
Too often, lopsided privatization agreements in the past have sold off public infrastructure too cheaply and ceded too much regulatory control.
Learning from past mistakes, policymakers can choose from a range of measures that enshrine public interest in asset recycling agreements:
Long-term leases, as opposed to outright sales, allow the government to retain ownership. Such agreements would weigh the benefits of an immediate payment with the revenue lost over the duration of the lease.
Minority equity stakes could help ensure government retains governance powers and continues to benefit financially from the asset.
Super-profit clauses could allow the government to share the windfall in cases where an asset was initially undervalued and ended up generating more revenue than expected.
Rate-cap clauses would set limits on how much operators could increase tolls and fees. For example, in an agreement giving operational control over a highway to a private sector partner, any toll price change could be linked to the Consumer Price Index to keep it in line with overall inflation.
Buy-back clauses in agreement contracts grant the government the right to repurchase the asset before or at the end of the contract, typically at a pre-defined or formula-based price. These clauses give the ability to step away from an agreement if it turns out poorly or if there were other strategic reasons to reacquire the asset.
For international context, Canada’s infrastructure stock is disproportionately owned by the government compared to many of our peers. Cross-country comparable infrastructure data is limited, but while governments hold about 70% of infrastructure assets in Canada, that share appears to be nearly flipped in countries like Australia, the UK and the U.S., based on capital investment activity1.
In Canada, the federal government has stated it is already considering alternative ownership model for federally owned airports. For private investors, airports are attractive investments due to their steady cash flow and long lifespans, but protections like rate-cap clauses may be necessary for protecting consumers.
The scale of capital from asset recycling
Estimates from Scotiabank Economics indicate a modest asset recycling program could potentially generate $25-50 billion over five years. An even more ambitious program could potentially generate over $100 billion over five years. Beyond these figures, there would also be reinvestment ripple effects such as long-term productivity gains and economic activity from construction.
To put these numbers in perspective, a report from the Parliamentary Budget Officer estimates that the Government of Canada will spend $159 billion2 on federal infrastructure between 2025-26 and 2029-30.
Notably, existing capital mobilizers like the Canada Infrastructure Bank – the Crown corporation mandated to invest in infrastructure that benefits Canadians – tend not to work with mature assets, instead focusing on early-stage projects. This leaves a potential gap that asset recycling could fill.
Another untapped source of capital is Canadian pension funds, who currently invest in global infrastructure but face limited opportunities domestically.
Asset recycling could open up Canadian projects to pension fund investment – primarily through special purpose vehicles, allowing pension funds to buy equity in an individual project. Such arrangements would require transparency and regulation to ensure the public’s interest is the priority but would also bring in more capital to help move the needle on Canadian infrastructure growth.
It is all the more relevant in today’s context where Canada is not only challenged to build out its infrastructure but also aims to unlock a trillion dollars in investment over the next five years in a broader array of priority areas including major projects of national interest. Many will be inherently riskier as new projects versus its mature infrastructure base often with established and stable income streams. Asset recycling would enable government investment to redeploy freed up capital into these areas where it is more difficult to crowd in private participation in initial phases.
Canada’s aging infrastructure stock
Nearly 40% of Canada’s roads and bridges and 30% of water and wastewater systems are rated in ‘fair’ to ‘very poor’ condition, according to a 2019 Canadian Infrastructure Report Card. Decades of underinvestment have resulted in worsening service quality.
Expecting governments to juggle reinvestment in mature assets while steadily delivering on ambitious new projects is a tall order, especially considering that 60% of Canada’s infrastructure is owned by municipalities despite them only receiving about 10% of every tax dollar.
According to polling, almost 90% of Canadians are pessimistic about the state of the nation’s infrastructure. If governments are going to restore faith in Canada’s ability to build, it may require looking beyond the traditional fiscal playbook to new financing approaches.
This article is adapted from a 2025 report by Rebekah Young, Scotiabank’s Vice President of Economic Policy: A New Lease on Life: Time for Team Canada to Play Offence With Public Infrastructure Assets
Footnotes
1 Comparable international infrastructure data is limited. Canada only began publishing its Infrastructure Economic Account in 2021. While the System of National Accounts (SNA) tracks non-financial assets globally, it lacks the detail needed for meaningful cross-country comparisons of infrastructure assets.
2 This estimate does not account for the revised NATO 5% spending target or the additional defence-related spending in the Supplementary Estimates (A), 2025-26.
