B.C. Business Matters:
Denise Mullen >>
Canada's Greenhouse Gas Emissions Projections (2016)
Just released: an update on Canada’s greenhouse gas emissions. And how do we fare? Comme ci, comme ça, in relation to the Government of Canada’s reference case, which is a forecast of emissions based on unknown results from the implementation of current policies and measures in play as of November 1, 2016.
If no action had been taken in 2016, the estimates suggest Canada would have been 73 MtCO2 worse off in 2030. So, the current forecast compared to the one from 2015 shows a positive trend. But for those who believe in worst-case scenarios, the future modeled possibilities look grim. Models, however, are a priori rather than based on empirical evidence. While past patterns of energy use may prevail, we won’t know the future until it happens.
For a moment, let’s assume what is foretold in the 2016 reference case is perfectly aligned with the unknown future. In this possible unfolding, virtually all the growth in Canada’s GHG emissions is from the oil and gas sector. This is not an unexpected scenario, given our extensive endowment of oil and gas, our status as a leading global energy producer and exporter and the fact that Canada obtains the bulk of our electricity from carbon-free sources. There are also small increases in a few other sectors but a sizable decrease in emissions from electricity, primarily due to the phase out of coal-fired generation in Alberta.
On the other hand, Canada achieves an overall reduction in emissions, -5 MtCO2e in 2030 compared to 2005. For some, this represents failure, given Canada’s Paris Agreement commitment of 30% below 2005 levels. At the same time, Canada is further augmenting our status as one of only a handful of countries that generate most of their electricity from non-carbon sources. This is a reason for celebration, not derision. Finally, as Environment Canada notes, “greenhouse gas (GHG) emissions projections depend on [several] economic and energy variables and are subject to significant uncertainty, especially in the longer term.” At best, the model helps us understand past patterns of behaviour and, more importantly, suggests an ongoing conversation about pragmatic solutions.
We can choose to ignore the International Energy Agency and International Renewable Energy Agency, which both conclude that fossil fuels will be a key part of any future global energy supply, albeit declining in proportion over time; there are simply some activities for which there are no substitutes – petrochemical and aviation fuels, for example. We can also pretend that not developing Canada’s energy resources is good for the world, despite the absence of any evidence supporting this assertion.
A couple of immediate actions that Canada could take which would have a positive impact on the 2016 reference case:
- There is a place for research and development funding but immediate gains are only possible with the reinstatement of a modified Class 27 accelerated depreciation under the federal Income Tax Act. Technology-agnostic, this could provide a powerful tool for incentivizing investment in new technologies and processes across the full spectrum of industrial sectors in Canada. With feeble capital investment by Canadian businesses, enabling installation of new machinery and equipment and encouraging continuous improvement of the capital stock is critical. This would produce multiple benefits beyond lower GHG emissions.
- Replace the current thinking on clean fuels in the transportation sector. Canada could regulate using an energy sales portfolio standard. Suppliers (not manufacturers) would comply with a carbon/GJ measure on a sales portfolio averages basis, using a calculation that includes imports, domestic sales, and exports. Suppliers choose what is in their portfolio to meet the intensity target. There is only a need for one national standard for all energy sales, no differentiation by energy product or portfolio mix or province. Simple. Efficient. Effective.
 In 2030, the Reference Case GHG emissions in Canada are projected to reach 742 Mt, 73 Mt below last year’s forecast of 815 Mt presented in Canada’s Second Biennial Report.
 Equipment Failure: Feeble Business Investment Costs Canadians their Competitive Edge, William B.P. Robson, Aaron Jacobs and Benjamin Dachis, CD Howe Institute, March 24, 2017.