History:

Canada

Page last updated: 17th May 2017

Rating

Assessment

We continue to rate Canada’s Nationally Determined Contribution (NDC) “inadequate.” Under its current policies, Canada will miss both its 2020 pledge and its 2030 NDC targets by a wide margin. In December 2016, the “Pan-Canadian Framework on Clean Growth and Climate Change”—an overarching strategy document for emissions reductions—was formally announced. It contains economy wide measures, including the carbon pricing plan and the plan to phase-out traditional coal plants, which could change Canada’s adverse outlook for 2030. Our CAT assessment shows that if the planned Pan-Canadian Framework policies are implemented, Canada may achieve its 2030 NDC target (including LULUCF credits). Based on policies implemented as of 1^st November 2016, we estimate that Canada’s GHG emissions (excluding LULUCF) will increase 17–23% above 1990 levels by 2020. By 2030, emissions are projected to increase by 14–29% above 1990 levels.

On 5 October 2016, Canada ratified the Paris Agreement. Its NDC communicates its economy-wide target to reduce greenhouse gas (GHG) emissions by 30% below 2005 levels in 2030. After accounting for forestry, we estimate this is a reduction of 20% below 2005 levels and 3% below 1990 levels of GHG emissions, excluding LULUCF. However, Canada is unlikely to meet this target under its current policies.

Canada’s NDC confirms the inclusion of land use, land use change and forestry (LULUCF) accounting (based on a net-net approach)[1] in its 2030 GHG mitigation framework. The net-net accounting in the LULUCF sector is likely to provide credits of ~72 MtCO₂e and therefore increases the level of industrial GHG emissions allowed under the NDC from ~511 MtCO₂e to ~583 MtCO₂e in 2030. This increase from LULUCF credits equates to around 12% of 1990 GHG emissions (excl. LULUCF). With planned policies, emissions are expected to reach 521–590 MtCO2e in 2030 which would allow Canada to achieve its NDC target (including LULUCF credits). However, for a robust emissions reduction commitment it would be preferable if Canada implemented additional measures to abate emissions, instead of relying on LULUCF credits.

Canada is developing a methodology to calculate LULUCF emissions and removals due to human activity— excluding the impacts of natural disturbances in the managed forests. The proposed accounting options are fraught with difficulties, including substantial potential for double counting, asymmetric accounting (counting sinks and omitting sources), and other issues.

While Canada has withdrawn from the Kyoto Protocol, and is not a party to its second commitment period, Canada could apply the Kyoto Protocol rules and thereby alleviate a number of substantial concerns about their proposed LULUCF accounting options.

Footnotes

[1] Net/net accounting approach takes the difference between the total net GHG flow from LULUCF in a given year and that in a defined base year which is accounted for in the country’s GHG balance. (EC, 2009)

Pledges and targets

Paris Agreement target

Canada’s NDC states that it will pursue an economy-wide target to reduce GHG emissions to 30% below 2005 levels by 2030. Canada has indicated that it may also use international credits to meet its target. Considering the upward trajectory of the current policy projection against the trajectory required to meet the pledge, Canada would need to use a large quantity of international credits to meet its target.

Canada intends to use a “net-net” approach to account for LULUCF emissions, and a production approach to account for harvested wood products. Accounting for Harvested Wood Products (HWPs) must be performed in a consistent and compatible manner across countries so that accounting of imported and exported HWPs is complete and emissions are not excluded from inventories. It excludes emissions from natural disturbances (e.g. forest fires and insect outbreaks).

In its NDC, Canada does not quantify the impact of these accounting rules on emissions levels for compliance in 2030. According to our best estimate, based on available data, the net-net accounting approach for LULUCF emissions will generate 72 MtCO₂e of credits for Canada in 2030 (see assumptions for further details). Using LULUCF credits weakens the NDC, as these credits can be used to offset emissions increases in other sectors such as energy and industry. We estimate the level of emissions under the 2030 target at 583 MtCO₂e. This is different from the target of 524 MtCO₂e stated in the Second Biennial Report (BUR) because it takes into account LULUCF credits and uses different global warming potential factors (GWPs) (see Assumptions). Our calculations result in the NDC target for 2030 without LULUCF credits at 511 MtCO₂e. We estimate that the NDC target with LULUCF credits is a reduction of 20% below 2005 and 3% below 1990 levels of GHG emissions excluding LULUCF.

Canada is currently developing a methodology to calculate LULUCF emissions and removals due to human activity—excluding the impacts of natural disturbances in the managed forests (Government of Canada, 2016b). The accounting options that Canada proposes using are fraught with difficulties, including substantial potential for double counting, asymmetric accounting (counting sinks and omitting sources), and other issues. The Kyoto Protocol rules provide the only current rigorous framework for managing these risks, including taking account of factors such as salvage logging emissions, land-use changes following a natural disturbance, international coordination of HWP accounting etc. While Canada has withdrawn from the Protocol, and is not a party to its second commitment period, Canada could apply the Kyoto Protocol rules and thereby alleviate a number of substantial concerns about their proposed LULUCF accounting options.

2020 pledge and Kyoto target

Canada's Kyoto Protocol target for the first commitment period 2008–2012 was a reduction of 6% below 1990 levels. However, in December 2011, Canada withdrew from the Kyoto Protocol. In 2012, Canada subsequently reported an emissions increase of 18% above 1990 levels.

Canada's Copenhagen pledge, which aims to reduce emissions by 17% below 2005 levels by 2020 (11% above 1990 levels) (Government of Canada, 2010), weakens its previous Kyoto target. The Copenhagen commitment, based on 2005 levels, aligned Canada’s level of ambition to the United States, which also targets a 17% reduction in emissions from 2005 levels by 2020.

Canada’s Copenhagen pledge also excludes emissions from natural disturbances from the reference level and from the commitment period’s cumulative emissions, and supports accounting for removals from harvested wood products. More details and clarifications from Canada on LULUCF forecasts, and assumptions on how natural disturbances are treated, would improve transparency on both the 2020 and NDC pledges.

Long-term goal

In 2016, Canada proposed a mid-century, long term low greenhouse gas development strategy (Government of Canada, 2016a). This strategy sets a target of 80% reduction in net emissions below 2005 levels. The strategy documentation indicates that this target equates to a 65% reduction in emissions below 2005 levels excluding LULUCF (Government of Canada, 2016a).

Fair share

On the basis of effort-sharing approaches, Canada’s NDC is rated “inadequate.” The “inadequate” rating indicates that Canada’s commitment is not in line with interpretations of a “fair” approach in line with holding warming below 2°C, let alone with the Paris Agreement’s stronger 1.5°C limit. This means that if most other countries were to follow Canada’s approach, global warming would exceed 3–4°C. In order to be consistent with most effort-sharing approaches and rated “sufficient,” Canada needs to set a more ambitious 2030 goal of reducing industrial GHG emissions by at least 73% below 2005 levels (67% below 1990 levels).

We also rate Canada’s 2020 pledge as “inadequate.” A more ambitious pledge would be in line with multiple effort sharing approaches, including the capability and responsibility approaches, and could upgrade Canada into the “medium” category. We rate Canada’s long-term, 2050 target to reduce net emissions by 80% below 2005 levels (equivalent to 58% below 1990 levels) as “medium.” This pledge is in line with approaches that focus on capability. According to multiple effort sharing approaches, to reach a fair share of emissions reductions, Canada’s emissions would need to be negative by 2050.

Current policy projections

With policies implemented as of 1^st November 2016, Canada will reach GHG emissions excluding LULUCF of 703–737 MtCO₂e in 2020: an increase of 17–23% from 1990 levels. In 2030, emissions are projected to increase by 14–29% above 1990 levels to 681–772 MtCO₂e.

Canada’s emissions have shown an upward trend from 1990–2007, reaching their highest levels at 741 MtCO₂e in 2007. At the beginning of the financial crisis, emissions dropped significantly. In the period from 2010–2012, emissions remained fairly stable at around 700 MtCO₂e. However, with currently implemented policies, emissions could either decrease or follow an upward trend again depending on GDP growth and the development of oil and natural gas prices.

Canada has various policies in place to reduce emissions. Fuel economy standards for light and heavy duty vehicles are aligned with federal-level regulations in the US. Canada has also implemented a regulation requiring a renewable fuel content of 2% for diesel and 5% for gasoline. In October 2014, Canada issued a notice of intent to develop GHG emission reduction regulations for heavy duty vehicles post 2018. The regulations will be harmonised with US EPA Phase 2 GHG regulations[1] (TransportPolicy.net, 2017).

A performance standard for new coal-fired power plants came into force on July 1, 2015, limiting emissions intensity to 420 tCO₂/GWh. The standard also applies to plants that have reached their useful end of life. In general, this means ageing, ~50-year old units - the first of the currently operating power plants commissioned before 1975 - will reach the end of their useful life after 2020, and will therefore not be subject to the performance standard until then. Given this age profile, and the current poor investment environment for new coal power, the performance standard will not contribute to any significant emissions reduction against business as usual by 2020.

In November 2016, Canada announced it would amend its existing coal-fired electricity regulation and accelerate the phase out of traditional[2] coal-fired power plants by 2030 (Government of Canada, 2016e). Since the phase out may pose challenges for some provinces, the government has indicated that it is willing to negotiate the terms with the provinces still generating electricity using coal: Alberta, Saskatchewan, Nova Scotia and New Brunswick. Performance standards for natural gas electricity plants are also being developed to support the transition towards cleaner sources of electricity generation.

Despite this phase-out of traditional coal-fired power plants, other developments in Canada suggest that this does not imply a total phase out of all coal-fired power plants. Saskatchewan’s Boundary Dam CCS project is the world’s first and largest commercial-scale coal-fired CCS project. It has the nominal capacity to capture 90% of its GHG emissions, which amounts to around 1 MtCO₂eq/year (Government of Canada, 2016b). While some of the CO₂ will be stored directly, most of it will be used for enhanced oil recovery which means it will also not be emitted back into the atmosphere (Global CCS Institute, 2016). The CCS unit has captured almost 1.5 million tonnes of CO₂ between the start of its operation in October 2014 and March 2017 (Global CCS Institute, 2016). The project cost a total of C$ 1.5 billion, including 240 million government funding (MIT CC&ST, 2016). Canada budgeted C$ 1 billion in 2016 and made a commitment of C$ 2.37 billion in 2017 over four years for clean technology industry. The government also announced an additional C$ 21.9 billion over 11 years for green infrastructure (David Suzuki Foundation, 2017).

In October 2016, Canada announced its national mandatory carbon pricing plan, which requires all Canadian provinces and territories to either introduce a cap and trade system, or an explicit price-based system like a carbon tax or a carbon levy and performance-based emissions system by 2018 (Government of Canada, 2016d). For provinces with a carbon tax, the rate should meet the federal benchmark or floor price, which starts at C$ 10/tonne in 2018 and reaches C$ 50/tonne by 2022.

The range of carbon prices across existing initiatives globally is very broad; spanning from less than US$1/tCO2e to US$131/tCO₂e with about 75% of the covered emissions priced below US$10/tCO2e (World Bank, 2016). The 2018 Canadian price looks high in comparison and becomes increasingly ambitious towards 2022. For provinces and territories that do not adopt a carbon pricing initiative by 2018 or fail to meet the benchmark, the federal backstop system will apply, imposing an explicit price-based carbon pricing mechanism (Government of Canada, 2016d). The enabling act for a federal backstop system is under consultation (Government of Canada, 2017). This is a positive development that could result in emission reductions. However, more details are required to allow quantification of the actual impact.

Policies are also under development to drive further emissions reductions. These policies will target emissions reductions from natural gas-fired electricity, chemicals and nitrogen fertilisers, and methane emissions from the oil and gas sector (Government of Canada, 2015). In October 2016, Canada signed the Kigali Amendment to the Montreal Protocol and proposed new regulations to substantially reduce HFC emissions (Government of Canada, 2016d). This is a significant move, as HFC emissions in Canada have increased tenfold over the period from 1990–2012. In November 2016, the Canadian government also announced that it will develop clean fuel standards, in consultation with provincial and territorial governments, to reduce emissions from fuels used in transportation, buildings and industry (Government of Canada, 2016d).

In 2016 Canada published the Pan-Canadian Framework on Clean Growth and Climate Change[3] to effectively combat climate change and grow its economy away from fossil fuels (Government of Canada, 2016c). The carbon pricing plan holds central importance to this framework but it proposes complementary actions to further reduce emissions across the economy to allow Canada to meet its 2030 target. In addition, the Framework suggests measures to build climate resilience, accelerate innovation, support clean technology and create jobs (Government of Canada, 2016c). The Framework document also quantifies the impact of planned policies on emission reductions (policies announced as of 1^st November 2016 and the measures listed in the Pan-Canadian Framework). With announced policies as of 1^st November 2016, Canada is expected to reduce 12% emissions from its current policy pathway. These reductions include international carbon credits in addition to domestic reductions through regulations on HFCs, heavy duty vehicles, methane, etc. A further reduction of 13% is expected from the measures listed in the Framework for the electricity sector (this includes the accelerated phase-out of traditional coal fired plants discussed above), buildings, transport and industry. In addition to these planned policies, the Framework estimates that further emission reductions of 8% are needed to reach the 2030 NDC target.

If all the planned policies in the Framework were implemented, our CAT estimates suggest that Canada would reach GHG emissions excluding LULUCF of 521–590 MtCO₂e in 2030. These emissions are 2–13% lower than 1990 levels. Canada may already achieve its NDC target of 583 MtCO2e (which includes LULUCF credits) by 2030 without having to implement further additional policies. However, for a robust emissions reduction commitment it would be preferable if Canada implemented additional measures to abate emissions, instead of relying on LULUCF credits.

Footnotes

[1] At the time of writing, the EPA has not announced any changes to its heavy duty vehicle GHG regulations.

[2] Traditional coal-fired electricity does not use carbon capture and storage (CCS) to capture carbon dioxide and store it.

[3] The province of Saskatchewan has not adopted the Framework. This indicates that the provinces have enough flexibility to design their own plans to meet their emission reduction targets.

Assumptions

Pledge and historical emissions

Pledges were calculated from historical data obtained from the UNFCCC GHG inventory (CRF, 2016).

Based on the NDC text, we assume that the LULUCF sector will be treated separately from other sectors. The 2030 contribution is therefore calculated as a 30% reduction in GHG emissions excluding LULUCF, with subsequent addition of credits from the LULUCF sector. We estimate credits from the LULUCF sector according to net-net accounting of LULUCF emissions excluding natural disturbances. LULUCF emissions excluding natural disturbances in 2005 are according to CRF data with reported emissions from wildfires discounted (UNFCCC, 2016).

Projected LULUCF emissions for 2020 and 2030 are from Canada’s sixth national communication (Government of Canada, 2014). Uncertainty in LULUCF emissions is high, and further clarity on the 2005 emissions excluding natural disturbances would improve our estimates (currently, as proxy we deduct emissions from wildfires from total emissions for the land-use category reported under CRF for 2005). Further, our calculations currently omit production-based accounting of harvested wood products. Contributions from LULUCF sector for 2020 and 2030 are calculated by taking the difference of emission projections for these years from the 2005 baseline, which is obtained from CRF (2016). However, the national communication projection indicates an increasing sink from 2005 to 2030 in this sector and therefore accounting generates credits and allows higher GHG emissions excluding LULUCF.

Canada has applied global warming potentials (GWPs) from the IPCC Fourth Assessment Report (AR4) in its projections from 2014–2030 reported in its second biennial report. For consistency with the historical data, obtained from CRF (2016) with other elements of our analysis we calculated the target and the projections based on GWPs from the IPCC Second Assessment Report (SAR). The graph included in the NDC is also based on SAR GWPs. An analysis based on AR4 GWPs would not significantly change the emission trend shown or rating given.

Current policy projections

The current policy projections from 2014 to 2030 were obtained from the Pan-Canadian Framework on Clean Growth and Climate Change (Government of Canada, 2016c). The report presents projections considering future impacts of policy measures enacted as of 1^st November 2016 (Government of Canada, 2016c). It presents three scenarios (low emissions scenario, reference scenario and high emissions scenario) reflecting different assumptions about oil and gas prices and GDP growth rate. Due to uncertainty in GDP growth rate and oil and gas prices, the CAT shows the current policy pathway as a range based on the low and high emission scenarios. Canada has recently introduced its national carbon pricing plan, to be implemented by provinces and territories by 2018. It is not yet clear how much this plan would contribute to reducing national emissions. This policy is not quantified in our current policy projections, as more details of the plan would be needed for this purpose.

The impact of planned policies for 2030 is quantified by subtracting the expected percentage emission reductions achieved through planned policies (policies announced as of 1^st November 2016 and the measures listed in the Pan-Canadian Framework) from the current policy pathway. Since the impact of these planned policies is additional to the current policies, we take the current policy pathway range as a starting point.