Canada

We rate Canada’s policies and action as “Highly Insufficient” when compared to modelled domestic pathways. After recovering from the pandemic, Canada’s emissions are essentially flat until 2030, when they should be falling rapidly. If all countries were to follow Canada’s approach, warming could reach over 3°C and up to 4°C. As the graph above highlights, there is a very large ‘domestic action gap’ between where Canada’s emissions in 2030 will be under current policies and where they need to be to be 1.5°C compatible.

If Canada can successfully implement all of the measures it has planned, it would go a long way to closing this ambition gap and its rating would improve to “Almost sufficient”, meaning that if all countries were to adhere to this level of action, warming could be held below—but not well below—2°C. It would also help Canada improve its overall CAT rating by one level.

Canada has announced a number of new policies and continues to make progress on implementing prior announced measures; however, both its current policies and those planned fall short of its updated NDC target and are not 1.5°C compatible.

Emissions in 2030 are projected to be 688 MtCO₂e (excl. LULUCF contributions), a mere 7% below 2005 levels, based on the policies in place as of September 2020. This is a far cry from the 427-467 MtCO₂e level Canada needs to reach to meet its updated NDC target. We estimate that emissions fell by 11% in 2020 compared to 2019 due to the economic impact of the pandemic.

While the lasting impact of the pandemic, if any, on GHG emissions is uncertain, at this stage it appears to be minimal. Our current policy estimate is now back around the pre-COVID estimate in our September 2020 assessment, though some of the pandemic impact may be masked by the fact that transport emissions estimates for 2030 are now higher due, in part, to the rollbacks for passenger car and truck standards (see the transport section for below). In any event, it is clear that Canada must focus on implementing the policies needed to transition its economy to a net zero emissions future.

In December 2020, the federal government updated its climate strategy (A Healthy Environment and A Heathly Economy), building on its Pan-Canadian Framework released in 2016 (Environment and Climate Change Canada, 2020a). The 2021 federal budget, released in April 2021, contained further policy measures and funding announcements (Government of Canada, 2021c). While encouraging, these measures are still not yet sufficient to meet the country’s updated NDC target as they would only lead to an emissions level in 2030 of 492 MtCO₂e (excl. LULUCF contributions), 25 MtCO₂e short of the top end of the country’s NDC target and about 150 MtCO₂e short of a 1.5°C compatible level.

In June 2021, Canada passed the Canadian Net-Zero Emissions Accountability Act, which enshrines its 2050 net-zero GHG emissions into law (Government of Canada, 2021f).

On August 15, Prime Minister Trudeau, who has had a minority government for the last two years, called an election for September 20 (Coletta, 2021). The Conservative Party, the party most likely to win if there was a change in government, has said it would not honour updated NDC target submitted by Canada to the UN in July 2021, but would revert to the original NDC target of a 30% reduction below 2005 levels (Zimonjic, 2021). The party has also not explicitly committed to the 2050 net zero target in their platform (Conservative Party of Canada, 2021). The Conservatives would only honour the Trudeau government’s CAD 170 carbon price for industry in 2030 only under certain conditions and would limit the carbon price for consumers to CAD 50 per tonne. They propose creating a “rewards” programme where consumers earn the carbon price equivalent every time they buy fossil fuel and can then use this money for low carbon activities. Their EV sales targets are weaker than Trudeau’s, 30% by 2030, compared to Trudeau’s 100% by 2035, and not 1.5°C compatible. They would also support the expansion of LNG exports to displace coal in power generation. To be 1.5°C compatible, global natural gas demand for electricity without CCS would need to peak before 2030 and drop by more than 50% below 2010 levels by 2040.

Carbon pricing

Mandatory carbon pricing has been in effect across the country since 2019 (Government of Canada, 2018b). The legislation enacting the carbon pricing scheme, the Greenhouse Gas Pollution Pricing Act, was found to be constitutional by the country’s top court in March 2021 after three provinces challenged it (Supreme Court of Canada, 2021).

Under the scheme, all Canadian provinces and territories must have a cap and trade system or carbon tax in place. Those jurisdictions that do not have such systems or taxes will fall under the federal backstop. The federal system has two components: a regulatory charge on fossil fuels and an output-based pricing system (OBPS), which applies to major emitting industrial facilities.

The federal fuel charge applies in four of the country’s ten provinces and two out of its three territories, while the carbon pricing for large industrial emissions fully applies in three provinces, and partially in three more, to fill gaps in the provincial systems (Canada Revenue Agency, 2020; Government of Canada, 2021k). As noted above, the constitutional challenge from three provinces was unsuccessful; however, one province is challenging the backstop in court, arguing that its climate plan is better than the backstop (Petz, 2021).

The initial carbon price of CAD 20/tCO₂e was set in 2019 and will increase by CAD 10 every year after that until it reaches CAD 50/tCO₂e in 2022. In its revised climate plan, the government has proposed further increasing the carbon price by CAD 15 per year from 2023-2030. With these increases, the carbon price will be CAD 170 in 2030 (Environment and Climate Change Canada, 2020a).

Canada is developing a federal GHG Offset system that would cover activities not covered by carbon pricing (Government of Canada, 2021g). Initially, the system will focus on voluntary projects in agriculture, waste and forestry. Credits generated under the system can be used to reduce the compliance costs of industrial facilities covered by the OBPS. Draft regulations were published in March 2021, with the final versions expected later in the year (Government of Canada, 2021h).

Oil & Gas

At over a quarter of total emissions, oil and gas production represents Canada’s largest source of emissions (Environment and Climate Change Canada, 2021c). While the sector’s emissions dropped due to the pandemic, they are projected to be essentially flat in 2030 compared to pre-pandemic levels under current policies. It is only under planned policies that emissions start to fall.

Canada, along with Norway, Qatar, Saudi Arabia and the United States, established a ‘Net-Zero Producers Forum’ at the US Leaders’ Summit on Climate in April 2021 (Natural Resources Canada, 2021a; U.S. Department of Energy, 2021). The forum will develop ‘pragmatic net-zero emission strategies’, including reducing methane emissions and supporting the use of CCS. It is too early to tell what impact, if any, this forum will have on Canada’s oil and gas sector. In May 2021, the IEA released a report on how to get to net zero by 2050, finding that the world already has sufficient oil and gas supply and no new fields development is needed (IEA, 2021).

In April 2021, New York’s state pension fund announced that it was divesting from six Canadian oil sand companies (Reuters, 2021). These announcements continue the exodus of companies and investors from the sector (Morgan, 2020; The Canadian Press, 2020b). Last year, French energy giant Total announced that it would not approve any projects to increase the capacity of its oil sands assets, and that it considered two of those assets as ‘stranded’ and Deutsche Bank announced that it would no longer provide financing for oil sands projects (The Canadian Press, 2020b; Total, 2020).

Canada continues to expand its pipeline capacity, despite modelling by its own energy regulator showing the additional capacity exceeds available supply under even relatively unambitious climate policy (Canada Energy Regulator, 2020, 2021). The cancellation of the Keystone XL pipeline by US President Biden does not alter this picture (The White House, 2021). The Canadian government purchased the Trans Mountain pipeline in May 2018, in order to facilitate the transport of Alberta’s oil to a port in the Vancouver area and sales to Asia and the United States (Leyland, 2018). The government approved the expansion of the pipeline in June 2019, one day after it declared a national climate emergency (Government of Canada, 2019d, 2019b). In July 2020, Canada’s top court dismissed a challenge to the project by Indigenous groups (Supreme Court of Canada, 2020). Recent research suggests that the pipeline is costing the country billions due to higher construction costs and lower oil demand as climate action increases (Lindsay, 2021).

As part of its pandemic recovery measures, Canada announced CAD 1.72bn to clean up orphan and inactive oil and gas wells (Department of Finance Canada, 2020). Environmental groups have cautioned that this support should be in the form of loans to the industry, and not grants, otherwise it undermines the polluter pays principles (Severson-Baker, 2020). Regulatory changes are also needed to avoid the orphaning of wells in the future; however, there appears to be little progress in this regard (Corkal, Gass, & Cosbey, 2020; IISD, 2021; The Canadian Press, 2020c).

LNG Exports

Canada continues to expand its LNG production geared towards the export market (Natural Resources Canada, 2020a). Since 2011, the federal government has issued dozens of export licenses for periods of 20-40 years, risking a lock in of carbon intensive structures. Modelling suggests that Canada could begin exporting large quantities of LNG after 2025 and increasing through to 2040 (Canada Energy Regulator, 2020).

These expansion plans are controversial. In British Columbia, renewed protests by indigenous groups over the construction of a natural gas pipeline in their territory occurred in first quarter of 2020 (The Canadian Press, 2020a). Solidarity protests and blockages were held across the country, leading to significant disruption of rail services in the eastern part of the country. The rail blockages have been linked to a decision by Berkshire Hathaway to pull out of investing into another LNG facility in Quebec (Rastello, 2020).

In May 2021, the IEA released a report on how to get to net zero by 2050, finding that the world already has sufficient oil and gas supply and no new fields development is needed (IEA, 2021).

Electricity generation

Electricity generation is responsible for around 8% of Canada’s emissions. Its share of the country’s emissions has been falling since 2015 as Canada shifts away from coal (Environment and Climate Change Canada, 2021c). Canada adopted performance standards on natural gas-fired power plants in December 2018 (Government of Canada, 2018e). It is anticipated that many of the coal-fired power stations affected by the country’s 2030 phase-out, or that are expected to shut down before that date, will be replaced with new natural gas plants or coal-to-gas conversions (Government of Canada, 2018d).

The purpose of the natural gas regulations was to provide regulatory certainty around the emissions intensity of these plants and does not represent best available technology standards (Government of Canada, 2018e). The CAT cautioned as early as June 2017 that natural gas has a limited role to play as a bridging fuel in the power sector and runs the risk of overshooting the 1.5°C long-term temperature goal and creating stranded assets.

Methane emissions

Regulation of fugitive methane emissions from upstream oil and gas production came into effect on 1 January 2020, along with some other regulations in the sector (Government of Canada, 2018f). Additional regulations related to routine venting and pneumatic controller and pumps will come into effect in 2023. The regulations do not apply in three provinces (Alberta, British Columbia and Saskatchewan) as the federal government estimates that provincial regulations are as stringent or stronger than the federal ones (Government of Canada, 2020e, 2020c, 2020d).

These regulations were adopted in 2018 as part of Canada’s commitment to reduce methane emissions from the oil and gas sector by 40–45% from 2012 levels by 2025 (Environment and Climate Change Canada, 2018). It is estimated that these regulations will result in cumulative GHG emission reductions of 232 MtCO₂e between 2018 and 2035 (Powell, 2018). The government has not yet begun tracking its progress towards meeting this target (Environment and Climate Change Canada, 2020c).

In December 2020, the government committed to establishing new targets for reducing methane emissions from the sector for 2030 and 2035, as well as amending the current regulations in order to achieve those targets (Environment and Climate Change Canada, 2020a).

As part of the COVID-19 economic recovery package, the government announced a CAD 750m (USD 580m) Emissions Reduction Fund to support the oil and gas sector in reducing methane emissions in April 2020 (Natural Resources Canada, 2021d). In early 2021, the Fund started awarding funding to successful projects, and will complete the allocation by March 2022. 90% of the funding will support activities to reduce or eliminate methane emissions from routine venting in onshore facilities, with the rest for offshore activities. The extent to which onshore funding is repayable depends on whether methane emissions are lowered or eliminated and the cost per tonne of carbon; the offshore activity funding must be repaid in its entirety (Natural Resources Canada, 2020b, 2021c). By providing some funding on a non-repayable basis, the government has effectively lowered the cost of compliance with venting limits that come into effect in 2023.

The need for more ambitious action in this sector is compounded by the fact that emissions could be even higher than currently reported. Canada reports on emissions from the oil and gas sector using bottom-up methods based on internationally agreed standards (Environment and Climate Change Canada, 2021c). Research, based on measurements rather than estimates, suggests that emissions could be much higher (Chan et al., 2020; Liggio et al., 2019; MacKay et al., 2021). Canada plans to improve its upstream oil and gas methane emission estimate methods for its 2022 inventory (Environment and Climate Change Canada, 2021c).

Coal

Canada co-founded the Powering Past Coal Alliance, along with the UK in 2017, to help accelerate clean growth and climate protection through the rapid phase-out of traditional coal-fired electricity (Government of Canada, 2018a). Such developments are critical because to reach full decarbonisation globally no new coal plants should be built, and unabated coal-fired power generation should be phased out globally before 2040 and by 2030 in Canada and the rest of the OECD (Climate Action Tracker, 2020; Climate Analytics, 2019).

In June 2021, Canada clarified its policy position on thermal coal mining in the country, finding that any new mines or expansions of existing mines would likely cause unacceptable environmental effects (Government of Canada, 2021l). Canada had come under fire for its hypocritical stance on coal mining (Rabson, 2020). Traditionally, thermal coal (the type used in power generation) represented a small fraction of Canada’s coal exports (most of which are coking coal used in steel production). That changed in 2019 with the opening of the Vista Coal mine. In December 2019, the Minister of Environment and Climate Change declined to subject the mine expansion proposal to a federal impact assessment, but reversed his decision this past July (Impact Assessment Agency of Canada, 2021a).

In releasing the policy statement, the Minister made clear that the new policy will apply to any decision on the Vista Coal mine expansion, thus making it unlikely that that project will be approved (Environment and Climate Change Canada, 2021b; Minister of Environment and Climate Change Canada, 2021). If the project had been approved, the expansion would have begun in 2022 and increased annual production by 5 Mt of coal per year, primarily for export to Asia (Government of Alberta, 2020; Rabson, 2020). The impact assessment progress was suspended at the end of June 2021 at the request of the miner (Impact Assessment Agency of Canada, 2021b).

Canada has the regulatory system in place to ensure a phase out of unabated coal-fired power generation by 2030; however, a lot of this capacity will be replaced by natural gas (Government of Canada, 2018d). These regulations were weakened by an agreement struck between the province of Saskatchewan and the federal government in May 2019 (Government of Canada & Government of Saskatchewan, 2019). Under this agreement, two of the province’s coal-fired power stations, that would otherwise have been required to close by the end of 2019, will remain in operation until the end of 2021 and 2024 (Government of Canada, 2019c). Analysis by the federal government shows that while total GHG emissions over the 2018-2029 period are anticipated to be the same, emissions will be higher in the 2020-2024 period and lower between 2025-2029 (Government of Canada, 2019c).

While unabated coal-fired power plants will be phased out in 2030, some coal-fired power plants may remain in operation using carbon capture and storage (CCS) technology. Saskatchewan’s Boundary Dam CCS project was the world’s first and largest commercial-scale coal-fired CCS project. The project cost a total of CAD 1.5bn (USD 1.2bn), including CAD 240m (USD 187m) in government funding (MIT CC&ST, 2016). The facility has not met its annual goal of capturing 0.8 MtCO2 since 2016, nor its average daily capture rate (SaskPower, 2021; Schlissel, 2021; Taylor, 2019). The Saskatchewan government decided against retrofitting two of the site’s other units with CCS in 2018 for economic reasons, but continues to study the feasibility of retrofitting other plants with CCS (CBC News, 2018; Dyer, 2021). Globally, coal with CCS must be phased out of the electricity sector by 2050 in order to be compatible with the 1.5°C long-term temperature goal (Masson-Delmotte et al., 2018).

Electricity generation is currently responsible for just under a tenth of Canada’ emissions; however, it is projected to contribute the most to emission reductions by 2030 under current policies, due in large part to the phasing out of coal (Environment and Climate Change Canada, 2021a).

Transport is the second largest source of emissions in Canada, with the sector representing a quarter of the country’s emissions (Environment and Climate Change Canada, 2021c).

While emissions dropped by around 16% year on year in 2020 due to the pandemic and associated lockdowns, this effect on emissions is likely transitory. In fact, due to the rollbacks for passenger car and truck standards (details below) as well as updates to better reflect driving patterns and other methodology changes, the government’s projections for 2030 transport emissions have actually increased by 16% compared to last year’s figure (Environment and Climate Change Canada, 2021a).

Canada is taking steps to reduce transport emissions; however, these are far from adequate to address such a large source of the country’s emissions.

Electric Vehicles

In 2019, Canada adopted sales targets for zero-emissions passenger vehicles (ZEVs) of 10% by 2025, 30% by 2030 and 100% by 2040, which, if achieved, would be mean that 3% of the total passenger vehicle stock would be ZEVs in 2025, 10% in 2030 and around half of the stock in 2040 (Transport Canada, 2019, 2020). In June 2021, it strengthened these targets, moving forward the 100% sales target date from 2040 to 2035 (Transport Canada, 2021).

The CAT has not developed EV benchmarks for Canada; however, our US benchmark suggests that Canada’s targets are not 1.5°C compatible: 95-100% of all US passenger cars and trucks sold in 2030 should be ZEVs. Under this pathway, the US EV stock would be 30-40% in 2030 and 70-90% in 2040.

EV sales growth is encouraging, but needs to be a lot faster. EVs were 6% of all new car sales in 2020 (Statistics Canada, 2020). Year over year EV growth was essentially flat; however, this is against a 20% drop in car and truck sales overall in 2020.

The government began supporting the development of EV-related infrastructure and charging networks in 2016 and currently has two programmes that will run until 2024 (Natural Resources Canada, 2021b, 2021f). It provided CAD 150m in additional funding in a mini-budget in November 2020; however, this falls short of the CAD 2bn in increased funding for EV infrastructure recommended by the Task Force for a Resilient Recovery, an independent group of leading Canadian finance, policy and sustainability experts (Task Force for a Resilient Recovery, 2020). Moreover, some of this infrastructure funding has gone to towards natural gas refuelling stations (Natural Resources Canada, 2021b). The CAT has long cautioned on the dangers of investing in natural gas infrastructure.

Since 2019, the federal government has provided rebates for the purchase or lease of EVs and will continue to do so until March 2022 (Environment and Climate Change Canada, 2020a; Transport Canada, 2020). In 2020, it launched a programme to support awareness raising with respect to EV usage (Natural Resources Canada, 2020d). While funding appears to have been allocated, no further details of this initiative were available as of May 2021.

Vehicle emission standards

Canadian fuel economy standards for light and heavy-duty vehicles are aligned with federal-level regulations in the US (Government of Canada, 2018c, 2021j). As a result, Canada’s standards for light-duty vehicles (passenger cars and trucks) for model years in 2021 to 2025 have been weakened due to rollbacks made by the Trump Administration and its GHG standards for new trailers have been delayed for one year, until May 2021, in response to legal challenges to those standards in the US (Government of Canada, 2020b). The Biden administration is working on reversing these rollbacks.

In its December 2020 revised climate plan, Canada promised to align both the light and heavy-duty vehicle regulations for post-2025 models with the most stringent American standards, either at the federal or state level (Environment and Climate Change Canada, 2020a).

Fuel standards

Canada published draft Clean Fuel Regulations in December 2020, with final regulations expected in late 2021 (Government of Canada, 2020a). The proposed regulations would require producers and importers of liquid fuels to reduce the carbon intensity of their fuels from 2016 levels starting in late 2022, with deeper annual reductions through to 2030. The stringency of the regulations was weakened in the initial years, but strengthened in 2030, as a result of the impacts of the pandemic on the oil and gas sector. The start date for the regulations was also pushed back by six months from June to December 2022.

The regulations create a credit market for compliance, which allows those not subject to the regulations (like EV charging stations or low carbon fuel producers (e.g. biofuels)) to participate. The regulations aim to improve production process in the oil and gas sector, foster production of low carbon fuels and enable end-use fuel switching in transport. Remote communities, international shipping, international aviation and aviation gasoline used by smaller domestic aircraft are exempt from the regulation. Whether the standard will be applied to domestic commercial airline jet fuel is still under consideration. The renewable fuel content requirements, of 2% for diesel and 5% for gasoline, as set out in the Renewable Fuels Regulations, have been incorporated in these new regulations (Government of Canada, 2010).

These regulations were first proposed in 2016 as part of the Pan-Canadian Framework (Government of Canada, 2016a). Originally, standards were also supposed to be prepared for gaseous and solid fuels; however, these were delayed due to industry concerns over trade impacts and have since been shelved (Environment and Climate Change Canada, 2020a; Government of Canada, 2017). The liquid fuels only standard is anticipated to reduce emissions by up to 21Mt in 2030, down from the 30Mt annual reduction envisioned initially for all fuels.

A little over a tenth of Canada’s emissions are from the buildings sector (excluding electricity) (Environment and Climate Change Canada, 2021c). Under the Pan Canadian Framework, the Government proposed to reduce emissions in the built environment through four main activities (Government of Canada, 2016b). First, new buildings would be required to be more efficient through the adoption of ever-more stringent building codes, beginning in 2020 and culminating in 2030 with a ‘net-zero energy ready’ building code. Second, existing buildings would be retrofitted and fuel switching encouraged. The government would begin by requiring building energy use labelling and adopting a code for energy-efficient renovations by 2022. Third, new energy efficiency standards for heating and other appliances would be established. Fourth, support would be provided to establish standards and renovation programs in Indigenous communities.

The government has made some progress in the sector. In June 2019, the government updated its energy efficiency regulations for a number of residential and commercial products (water heaters, furnaces, etc) and is planning a further round of revisions (Government of Canada, 2019f, 2019e; Natural Resources Canada, 2020c). The June 2019 regulations largely align with existing standards in the USA. The government is delayed in its latest update of the National Energy Code and other building codes, with the new version expected by December 2021 (National Research Council Canada, 2020a, 2020b). The National Energy Code was last updated in 2017.

As 75% of the buildings stock that will exist in 2030 has already been built (Natural Resources Canada, 2017), accelerating energy-efficient renovations and retrofits is crucial to decarbonising the sector. While we have not undertaken this analysis for Canada, the CAT estimates the USA and the EU would need to renovate 3.5% of the existing buildings stock per year to be compatible with the 1.5°C temperature limit. Historic data on renovations is sparse, but indicators suggest that the rate is extremely low. Both the revised climate plan and the 2021 Federal budget include financing to support energy-efficient renovations and retrofits (Environment and Climate Change Canada, 2020a; Government of Canada, 2021c).

Agriculture is responsible for a tenth of the country’s emissions (Environment and Climate Change Canada, 2021c).

Canada has set a target of reducing emissions from fertilisers by 30% below 2020 levels, though has yet to set a deadline by which to meet the target (Environment and Climate Change Canada, 2020a). Its direct emissions from synthetic nitrogen fertiliser have increased substantially since 2005.

A federal GHG offset system is being developed for activities not covered by carbon pricing (Government of Canada, 2021g). Initially, the system will focus on voluntary projects in agriculture, waste and forestry. Draft regulations were published in March 2021, with the final versions expected later in the year (Government of Canada, 2021h).

In early 2019, Health Canada released a new version of the Canada Food Guide (Government of Canada, 2019a). It is the first time the guide has not included a meat category, instead choosing to focus on “protein foods” (Health Canada, 2019). It recommends choosing plant-based protein more often than other sources. Reducing emissions from agriculture, including through shifting consumer behaviour to a more plant-based diet, will be key to meeting the 1.5°C temperature goal.

As part of its COVID-19 economic recovery package, the government announced CAD 50 million to redistribute food as well as other measures to avoid food waste (Agriculture and Agri-Food Canada, 2020; Government of Canada, 2020f). Avoiding food waste also contributes to reducing emissions from the sector.

Canada has announced several billion dollars CAD to support nature-based solutions (Environment and Climate Change Canada, 2020a). Its flagship initiative is to plant two billion trees over the next ten years (Government of Canada, 2021a). Talk of the two billion commitment dates back to the 2019 election, but the programme itself was only launched in February 2021 for the the 2021 growing season (Liberal Party of Canada, 2019; Natural Resources Canada, 2021e). Overall, these activities are estimated to reduce emissions by 4 - 7 MtCO₂e annually by 2030 (Environment and Climate Change Canada, 2020a).

Voluntary projects in the forestry sector will also be covered by the federal GHG Offset system currently under development (Environment and Climate Change Canada, 2020b; Government of Canada, 2021g).

Up until the most recent GHG inventory, Canada has reported a net sink for its land sector (meaning that the sector removes more emissions than it releases) (Government of Canada, 2021b). In its latest inventory, Canada is now reporting that the sector has been a net source of emissions since 2015. The difference, on the order of around 20 MtCO₂e in recent years, is due to changes in how insect disturbances are modelled, revisions to forest harvest activity and other corrections and method updates (Environment and Climate Change Canada, 2021c).