Canada

Critically Insufficient4°C+
World
NDCs with this rating fall well outside of a country’s “fair share” range and are not at all consistent with holding warming to below 2°C let alone with the Paris Agreement’s stronger 1.5°C limit. If all government NDCs were in this range, warming would exceed 4°C. For sectors, the rating indicates that the target is consistent with warming of greater than 4°C if all other sectors were to follow the same approach.
Highly insufficient< 4°C
World
NDCs with this rating fall outside of a country’s “fair share” range and are not at all consistent with holding warming to below 2°C let alone with the Paris Agreement’s stronger 1.5°C limit. If all government NDCs were in this range, warming would reach between 3°C and 4°C. For sectors, the rating indicates that the target is consistent with warming between 3°C and 4°C if all other sectors were to follow the same approach.
Insufficient< 3°C
World
NDCs with this rating are in the least stringent part of a country’s “fair share” range and not consistent with holding warming below 2°C let alone with the Paris Agreement’s stronger 1.5°C limit. If all government NDCs were in this range, warming would reach over 2°C and up to 3°C. For sectors, the rating indicates that the target is consistent with warming over 2°C and up to 3°C if all other sectors were to follow the same approach.
2°C Compatible< 2°C
World
NDCs with this rating are consistent with the 2009 Copenhagen 2°C goal and therefore fall within a country’s “fair share” range, but are not fully consistent with the Paris Agreement long term temperature goal. If all government NDCs were in this range, warming could be held below, but not well below, 2°C and still be too high to be consistent with the Paris Agreement 1.5°C limit. For sectors, the rating indicates that the target is consistent with holding warming below, but not well below, 2°C if all other sectors were to follow the same approach.
1.5°C Paris Agreement Compatible< 1.5°C
World
This rating indicates that a government’s NDCs in the most stringent part of its “fair share” range: it is consistent with the Paris Agreement’s 1.5°C limit. For sectors, the rating indicates that the target is consistent with the Paris Agreement’s 1.5°C limit.
Role model<< 1.5°C
World
This rating indicates that a government’s NDC is more ambitious than what is considered a “fair” contribution: it is more than consistent with the Paris Agreement’s 1.5°C limit. No “role model” rating has been developed for the sectors.

Economy-wide

Canada continues to implement its climate strategy, the Pan-Canadian Framework on Clean Growth and Climate Change, adopted in 2016; however it remains far from meeting its NDC (Government of Canada, 2016c). Prior to the pandemic, the government was set to miss its NDC by a wide margin. Emissions in 2030 were projected to be 679 MtCO2e, 153 Mt above the country’s NDC target of 526 MtCO2e (excl. LULUCF credits). While emissions in 2020 are projected to fall by 11 to 13% compared to 2019 due to the economic impact of the pandemic, Canada is still likely to miss its 2030 NDC by 15-20% as we estimate that emissions could be in the 603-630 MtCO2e range. Even the combined effect of its additional planned policies and the COVID-19 economic impact is not enough to meet its NDC; emissions would still be in the 540-565 MtCO2e range.

During the last federal election (October 2019), the Trudeau government made a number of promises to scale up action on climate change, including: to exceed the country’s 2030 target, adopt five-year carbon budgets, achieve net zero emissions by 2050, and to enshrine all of those targets in law (Liberal Party of Canada, 2019b). The need for climate action featured prominently in the government’s legislative agenda for the new Parliament issued in December 2019 (Governor General of Canada, 2019).

The Trudeau government lost its majority in the October 2019 federal election and will now need to work with other political parties in order to get legislation passed. The parties the government is most likely to work with often have stronger climate policies, therefore there is potential for scaling up climate action (Croome, 2019). The government will set out its legislative agenda in a Speech from the Throne on September 23, 2020 (Harris & Wherry, 2020). It is widely expected that the government will outline further recovery measures at that time. Previous CAT analysis showed that the extent to which the recovery measures support green climate action will have a much greater impact on lowering emissions in 2030 than the temporary drop in emissions due to the lockdown and associated economic impact.

Carbon pricing

Mandatory carbon pricing has been in effect across the country since 2019 (Government of Canada, 2018b). 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 carbon price for these industries was CAD 20/tCO2e in 2019 and will increase by CAD 10 every year after that until it reaches CAD 50/tCO2e in 2022 (Environment and Climate Change Canada, 2018b).

The federal backstop currently applies in half of the country’s provinces and two out of its three territories. The Greenhouse Gas Pollution Pricing Act, under which the backstop is enacted, is currently subject to a number of legal challenges in federal and provincial courts. The Alberta Court of Appeal found the Act to be unconstitutional, but two other provincial courts have ruled that the Act is constitutional. The Supreme Court of Canada, the top court in the country, was set to hear the case in March; however, it has been postponed until late September 2020 due to the pandemic (Supreme Court of Canada, 2020b). A fourth province (Manitoba) filed its own challenge to the Act in Federal Court in late April (The Canadian Press, 2019b). The case is currently scheduled for December 2020 (Federal Court of Canada, 2020). In September 2020, an Ontario provincial court struck down the Ontario Premier’s requirement that all gas stations put anti-carbon tax stickers on their gas pumps as unconstitutional (CBC News, 2020; Ontario Superior Court of Justice, 2020).

Canada is developing a federal GHG Offset system that would cover activities not covered by carbon pricing (Government of Canada, 2020g). Initially, the system will focus on voluntary projects in agriculture, waste and forestry (Environment and Climate Change Canada, 2020b). Credits generated under the system can be used to reduce the compliance costs of industrial facilities covered by the OBPS. Draft regulations will be published in the latter half of 2020.

The effect of the federal backstop is considered in our current policy projection. We have not quantified nor included the potential mitigation impact of the Federal Offset system in the planned policy projection.

COVID-19

Economic response

In March, the Government released its COVID-19 Economic Response Plan and has expanded it over time (Government of Canada, 2020c, 2020d). The $200+ billion Plan is largely focused on helping affected individuals and businesses address the immediate health and economic impacts of the pandemic. The elements of the Plan most relevant to the climate, include:

  • CAD 1.72 billion to clean up orphan and inactive oil and gas wells (Department of Finance Canada, 2020a). 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 (Corkal, Gass, & Cosbey, 2020; The Canadian Press, 2020d).
  • A CAD 750 million fund to support the oil and gas sector reduce methane and other emissions (Natural Resources Canada, 2020f). No further details of the plan had been released as of September 1. It is unclear what impact, if any, the fund will have on the compliance costs of methane regulations that came into effect for the sector in January.
  • Waiving lease payments of around CAD 330 million for 21 airports across the country from March to December (Department of Finance Canada, 2020b).
  • Accelerated disbursement of the annual CAD 2.2 billion in federal support for local infrastructure projects (Infrastructure Canada, 2020).
  • CAD 50 million to redistribute food as well as other measures to avoid food waste (Agriculture and Agri-Food Canada, 2020; Government of Canada, 2020j).
  • A requirement that large employers who receive support publish annual climate-related financial disclosure reports and contribute to achieving Canada’s NDC, 2050 net-zero target and commitments under the Paris Agreement (Canada Development Investment Corporation, 2020).

The government will set out its legislative agenda in a Speech from the Throne on September 23, 2020 (Harris & Wherry, 2020). It is widely expected that the government will outline further recovery measures at that time (Kirby, 2020).

A number of groups across Canada have called on the government to ensure that any economic recovery package helps to green the economy and protect the climate (Corkal et al., 2020; Task Force for a Resilient Recovery, 2020).

Civil society groups urged the government to attach ‘green strings’ or climate-friendly conditionalities to recovery measures, including that any financial support provided to industry must be conditional on their developing plans to transition to a net-zero emission economy by 2050 (Corkal et al., 2020). For emissions-intensive sectors, such as aviation, the automotive sector and oil and gas, support should be conditional on significant emission reductions or the necessary regulatory changes to achieve such reductions. Support for a just transition of workers from high-carbon sectors is also essential.

A group of 15 finance and sustainability leaders have urged that the government invest CAD 55 billion over the next five years to foster a green recovery (Task Force for a Resilient Recovery, 2020). Half of the money would go to investing in energy-efficient buildings, followed by growing the country’s clean energy sectors, producing and adopting zero-emission vehicles, supporting green jobs and investing in nature-based solutions. The group is noteworthy because it includes the Prime Minister’s former Principal Secretary and long-time friend (Kirby, 2020; Porter & Austen, 2019).

Previous CAT analysis has shown that the extent to which the recovery measures support green climate action has a much greater impact on lowering emissions in 2030 than the temporary drop in emissions due to the lockdown and associated economic impact. According to the Energy Policy Tracker, which tracks public finance for energy in the G20, both federal and provincial governments have committed over USD 12 billion to support fossil fuels compared to just over USD 2 billion for clean energy since the start of the pandemic (Energy Policy Tracker, 2020). The government has also been pressured by emissions-intensive sectors for bailouts (Corkal et al., 2020). The extent to which the government decides to focus on a green recovery this fall will go a long way to determining whether Canada can meet and exceed its ‘Insufficient’ NDC.

Regulatory impact

The pandemic has caused delays in regulatory development or monitoring efforts (McIntosh, 2020). The extent to which that has had an impact of GHG emissions is unclear.

  • Deadlines for the submission of annual verification and compliance reports, and any associated payments for excess emissions, under the carbon pricing scheme for large industrial emitters have been pushed back by four months (Government of Canada, 2020i). The government contends that this delay will not affect the functioning of the scheme in the long-term; however, it does note that other major international carbon pricing systems have not changed their compliance deadlines.
  • The detection and repair of fugitive emissions may be delayed as the government has recommended that facilities follow the advice of public health officials and document any instances of non-compliance (Environment and Climate Change Canada, 2020c). At least three inspections are required per year, the first of which was supposed to have taken place by 1 May 2020.
  • The pandemic has further delayed the release of draft regulations for the country’s Clean Fuel Standard; however, the anticipated entry into force of the first set of regulations in 2022 remains unchanged (Government of Canada, 2020e)

Delays have also occurred at the provincial level (McIntosh, 2020). For example, British Columbia has delayed the annual increase in its carbon tax until further notice, though it remains above the federal mandatory minimum (Government of British Columbia, 2020). The current level is CAD 40 per tCO2e and was supposed to increase to CAD 45 in 2020 and CAD 50 in 2021.

Energy supply

Oil

At over a quarter of total emissions, oil and gas production represents Canada’s largest source of emissions (Environment and Climate Change Canada, 2020a). Prior to the pandemic, emissions from this sector were projected to grow under current policies and would only have started to fall under the planned policies scenario. However, any scenario (and the associated emissions) is highly sensitive to oil prices.

The US EIA short-term energy outlook projects an 8% drop in oil and gas supply in Canada for 2020, but a 9% rebound in 2021 (U.S. Energy Information Administration, 2020). There are few analyses of production levels to the end of the decade; however, some analysts have projected only a small decrease in oil sand production levels by 2030 compared to pre-COVID-19 (Hwang & Birn, 2020). About half of this anticipated output by 2030 is from projects currently on hold or represents new developments. It remains to be seen if the economic conditions support such developments.

In July, 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’ (Total, 2020). This equates to a USD 7 billion write-down and is part of a longer-term trend of the company disengaging with the oil sands. Total also announced that it was withdrawing from an industry advocacy group, the Canadian Association of Petroleum Producers, due to divergent public positions. Deutsche Bank also announced in July that it would no longer provide financing for oil sands projects (The Canadian Press, 2020c). These announcements continue the exodus of companies and investors from the sector (Morgan, 2020; The Canadian Press, 2020c).

The government continues to attempt to have its cake and eat it too. Despite fierce opposition, 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, 2019f, 2019b). In July 2020, Canada’s top court dismissed a challenge to the project from Indigenous groups (Supreme Court of Canada, 2020a).

In June 2019, the government passed legislation banning oil tanker traffic off the country’s northern west coast (Government of Canada, 2019d). It also passed legislation on environmental impact assessments that have been opposed by the oil industry (Government of Canada, 2019c; The Canadian Press, 2019a).

The lack of concerted policy action in this sector are 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 (Government of Canada, 2020b). Some research, which took direct measurements of the sector, suggests that emissions could be up to 30% higher (Liggio et al., 2019).

Natural Gas

Electricity generation

Canada adopted performance standards on natural gas-fired power plants in December 2018 (Government of Canada, 2018f). It is anticipated that many of the coal-fired power stations affected by the 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, 2018e). 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, 2018f). 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 Paris Agreement long-term temperature goal and creating stranded assets.

Fugitive emissions

On 1 January 2020, a number of regulations regarding fugitive and venting methane emissions from upstream oil and gas production came into effect (Government of Canada, 2018g). The remaining provisions will come into effect in 2023. 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, 2018c). It is estimated that these regulations, which include general requirements for compressors and well completions involving fracking and conditional requirements for other technologies, will result in cumulative GHG emission reductions of 232 MtCO2e between 2018 and 2035 (Powell, 2018). The regulations do not apply in the province of British Columbia, as the federal government estimates that provincial regulations are more stringent and will lead to greater emission reductions (about 0.6 MtCO2e by 2030) (Government of Canada, 2020h). However, these reductions are due to more stringent regulations on new facilities and may not materialise if new facilities are put on hold due to low gas prices.

As part of the COVID-19 economic recovery package, the government announced a CAD 750 million Emissions Reduction Fund to support the oil and gas sector in reducing methane emissions in April (Natural Resources Canada, 2020f). Few details about the fund are available and it is unclear what impact, if any, the fund will have on the compliance costs of methane regulations that came into effect for the sector in January.

The pandemic has also impacted the ability to monitor compliance with these regulations. Under the regulations, facilities are required to establish a leak detection and repair programme to reduce fugitive emissions. At least three inspections are required per year, the first of which was supposed to take place by 1 May 2020; however, the pandemic may cause some delays in these inspections and correspondingly, a delay in the detection and repair of any leaks. The regulations allow for non-compliance if such inspections were to cause “a serious risk to human health or safety.” The government has recommended that facilities follow the advice of public health officials and document any instances of non-compliance (Environment and Climate Change Canada, 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 24 export licenses for periods of 20-40 years. Canada anticipates exporting large quantities of LNG beginning in 2024 and increasing through to 2040 (Canada Energy Regulator, 2019).

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).

The CAT has long cautioned that natural gas has a limited role to play as a bridging fuel in the power sector. To be compatible with the Paris Agreement, 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.

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 Analytics, 2019).

Canada had been under fire recently 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, 2020). If approved, the expansion will begin in 2022 and increase annual production by 5 Mt of coal per year, primarily for export to Asia (Government of Alberta, 2020; Rabson, 2020).

Canada does have 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, 2018e). In 2012, Canada adopted stringent performance standards for new coal-fired power plants coming online after 1 July 2015 as well as those that had reached the end of their useful life. Further regulatory action was taken in December 2018 to adopt standards for existing coal-fired power stations, effectively requiring the phasing out traditional coal-fired electricity in Canada by 2030 (Government of Canada, 2018e).

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, 2019e). 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, 2019e).

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 1.5 billion, including CAD 240 million in government funding (MIT CC&ST, 2016). The facility has not met its annual goal of capturing 0.8 MtCO2 since 2016 (SaskPower, 2020; Taylor, 2019). During the first seven months of 2020, it had only captured 0.397 MtCO2 (SaskPower, 2020). The Saskatchewan government decided against retrofitting two of the site’s other units with CCS in 2018 for economic reasons (CBC News, 2018). At the time, it reiterated its commitment to the technology and said it would study the feasibility of retrofitting another site with CCS. Globally, coal with CCS must be phased out of the electricity sector by 2050 in order to be compatible with the Paris Agreement’s 1.5°C long-term temperature goal (Masson-Delmotte et al., 2018).

Electricity generation is currently responsible for around one tenth of Canada’ emissions; however, prior to the pandemic, it was the sector that was projected to contribute the most to emission reductions by 2030, in part due to the phasing out of coal (Environment and Climate Change Canada, 2020a).

Transport

Transport is the second largest source of emissions in Canada, with the sector representing about a quarter of the country’s emissions (Environment and Climate Change Canada, 2020a; Government of Canada, 2020a).

The pandemic will cause a reduction in emissions from transport this year. Congestion data for a number of Canadian cities and national mobility data from Apple (i.e. requests for directions from Apple Maps) suggest that there was a marked decline in driving during March to June of around 36%; however, by July the two metrics show an average of increased activity based on the CAT’s own calculations (Apple, 2020; TomTom, 2020). At the height of the lockdown in April, domestic air travel was down by 72% from the same time in 2019 (Statistics Canada, 2020a). It had already begun declining in March (-29%) and only marginally recovered in May (-66%) and June (-50%). Domestic travel continued to rebound slowly in July (Statistics Canada, 2020b). The largest Canadian airline has reduced its capacity (both domestic and international) for the second quarter by 85-90% (Air Canada, 2020). It anticipates a capacity reduction of around 75% in the third quarter and that it may take at least three years for flights to return to normal levels (Air Canada, 2020; The Canadian Press, 2020b). Domestic aviation represented about 4% of total transport emissions in 2018 (Government of Canada, 2020a). Rail transport is also down. Canada’s largest railway has seen a drop of 11% in revenue ton-miles (RTM) this year (CN, 2020). RTM started to decline at the end of March and had not returned to 2019 levels at the beginning of August.

Whether and how any behaviour changes from the pandemic affect the sector over the long-term is unclear; however, what is clear is that more policies and measures are needed to ensure that decarbonisation occurs.

Electric Vehicles

In 2019, Canada has adopted sales targets for zero-emissions passenger vehicles of 10% by 2025, 30% by 2030 and 100% by 2040 (Transport Canada, 2019).

The 2019 Federal Budget allocated CAD $130 million over five years to support the development of EV charging infrastructure (Natural Resources Canada, 2020h). This funding builds on approximately CAD 100 million allocated in previous budgets to support electric vehicle charging stations and natural gas and hydrogen refuelling stations (Natural Resources Canada, 2020b). The 2019 Budget also included measures to support consumers and businesses to purchase zero-emission vehicles (Transport Canada, 2019). In 2020, it launched a programme to support awareness raising with respect to EV usage (Natural Resources Canada, 2020g). The Task Force for a Resilient Recovery has recommended the government increases funding for EV charging infrastructure by CAD 2 billion to accelerate the uptake of these vehicles (Task Force for a Resilient Recovery, 2020).

The Advisory Council on Climate Action has recommended that the government follow up on these initiatives by imposing supply commitments on car manufacturers (Vrooman & Guilbeault, 2019). Quebec has had such a standard in place since 2018 and British Columbia adopted standards in May 2019 (Government of British Columbia, 2019; Government of Quebec, n.d.).

In 2019, EV sales grew by 25% compared to 2018; however, the total portion of sales remains small at 5% (Statistics Canada, 2020c). While EV sales have been increasing, there has also been a sustained shift towards SUVs (Canada Energy Regulator, 2020). To reach full decarbonisation of the road transport sector worldwide, the last fossil fuel car should be sold before 2035. Norway is a world leader in this regard and demonstrates that with the right policy support much faster growth in this sector is possible.

EV market share

Some of Canada’s alternative fuels transport infrastructure spending is going towards natural gas refuelling stations. The CAT has long cautioned on the dangers of investing in natural gas infrastructure. To date, that programme has supported more than CAD 18 million in natural gas refuelling (Natural Resources Canada, 2020c, 2020d).

Vehicle emission standards

Canada has various policies in place to reduce vehicle emissions. A cloud of uncertainty hangs over these regulations due to the recent rollbacks in the USA on fuel economy standards for cars and light-duty trucks and the revocation of California’s ability to set tougher standards for itself.

Canadian fuel economy standards for light and heavy-duty vehicles are aligned with federal-level regulations in the US. In 2018, the USA decided to revise Obama-era fuel economy standards for some passenger vehicle model years. While Canada began a review of its own regulations for 2022-2025 model years, it decided to wait until the final ruling in the USA before proceeding with any changes (Government of Canada, 2018c; Nuthall, 2019a). The CAT estimates that the cumulative effect of this rollback in the USA could be around 468 MtCO2e between 2020-2035. We have not quantified the potential impact in Canada.

In June 2019, Canada signed an agreement with California to work on vehicle emissions, suggesting that perhaps the government would not follow any weakening of American standards; however, the ability to follow through on this agreement has also been called into question given the limitations that have now been placed on California (Environment and Climate Change Canada, 2019a; Nuthall, 2019b). California and 22 other states are appealing the Trump Administration’s decision.

In 2018, Canada adopted more stringent greenhouse gas emission standards for on-road heavy-duty vehicles and engines beginning with the 2021 model year as well as new emission standards applicable to trailers hauled by on-road transport tractors for which the manufacture is completed on or after 1 January 2020 (Government of Canada, 2018d). The regulations have not been impacted by recent developments in the USA.

Fuel standards

The Clean Fuel Standard was announced in 2016 as part of the Pan-Canadian Framework to reduce emissions from fuels used in transportation, buildings and industry (Government of Canada, 2016b). The standard should cut emissions by 30Mt annually from 2030 onwards and is included in our planned policies scenario. While draft regulations for all fuels were originally set to be released in mid-2018, there have been a series of delays (Government of Canada, 2017a). Due to the potential impact on trade-exposed industries, the government also decided to proceed with the regulations on liquid fuels (e.g. gasoline and diesel) first, followed by gaseous and solid fuels. Due to COVID-19, the draft regulations, which should have been released in early 2020, have been postponed until late 2020, though the anticipated entry into force of the regulation in 2022 remains unchanged (Government of Canada, 2020e).

The Clean Fuel Standard will set an annual carbon emission reduction target for all liquid fuels, starting in 2022, and increase annually until 2030 (Environment and Climate Change Canada, 2019b). Remote communities, international shipping, international aviation and aviation gasoline used by smaller domestic aircraft will all be exempt from the regulation. Whether the standard will be applied to domestic commercial airline jet fuel is still under consideration. Under its Renewable Fuels Regulations, Canada requires renewable fuel content of 2% for diesel and 5% for gasoline, which will be continued under the Clean Fuel Standard (Environment and Climate Change Canada, 2019c; Government of Canada, 2010).

Buildings

A little over a tenth of Canada’s emissions are from the buildings sector (excluding electricity) (Environment and Climate Change Canada, 2020a). Under the Pan Canadian Framework, the Government proposed to reduce emissions in the built environment through four main activities (Government of Canada, 2016c). 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. Prior to the pandemic, emissions in the buildings sector were projected to drop around 9% under current policies (Environment and Climate Change Canada, 2020a). 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, 2019h, 2019g; Natural Resources Canada, 2020e). The June 2019 regulations largely align with existing standards in the USA. In February 2020, the US Department of Energy made changes to its energy efficiency standards rule-making process that will likely make it more difficult to update these standards in the future. It is not known what impact this may have on the Canadian regulatory process.

The government is working on updating its Model Building and Energy Codes, which should be published by the end of the year (Lockhart, 2020; National Research Council Canada, 2020a, 2020b). The government estimates that these measures and building energy use labelling could reduce emissions by 11 MtCO2e in 2030 (Environment and Climate Change Canada, 2020a). This is reflected in our planned policies projection.

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 Paris Agreement’s 1.5°C temperature limit. Historic data on renovations is sparse, but indicators suggest that the rate is extremely low. The Task Force for a Resilient Recovery has recommended that the government invest CAD 27 billion over the next five years to accelerate energy-efficient retrofits and promote jobs in the sector(Task Force for a Resilient Recovery, 2020).

Canada is developing emission standards to reduce the carbon intensity of various fuels, such as the natural gas used to heat homes (the Clean Fuel Standard). The regulations most relevant for the building are likely to be finalised in late 2022 (Government of Canada, 2020e).

Industry

Industrial emissions are around a tenth of Canada’s emissions (Environment and Climate Change Canada, 2020a). Emissions in this sector were projected to grow by about 15% prior to the pandemic.

In July 2018, Canada amended its carbon pricing backstop plan for the industry sector, which was originally proposed in January 2018. The change aims to reduce the impact of the carbon tax on heavy industry by increasing subsidies on production and thereby reducing the competitive risk of certain industries (Dawson & Thomson, 2018). It was originally proposed in January 2018 that companies would be taxed if they emit more than the 70% of the benchmark for average emissions but increased the benchmark to 80% a few months later, essentially allowing companies to emit more without being taxed. For heavy industries, such as cement, iron and steel manufacturing, and lime and nitrogen fertilisers, the threshold increases to 90% of their average industrial emissions (Connolly, 2018).

During the 2019 federal election, the government promised to cut corporate taxes for companies that develop or manufacture zero-emissions technologies, such as solar panels, electric vehicles or carbon sequestration and removal technology (Liberal Party of Canada, 2019a). However, there is little evidence to date of any action on fulfilling this promise.

Canada is developing emission standards to reduce emissions from various fuels (the Clean Fuel Standard). The regulations most relevant for industry are likely to be finalised in late 2022 (Government of Canada, 2020f).

Canada is taking actions to reduce HFC emissions. In November 2017, Canada ratified the Kigali Amendment to the Montreal Protocol and has adopted the necessary regulations to implement its commitments under the Amendment (Government of Canada, 2017b; United Nations Treaty Collection, n.d.).

Agriculture

Agriculture is also responsible for around a tenth of the country’s emissions (Environment and Climate Change Canada, 2020a). Prior to the pandemic, its emissions were projected to increase by about 5% by 2030.

A federal GHG offset system is being developed for activities not covered by carbon pricing (Government of Canada, 2020g). Initially, the system will focus on voluntary projects in agriculture, waste and forestry, with draft regulations expected later in 2020 (Environment and Climate Change Canada, 2020b).

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 Paris Agreement’s 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, 2020j). Avoiding food waste also contributes to reducing emissions from the sector.

Forestry

During the 2019 federal election, the government promised to plant two billion trees over the next decade (Liberal Party of Canada, 2019c). It estimates that the initiative could reduce emissions by 30 MtCO2e by 2030 and would contribute to the government’s proposed net-zero 2050 target (Liberal Party of Canada, 2019c, 2019d). The government intends to use the revenue from the Trans Mountain pipeline to offset the cost of the initiative, estimated at CAD 300 million per year (Liberal Party of Canada, 2019d). Nature-based solutions can contribute to climate protection when paired with initiatives to decarbonise the economy, and to curb fossil fuel developments. There is little evidence to date on how the government is progressing in reaching this tree planting target. 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, 2020g).

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