By The Delphi Group’s Sarah Todgham, Policy Consultant, Climate Change, and Matt Beck, Senior Director, Carbon Management & Sustainability
We’re over a month into 2023 and the clock is ticking when it comes to achieving Canada’s net-zero emissions target by 2050. Moving from commitment to action is hard but necessary to secure a competitive edge in the global economy, diversify our job market, and attract and facilitate a just transition that leaves no Canadian behind.
Inspired by the progress made to date, we’re here to give you the low-down on Canada’s net-zero policy landscape in the year ahead.
Canada’s achievements in 2022
Let’s start with a look back at some of the key advancements that were made over the past year.
- Updates to the Clean Fuel Regulations – In 2022, the Canadian government published the final version of the Clean Fuel Regulations, which established stricter carbon intensity requirements and set obligations for primary suppliers that produce or import liquid fuels like diesel and gasoline. The regulations also established a market for carbon credits. This new regulatory tool aims to drive further investments in low-carbon fuels and other emission-reduction projects.
- Emissions Reduction Plan – Last year, the Government of Canada released the first Emissions Reduction Plan as mandated under the Canadian Net-Zero Emissions Accountability Act. The plan outlines greenhouse gas (GHG) emission pathways for each sector, as well as how the government will maximize investments to (1) curb emissions by 40% (compared to 2005 levels) by 2030, and (2) remain on track to achieving the longer-term target of net zero by 2050. See below for the chart featured in the Emissions Reduction Plan that outlines the pathway and emission reductions projected per sector.
2030 Emission Reduction Plan: Canada’s Next Steps for Clean Air and a Strong Economy
What’s ahead in 2023
There are a range of policies and activities that are likely to sustain net-zero momentum in the year ahead, including:
- Cap on oil and gas sector emissions – At COP27, Environment and Climate Change Minister Steven Guilbeault announced a cap on GHG emissions from Canada’s oil and gas sector by the end of 2023. While the sector has made some improvements in terms of emissions intensity of production, absolute emissions rose by 18.8% between 2005 and 2019. Emissions from the rest of the economy declined by 1% during the same period. Within and outside the sector, some argue that Canada can’t reach its 2030 emissions targets without a significant effort to reduce oil and gas emissions. The Canadian government has been engaging with stakeholders to design an effective regulatory approach, which is expected to continue through 2023.
- Ramped up methane regulations – Methane is the primary component of natural gas, which is used for 8.5% of Canada’s electricity generation, a large portion of industrial and building energy across Canada, as well as a major feedstock for plastics and other petrochemicals. It’s also a potent GHG and represents nearly one-sixth of Canada’s annual emissions. In 2016, Canada committed to reducing oil-and-gas sector methane emissions by 40-45% by 2025 (from 2012 levels). This was reinforced by Canada’s commitment to the Global Methane Pledge (GMP), which aims to reduce all human-caused methane emissions by 30% compared to 2020 levels by 2030. As part of this pledge, Canada was the first country to commit to a target of a 75% reduction in methane emissions from the oil and gas sector from 2012 levels by 2030. Achieving this target means reducing annual oil-and-gas sector methane emissions by more than 20 million tonnes (measured in CO2e) compared to 2020. That’s about the same as the annual GHGs from almost a third of Canada’s light-duty vehicles on the road today. To guide further reductions in methane emissions, the government proposed Canada’s Methane Strategy, which was published for public consultation in late 2022. This strategy is anticipated to be finalized in 2023 – including the launch of the global center of excellence on methane detection and elimination.
- Growth in the electric vehicle market – To make progress on decarbonizing the transportation sector, more zero-emission vehicles (ZEVs) are needed on the road. In December 2022, the Government of Canada unveiled proposed regulations outlining annual ZEV sales targets for automakers and importers. Regulated light-duty vehicle sales targets require at least 20% of new vehicles sold by 2026 to be zero emission, increasing to 60% by 2030 and 100% by 2035. These targets are twice as ambitious as the BC sales targets made in 2019 under the Zero-Emission Vehicles Act. These proposed regulations are intended to more closely align with other government policies that have also proposed performance standards and ZEV sale requirements. Partners include the State of California, which has also committed to meet a 100% ZEV sales target by 2035.
- Nature-based climate change solutions – There is increasing recognition of the synergies between climate change and biodiversity, and the opportunities that nature-based climate solutions represent. In Fall 2021, Environment and Climate Change Canada introduced the Nature Smart Climate Solutions Fund (NSCSF), a $631 million, ten-year fund intended to reduce 2-4 megatons of GHG emissions per year from 2030 to 2050 and onwards. Starting in 2023, the funding recipients will be required to report on their program activities, which will be factored into national reporting on GHG emissions reductions.
- Advancing the just transition – The just transition involves providing sustainable jobs across sectors and ensuring that the workforce is fully prepared to participate in the shift to a green and low-carbon economy. The Government of Canada is not showing any signs of backing down on releasing legislation that’s based on the feedback provided for their 2022 Discussion Paper. The goal of the legislation? To help affected workers and communities across the country prosper in a net-zero future. With a looming election in Alberta this spring, expect the rhetoric on this issue to heat up in the coming months.
Recommendations from the Net-zero Advisory Body
Last month, the Net-Zero Advisory Body (NZAB) released its first annual report, which provides an additional 25 recommendations to the Minister of Environment and Climate Change beyond the input the NZAB submitted as part of the 2030 Emissions Reduction Plan in 2022. The recommendations are intended to serve as guideposts over the next year and to inform the next phase of the government’s implementation planning on net zero. Below we touch on a few recommendations from the report that emphasize maintaining strong governance structures and the importance of monitoring progress:
- Setting the stage (advice #1): All federal agency departments and Crown corporations do their part in embedding net-zero objectives in their mandates and promoting transparency in aligning compensation to mitigation performance using reporting standards.
- Giving recognition (advice #2): Empower net-zero champions across Canada to foster shared leadership in reducing GHG emissions – including federal, provincial, territorial, non-governmental, private, and Indigenous entities. You can check out Canadian companies with net-zero targets on CBSR’s Net-zero Leaderboard here.
- Managing shared data (advice #3 and #5): Create a public-facing net-zero dashboard to monitor progress in real time and close the two-year data lag for reporting, working towards a quarterly report of GHG emissions based on the European Union model.
- Constructing a modelling and data centre of excellence (advice #4): Establish a third party to help facilitate data sharing and modelling between government agencies.
Other important recommendations from the Net-Zero Advisory Body include identifying a pathway for an industrial policy that includes the necessary regulatory tools to advance emission reductions and targets. Additional recommendations are focused on ensuring that Canada’s infrastructure can support the energy system transformation needed to get to net zero (advice #10-25).
What’s next?
Canada has laid a strong policy foundation for reducing emissions over the next few decades. Third-party groups such as the Net-Zero Advisory Body provide an effective forum for integrating the interests and concerns of all levels of government, Indigenous Peoples, the private sector, and interested public representatives into Canada’s net-zero strategy. The recommendations from the Net-Zero Advisory Body also have the potential to help keep the government on course. Since the requirement for progress reports is legislated under the Canadian Net-Zero Emissions Accountability Act, momentum is likely to continue even after an election year.
To achieve our climate targets and ensure Canada can compete in the global economy, we will need to be strategic in order to attract necessary capital in light of the net-zero investments that are being made by other nations. For example, the US’ Inflation Reduction Act provides funding opportunities and tax credits for eligible US-based facilities. We’ll be keeping an eye on where investments can best be leveraged to support a net-zero future while fostering a prosperous economy for all Canadians.
Sarah Todgham is a Policy Consultant, Climate Change, and Matt Beck is Senior Director, Carbon Management & Sustainability. Interested in more information on how your organization can reach its corporate sustainability, net-zero, and ESG goals in the shifting policy landscape? Reach out to Sarah at stodgham@delphi.ca or Matt at mbeck@delphi.ca.
