Canada is on track to reduce its greenhouse gas emissions by only 16% this decade, far short of the 40 to 45% target that Prime Minister Justin Trudeau introduced earlier this year, partly thanks to strategies that favour greater efficiency in fossil fuel use over a transition to non-emitting energy, according to an analysis released this week by the Trottier Energy Institute.
The tough assessment landed just a day before the Institute for Sustainable Finance at Queen’s University’s Smith School of Business warned that the country has been too slow to integrate climate disclosure and reporting into its financial system.
The Trottier Institute report, co-funded by Natural Resources Canada and the Trottier Family Foundation, “says that Ottawa’s recent commitment to achieve net-zero emissions by 2050 necessitates rethinking some of the techniques for meeting the 2030 target,” the Globe and Mail reports. “The report also underscores the need for greater clarity about the expected emissions reduction impacts of the Liberals’ policies,” just as Trudeau “prepares to tout Canada’s emissions goals at next month’s landmark United Nations climate summit, COP26, in Glasgow.”
The critical analysis leaves out climate-related policies like the government’s C$8-billion Net Zero Climate Accelerator that don’t have specific emissions goals, and “only includes policies that the government has implemented, not those it has merely promised,” writes Globe climate specialist Adam Radwanski. But it still “stands to increase pressure on [Trudeau’s] Liberal Party to move swiftly on the climate-related promises it made in its recent campaign platform.”
“There’s been a lot of money spent in recent years without that much result,” Trottier Institute Academic Director Normand Mousseau told Radwanski. “So you need to construct the programs in a much more efficient way.”
The report calls for a comprehensive building energy retrofit strategy, including the new incentives and regulations the Liberals promised in their election platform, to fully tap into the sector’s carbon reduction potential through 2030, the Globe says. It’s less optimistic about the potential for rapid gains in transportation, due to the long lifespan of private vehicles and the challenge of decarbonizing large freight vehicles, which account for about half of Canada’s transportation emissions.
That leaves heavy industry, particularly the fossil industry, as an essential focus for achieving Trudeau’s promise to reduce emissions at least 40% from 2005 levels by 2030. “In a cost-optimal net-zero pathway, oil and gas production bears the brunt of reductions before 2030,” the report says, adding that without attention to the fossil industry, the changes needed in other sectors of the economy would be expensive and drastic.
“While the oil and gas industry has been pinning its hopes on carbon capture to reduce its footprint, the authors are skeptical about that prospect, not just because the technology’s costs remain high,” Radwanski writes. “They concede that carbon capture will have a big role in achieving net-zero, and that it will account for at least 125 megatonnes of annual abatement eventually. But they contend that the technology would be better used to counterbalance unavoidable emissions from sectors that we will continue to rely on, such as agriculture.”
The Trottier Institute rejects the notion that natural gas can serve as a “transitional fuel” to a renewable future, and digs into the structural changes that will be required to hit a 2050 decarbonization target. “The massive increase in total demand for low-carbon electricity that comes with a net-zero society will need to be met one way or another, and planning and investment will have to start very soon,” the report states.
While the cost of those new technologies is falling, the time to act is now. “The more we delay,” Mousseau said, “doing a crash transformation will wind up costing more.”
But while investors increasingly want to be a part of that change, Canada is already being “forced to play catch-up” with European countries that have been faster to integrate climate goals into their financial systems, writes Globe sustainable finance specialist Jeffrey Jones.
“It’s become quite clear that providers of capital really do want to participate in a meaningful way in terms of mitigating physical risks and transition risks, and in order to do that we need proper information, the right types of disclosure, to make those decisions,” said Margaret Childe, head of ESG, Canada, at Manulife Investment Management, who contributed to the Institute for Sustainable Finance assessment.
But so far, Canadian investors only have access to “piecemeal” corporate data on greenhouse gas emissions and climate-related risk, despite more standardized reporting in other countries, she said.
“The most frequent comment made by interviewees was that Europe and the U.K. have been setting the tone in terms of discussions and actions related to sustainable finance issues, and that Canada has fallen behind,” the ISF stated. “This leaves us playing catch-up, and it is becoming clear that the Biden administration will be moving very quickly.”