The Canada Energy Regulator (CER) may be on the verge of a breakthrough as it nears the end of a high-stakes, 18-month effort to map a net-zero pathway for the country’s energy sector.
The next edition of Canada’s Energy Future, the regulator’s flagship energy modelling report, is due next month. If it successfully models a realistic route to cutting the country’s energy-related emissions to net-zero, it will represent a major challenge to the conventional wisdom that Canada can meet its 2030 climate commitments while continuing to expand an oil and gas sector whose emissions have skyrocketed 85% [pdf] since 1990.
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“A lot of work has been happening,” Nichole Dusyk, senior policy advisor at the Winnipeg-based International Institute for Sustainable Development, told The Energy Mix. “We don’t have a lot of insight into what the results are.”
But the CER’s public pronouncements so far indicate it has taken onboard its mandate from Natural Resources Minister Jonathan Wilkinson to align its modelling with international work on net-zero emissions, and the 1.5°C target in the Paris climate agreement.
“That, I think, is really encouraging,” Dusyk said. “It’s actually one of the critical pieces, because obviously the results will be very different if you’re modelling net-zero for Canada versus 1.5°C for the world, given the export orientation of our oil and gas industry.”
That kind of analysis would be a major departure from the last edition of Canada’s Energy Future, released in December 2021, which projected that Canada’s oil and gas extraction would continue to grow through 2032. The CER’s findings were in sharp contrast to the International Energy Agency’s landmark Net Zero by 2050 report seven months previously. which called for no new investment in oil, gas, or coal development.
“Beyond projects already committed as of 2021, there are no new oil and gas fields approved for development in our pathway, and no new coal mines or mine extensions are required,” the IEA declared at the time, in the annual analysis it modestly styles as “the gold standard of energy analysis”.
How to Refocus a Regulator
After publishing that last edition of Canada’s Energy Future, the CER drew scathing criticism for failing to factor the realities of climate change or the federal government’s response into its calculations.
“We have seen horrifying floods in B.C., wildfires throughout the summer, an extremely difficult season of drought for Canadian farmers—we are already experiencing the impacts of climate change,” IISD policy advisor Vanessa Corkal said in mid-December, 2021. “This report does not provide the information that helps us deal with and prevent those types of climate disasters.”
“When you have a report that assumes Canada won’t even meet its own existing climate targets, and then that leads to a lock-in of [investment] decisions, that will make it more difficult for us to meet our climate targets,” agreed Julia Levin, then-senior program manager at Environmental Defence Canada. “There’s a bit of a self-fulfilling prophecy.”
At the time, Wilkinson appeared to echo the call for the CER to get with the program. In a series of tweets, he thanked the regulator for adding to a “growing body of knowledge on the clean energy transition”, before commenting that “going forward, I have asked the CER to look into how they could provide even more data in line with Canada achieving net-zero emissions by 2050.”
Then Wilkinson, a former cleantech executive who previously served as federal environment minister, formally instructed the Calgary-based agency to come up with a pathway to net-zero emissions by mid-century.
“As we continue to make historic investments in clean energy throughout the country, we know that more needs to be done in order to reach net-zero emissions by 2050,” he told [pdf] CER Chair Cassie Doyle in a December 16 letter. “This includes ensuring we provide Canadians with information they need to better understand the energy we currently produce and consume, the impact of evolving energy policies, and what our energy future and energy transition could look like.”
Doyle responded December 20 that “the next iteration of Canada’s Energy Future will be expanded to include modelling consistent with Canada’s commitment to achieve net-zero emissions by 2050,” with analysis meant to “cover all energy commodities and reflect a global context in which the world achieves its Paris Accord goal of limiting warming to 1.5°C.”
After that, the CER received few if any objections when it decided to postpone the release of Canada’s Energy Future 2023 (EF2023) from December, 2022 to June, 2023. The general sense was that the agency’s in-house modelling team should take the time it needed to get the analysis right, rather than trying to get it done faster.
Driving for Net-Zero
The regulator set out to fulfill its new mandate from Wilkinson by issuing a discussion paper and online survey, then conducting a technical consultation to gather feedback on its approach to the analysis, the assumptions it was bringing to the process, and any alternate modelling approaches it could consider. After listening to environmental groups, institutes, industry, government, and academia, the CER said it heard back that:
• While most modelling reports provide at least two or three scenarios showing different outcomes, the main scenario in EF2023 should be consistent with Canada’s commitment to bring its emissions to net-zero by 2050. “Some respondents also suggested the net-zero scenario should align with other national targets, such as the 2030 target of a 40 to 45% reduction in greenhouse gas (GHG) emissions relative to 2005.”
• With some caveats, consultation participants agreed with relying on the international assumptions in the IEA’s Net Zero by 2050 analysis, including its top-line statement on no new oil or gas fields. Some respondents pointed to other sources of international analysis and suggested the CER “rationalize” its reliance on the IEA; others pointed to the Paris-based agency’s strong reliance on “unproven or uncertain technologies” like carbon capture and storage.
• The CER should show its work by clarifying all the assumptions behind the analysis in EF2023, including “recent major geopolitical events and their potential long-term impacts on global energy systems.”
• The EF2023 team should acknowledge Indigenous communities as rights holders and ask them how best to engage them in the process, while recognizing that “remote communities, many of which are mostly Indigenous, will be particularly vulnerable to the impacts of climate change. They possess significant knowledge that could be leveraged to determine potential future net-zero pathways.”
• The analysis should reflect regional differences in Canada’s energy systems.
• The modelling should factor in “potential resource constraints, such as for biomass, land use, critical minerals, labour, and others,” and limit its reliance on negative emissions technologies to hard-to-abate sectors.
• Respondents identified several areas of future uncertainty, including the role of clean technologies (the CER’s list includes hydrogen, small modular nuclear reactors, negative emissions technologies, and renewables), future international demand and prices for oil and gas, international demand for liquefied natural gas, the cost and impacts of climate change, and future large infrastructure projects like grid expansions.
“Aside from input specific to energy modeling, responders provided important insights on a wide range of energy technologies, infrastructure projects, and climate policies,” the CER wrote. “We’ve also heard there is significant enthusiasm for the CER to broaden the scope of EF2023 to investigate how different net-zero pathways could impact Canadians.”
What Success Could Look Like
While there’s been growing, if cautious, optimism around the CER’s work on EF2023, the regulator will face a wall of skepticism when it releases its analysis. That’s partly because its deep connections to the industry it regulates date back to the 1990s, when the Brian Mulroney government moved its headquarters from Ottawa to Calgary and two-thirds of its staff decided to stay behind. The head office shift made the then National Energy Board the only federal regulatory agency with a head office outside the nation’s capital.
“It’s wildly optimistic to believe there will be a fundamental change in the workings of the CER in the future,” Marc Eliesen, a former CEO of four provincial utilities and energy authorities and one-time board member with Suncor Energy, told The Mix in December, 2021. “The people there are entrenched in a petro-culture with industry. Most people are not aware that 90% of the funding of the CER comes from industry, which really compromises the board’s own goals and aspirations of trying to serve the public interest.”
And yet, through the first half of 2022, close observers reported the CER was taking its new assignment seriously. In an April 5 update to Wilkinson, Doyle promised “fully modelled scenarios” that “reflect a global context in which the world achieves its Paris Accord goal of limiting warming to 1.5°C” and “consider relevant uncertainties, including future trends in low-carbon technology and energy markets.” The discussion paper and consultation process followed over the next three months.
“They’re asking some good questions that we haven’t seen asked in the past,” Caroline Brouillette, then-national policy manager at Climate Action Network-Canada, said at the time. “It remains to be seen whether their answers will be satisfactory.”
“If we look at the consultation that happened last year before Canada’s Energy Future came out, it was basically ‘here’s what we’re going to present, do you have any feedback?’,” with no time for any meaningful edits, said another close observer who took part in the 2021 consultations. This time, Wilkinson has formally directed the regulator “to do this modelling and to show a net-zero pathway, and that implies that Canadian oil and gas production can’t just keep unrealistically growing into the future as the world decarbonizes.”
All of which leads to two questions: What success will look like when Canada’s Energy Future 2023 is released, and how the analysis could still go wrong.
The Meanings of Net-Zero
Binnu Jeyakumar, director of clean energy at the Pembina Institute, said the CER previously modelled a pathway to a net-zero power grid, and now seems to be on track to produce an economy-wide net-zero scenario. “One of the main things for us will be to see how much they rely on the netting,” she said—since a net-zero economy still needs to eliminate all the emissions and use carbon removal technologies for only the emissions that would be hardest to avoid.
“So we’ll have to look at how much credible emission reduction is happening and how many residual emissions are left in the economy,” she added, noting that the Intergovernmental Panel on Climate Change (IPCC) calls for 90% of a net-zero scenario to consist of real emission cuts. “That to me is one measure of credibility.”
Jeyakumar said she’ll also be watching for whether the CER factors in the goals of the federal government’s upcoming cap on oil and gas emissions, and how accurately it compares the cost of competing energy options. In the past, “they’ve overestimated the cost of clean energy and underestimated the potential for energy efficiency. The price tag of the energy transition has often been made to look like it’s much bigger than it would be.”
In reality, wind and solar are now cheaper than gas, she added, and annual revenues from wind and solar projects could exceed $60 billion by 2030.
In its sweeping assessment report in late March, the IPCC identified solar, wind, and methane reductions in industry as the best options for delivering rapid emission cuts, generally at a cost below US$20 per tonne of carbon dioxide or equivalent. A chart toward the end of the synthesis report showed carbon capture and storage (CCS) delivering about one-tenth the benefit at far higher cost, with nuclear, geothermal, hydropower, and electricity from biomass doing not much better.
Dusyk said future cost and learning curves for different energy technologies are open to interpretation, but the CER could do worse than to track with the IEA’s analysis. “The IEA is obviously not perfect, and we could point out some potential problems with their modelling,” she said. But “it’s better to follow the lead of a well-respected international agency” and take advantage of their “already established assumptions and cost expectations.”
It’s also “smart politically to do that,” she added, “because it takes some of the burden off the CER. It’s not an easy task, so if there are questions about assumptions it’s easier and I think politically more defensible for them” to incorporate the IEA’s analysis.
The remaining question is whether there’s any way the CER can avoid projecting a declining future for oil and gas, even if it wants to. “This is where we get into assumptions around negative emissions technologies and their uptake,” Dusyk said. “There is a certain amount of pressure to over-estimate their potential contribution,” but the CER’s consultation report “makes it clear that they heard the part about tracking to what the IEA said about a 1.5°C scenario where no new fossil fuel fields are needed. That’s something they clearly heard from stakeholders, it’s in the document as an assumption, and it will be really important for them to take it up and take it seriously.”
Dusyk said she remains “cautiously optimistic”, but stressed the importance of the CER getting its analysis right with this edition of Canada’s Energy Future.
“This is a really crucial scenario,” she said. “It has a key role to play in informing Canadians, but even more importantly, in informing investors, policy-makers, and people engaged in public policy about what the direction needs to be if we’re going to meet our climate commitments.”
Until now, she added, “we’ve been lacking that direction.”
Dodging the Next Landmine
One landmine the CER could still trip over is some stakeholders’ request that it “rationalize its reliance on the IEA’s assumptions” about a net-zero future. Many of the other international scenarios on offer come from fossil fuel companies and typically rely on carbon capture or carbon removals that take effect later in the first half of this century, rather than going all-in on energy efficiency and renewable energy options that are practical, affordable, and ready for prime time right now.
In early April, UK-based fossil major Shell produced a pair of energy security scenarios that called for a massive, likely devastating uptick in carbon capture through 2100, while allowing average global warming to overshoot the crucial 1.5°C guardrail for averting the worst effects of climate change. Scarcely two weeks later, one carbon capture publicist in Canada tried to make the case that 2050 is a more important climate target than 2030. That was 4½ years after the IPCC’s net-zero scenario—which relied predominantly on science and substance, not spin—set a 2030 deadline for a 45% reduction in global greenhouse gas emissions.
So alongside the IEA, which other international scenarios might the Canada Energy Regulator factor into its analysis for Energy Futures 2023?
The CER is being tight-lipped about its findings until EF2023 sees the light of day. However, asked to identify the other models and analyses the regulator would use as reference points, Communications Officer Karen Ryhorchuk cited domestic net-zero studies by the Canadian Climate Institute and l’Institut de l’énergie Trottier, work by the International Renewable Energy Agency, the U.S. Energy Information Agency, and U.S. National Renewable Energy Laboratory, and the latest IPCC assessment report.
Asked whether analysis from fossil super-majors like Shell would be excluded, she said the companies’ long-term scenarios “are not explicitly factored into the analysis. We do look at all long-term scenarios for awareness and context.”
I think the chances are next to nil that this road map will not rely HEAVILY on carbon capture to reach Net Zero… with no regard for performance and reasonable expectations of CCS.
It would be consistent with the way Wilkinson always talks .