Industrial fossil fuel consumption has been rising for 20 years and now takes up two-thirds of total industrial energy consumption in Canada.

Industrial emissions—from oil and gas and mining, cement, chemicals, pulp and paper manufacturing, and metals manufacturing—account for roughly 42% of Canada’s national emissions, making industrial energy consumption a critical indicator for tracking decarbonization progress. 

Statistics Canada’s final energy consumption data tracks energy used for heating, cooling, powering vehicles, running machines, and non-energy uses like fossil fuels in chemical production. Out of total final energy consumption across the economy, industry’s share accounts for 30%. Looking at industry’s share of total final energy consumption, this insight reveals energy use trends affecting carbon dioxide equivalent emissions over the past two decades.

The overall picture shows little movement on industrial electrification (Figure 1). Over the past two decades, industries have used less coal, which has been replaced with natural gas, a lower-emitting fuel. However, the growth in gas use has also meant that industrial facilities are now using less electricity as a portion of their final energy consumption.

Gas use largely driven by oil and gas and mining, while industries cut coal

The most significant growth in gas use has come from the oil and gas and mining industries, which are grouped together in Statistics Canada data. Since 2005, the industries’ natural gas consumption increased 3.5-fold and now represents almost 60% of total industrial gas use. Excluding this sector, other industries increased their natural gas share by only five percentage points—versus 19 percentage points when including oil and gas.

Industries are generally using natural gas to replace other fossil fuels, notably coal, whose use has declined by more than two-thirds since 2005. Coal consumption in the cement industry has fallen by 85%, and heavy fuel oil consumption for the pulp and paper sector has plummeted by almost 90%.

Furthermore, the rise in cogeneration has also led to improvements in energy efficiency and decarbonization. While fossil-fuel-based cogeneration isn’t emissions-free, it achieves high efficiency by capturing waste heat and avoiding transmission losses, making it lower-emission than external gas power plants.

More natural gas has meant less electrification

However, expanded natural gas consumption has also decreased the share of electricity use. Final electricity consumption—as the sum of electricity generated by clean electricity (solar, wind, hydro, nuclear), and electricity generated by natural gas—decreased by five percentage points from 2005 to 2024. 

Clean electricity’s share dropped 12 percentage points over this period. Pulp and paper, and iron and steel manufacturing, saw the largest absolute declines in clean electricity use, while oil and gas experienced the steepest drop as a share of sectoral energy. However, not all sectors saw a declining share of electricity in their energy mix, as aluminum production in particular has long relied on electricity-intensive electrolysis.

Taken together, the data show that, while Canadian industry has made progress in phasing out more carbon-intensive fuels, rising gas use risks locking in capital stock and delays progress on electrification. Without a renewed push to expand access to affordable, clean electricity and to deploy technologies that enable electrification of industrial heat and processes, industrial decarbonization is at risk of remaining stalled.