Climate change: Appearance before the Standing Committee – March 19, 2024
Carbon pollution pricing
Q1. What is carbon pricing and why is it important?
- Carbon pollution pricing is widely recognized as the most efficient way to reduce greenhouse gas (GHG) emissions while driving innovation to provide consumers and businesses with low-carbon options.
- The federal government is committed to ensuring that carbon pricing is in place across Canada at a similar level of stringency while ensuring provinces and territories have the flexibility to implement their own carbon pricing systems.
- Carbon pollution pricing is central to Canada’s climate plan and is critical to delivering on Canada’s targets of reducing GHG emissions to 40-45% below 2005 levels by 2030 and reaching net-zero emissions by 2050.
Q2. What is the federal benchmark and what does it do? Why not let provinces and territories decide for themselves how to price carbon pollution?
- The Government’s approach to pricing carbon pollution gives provinces and territories the flexibility to implement the type of system that makes sense for their circumstances as long as they align with minimum national stringency standards, or benchmark criteria.
- The federal benchmark has been updated to ensure that carbon pricing systems are at a similar level of stringency across Canada (2023-2030) and that they continue to drive low-cost emissions reductions required for Canada to build a cleaner, more prosperous economy.
- The federal carbon pollution pricing system applies in provinces and territories that request it or that choose not to adequately price carbon pollution.
Q3. How does carbon pricing impact competitiveness, and what is the impact on Canadian industries?
- Canada’s approach to carbon pollution pricing is designed to mitigate risks of adverse competitiveness impacts.
- Under the federal approach, the Output-Based Pricing System (OBPS) is designed to put a price on the carbon pollution of large industrial facilities, while limiting the impacts of carbon pricing on their ability to compete in the Canadian market and abroad. Carbon costs can affect businesses that conduct activities that are emissions-intensive and highly internationally traded if they compete with similar businesses in countries that do not have carbon pricing in place.
- Instead of paying the fuel charge, an industrial facility in the federal OBPS faces a compliance obligation on the portion of emissions that exceed an annual limit. Covered facilities are required to provide compensation for GHG emissions that exceed their emissions limit and are issued surplus credits if their emissions are lower than the applicable emissions limit. Facilities can sell surplus credits or bank them for use in future years. This approach minimizes the risk that businesses will move from Canada to jurisdictions that do not price carbon.
- Provincial and territorial carbon pollution pricing systems have similar designs to protect against this risk.
Q4. Has the federal government considered implementing border carbon adjustments to help mitigate carbon leakage?
- Avoiding carbon leakage is key to good climate policy. Carbon leakage occurs when companies move to countries with lower climate ambition to avoid carbon costs. The result is that emissions shift from one place to another rather than decline. Canada’s carbon pricing systems are designed to address this risk. The federal Output-Based Pricing System and similar provincial systems are designed to minimize the risk of carbon leakage.
- Another way to address the risk of carbon leakage is with a border carbon adjustment. This can help level the playing field between domestic and foreign producers.
- Canada will continue to explore whether a BCA makes sense in the Canadian context, working with like-minded economies, including the European Union and our North American partners, to consider whether and how this approach could fit into a broader strategy to meet ambitious climate targets while avoiding carbon leakage.
Q5. Why not expand the exemption on heating oil to support affordability?
- This was a targeted temporary suspension as part of a national package of measures designed to help Canadians transition from less environmentally friendly fuels like heating oil as quickly as possible.
- In addition to a temporary suspension of the federal fuel charge on heating oil, this also included:
- Doubling the supplement to carbon pollution price rebates (Climate Action Incentive Payments) to small and rural communities from 10% to 20%.
- Significant investments to help households switch from oil to heat pumps to heat and cool their homes, including through NRCan’s Oil to Heat Pump Affordability program.
- Carbon pollution pricing remains a pillar of the Government of Canada’s Emissions Reduction Plan and is the most cost-efficient way to reduce emissions and incent innovation.
Q6. What is the Government of Canada doing with the revenues it collects through carbon pollution pricing?
- All proceeds from the federal carbon pollution pricing system are returned to the province or territory of origin. Jurisdictions that requested or accepted the application of the federal fuel charge and/or the Output-Based Pricing System (OBPS) can choose to have these proceeds returned directly.
- In jurisdictions where the federal fuel charge has not been requested but has been applied, the majority of direct proceeds are returned to households through Canada Carbon Rebate payments (previously Climate Action Incentive payments). Most households will get back more in Canada Carbon Rebate payments than they pay in increased costs due to the federal carbon pollution pricing system.
- The remaining portion of proceeds will be returned through federal programming to groups that may be disproportionately impacted by climate change. This includes returning proceeds to farmers, to Indigenous peoples through joint-development of distinctions-based mechanisms, and to small and medium-sized businesses.
- Past backstop jurisdictions where the federal OBPS system was applied but not requested included Saskatchewan, Ontario, and New Brunswick, as well as current backstop jurisdictions where the federal OBPS system is currently applied, namely Manitoba, will see proceeds retuned through the OBPS Proceeds Fund to further support industrial decarbonization and clean electricity initiatives.
Q7. What is the Government of Canada’s plan to return fuel charge revenues?
- The federal fuel charge currently applies to the provinces of Alberta, Saskatchewan, Manitoba, Ontario, Nova Scotia, New Brunswick, Newfoundland and Labrador, and Prince Edward Island, and the territories of Nunavut and Yukon. In the provinces, the Government remains committed to ensuring that proceeds are returned to the jurisdiction of origin though a combination of Canada Carbon Rebate payments (previously Climate Action Incentive payments) and federal programming. The governments of Nunavut and Yukon receive the proceeds directly and have their own programming to return them.
- For the 2023-24 fuel charge year, around ninety per cent of fuel charge proceeds are returned via Canada Carbon Rebate payments (previously Climate Action Incentive payments). Remaining proceeds are returned to small and medium-sized enterprises and Indigenous governments. Proceeds relating specifically to the use of natural gas and propane by farmers are returned directly to farmers via a refundable tax credit.
- The Government of Canada continues to prepare to return over $3.1 billion of fuel charge proceeds to small and medium-sized enterprises in jurisdictions where the federal fuel charge applies. Information regarding available programming to return these fuel charge proceeds will be shared as soon as details are available.
- The Government of Canada also remains committed to returning over $531 million of federal fuel charge proceeds to Indigenous governments and is currently engaging with First Nations, Inuit, and Métis partners on the approach for distributing these proceeds in each province where the federal fuel charge applies.
Q8. What is the OBPS Proceeds Fund, and how much funding is available?
- Launched on February 14, 2022, the OBPS Proceeds Fund is designed to further reduce industrial greenhouse gas emissions and support clean electricity projects. The program has two streams:
- The Decarbonization Incentive Program (DIP) stream is a merit-based program that incentivizes the long-term decarbonization of Canada’s industrial sectors by supporting clean technology projects to reduce greenhouse gas emissions. Most OBPS regulated facilities can apply and applications are currently being accepted.
- The Future Electricity Fund stream is designed to support provincially managed clean electricity projects and/or programs. Eligible projects will be determined during the negotiation of funding agreements in each jurisdiction. Formal negotiations are underway.
- Available funding depends on the amount of proceeds collected from OBPS regulated facilities during a given compliance period. Approximately $162 million from 2019, $233 million from 2020, $291 million from 2021, and $223 million from 2022 was collected from the federal OBPS during the respective compliance periods. Jurisdictions that exit the federal OBPS by implementing their own system will no longer have proceeds collected by the federal government, but will see any previous amounts returned through the OBPS Proceeds Fund; New Brunswick exited the federal OBPS system in January 2021, Ontario in January 2022, and Saskatchewan in January 2023.
- The following table shows the estimated funding available in respective jurisdictions:
Province | 2019 (in millions) | 2020 (in millions) | 2021 (in millions) | 2022 (in millions) |
---|---|---|---|---|
Manitoba | $5.1 | $7.0 | $8.3 | $10.3 |
New Brunswick | $2.7 | $3.0 | - | - |
Ontario | $68.0 | $97.7 | $89.8 | - |
Saskatchewan | $6.9 | $6.4 | $10.5 | $20.2 |
*New Brunswick exited the federal OBPS system in January 2021*
Province | 2019 (in millions) | 2020 (in millions) | 2021 (in millions) | 2022 (in millions) |
---|---|---|---|---|
Manitoba | $0.3 | $0.2 | $0.5 | $0.4 |
New Brunswick | $5.9 | $14.1 | - | - |
Ontario | $17.0 | $19.9 | $18.5 | - |
Saskatchewan | $56.3 | $84.9 | $163.2 | $191.6 |
Q9. How will the Government of Canada return proceeds to provinces or territories that have transitioned out of the federal OBPS and implemented their own carbon pollution pricing system for industrial emitters?
- If a province or territory implements its own carbon pollution pricing system that meets the federal benchmark and transitions away from the federal OBPS, the OBPS Proceeds Fund would continue to support any projects that have been approved for implementation in those jurisdictions. The program would continue in the jurisdictions where the OBPS is no longer in effect until proceeds have been returned.
Q10. How will the Government of Canada return proceeds to Indigenous governments?
- In 2020, Canada committed to work on a distinctions-basis to jointly develop the mechanisms by which 1% of fuel charge proceeds would be returned to Indigenous governments in jurisdictions where the federal fuel charge applies. The purpose of this approach is to provide flexible transfer payment mechanisms that better support investments in self-determined priorities, including Indigenous-led climate action.
- Beginning in 2021, officials from Environment and Climate Change Canada have engaged with First Nations, Inuit and Métis in the provinces where the federal fuel charge is in effect on the path forward for returning fuel charge proceeds. Inuit partners began being engaged in 2023.
- The Minister of Finance has specified the Minister of Environment and Climate Change as responsible for returning over $531M of net fuel charge proceeds for the period of 2020-21 to 2024-25 to Indigenous governments in each province where the federal fuel charge applies.
- December 2023: specification of $282.19M, representing 1% of net fuel charge proceeds collected from 2020-21 to 2023-24,
- February 2024: specification of $249.3M, representing 2% of net fuel charge proceeds for the period of 2024-25.
- In February 2024, the Government of Canada announced that, in recognition of the impacts of climate change on Indigenous communities, starting in 2024-25, the share of fuel charge proceeds returned to Indigenous governments will increase from 1% to 2%. The government intends to return 2% of fuel charge proceeds to Indigenous governments in subsequent years.
- Environment and Climate Change Canada is working to complete engagement with Indigenous partners on the approach for returning the proceeds that have been specified thus far, and to announce programing as soon as possible.
Q11. Why is the government refusing to pause the carbon price increase scheduled for April 1, 2024, as requested by Atlantic Premiers on March 12?
- Affordability is top of mind for the federal government, as it is for Atlantic Premiers and other provincial and territorial leaders.
- But pausing the increase to the price on carbon pollution would be counter-productive, both for affordability and the fight against climate change.
- The federal approach to carbon pollution pricing actually protects households against affordability impacts.
- The Canada Carbon Rebate ensures that proceeds go back to households before they incur costs from the price on pollution.
- The majority of households get more back than the costs they incur, in particular low- and medium-income households. This means that pausing the carbon price wouldn’t in practice help most households and could actually hurt some lower and medium-income households.
- Doubling the rural top-up to 20% will also help those with fewer options to reduce emissions.
- The small, steady increases to the carbon price each year (about 3.3 cents per liter of gasoline) are designed to avoid major price shocks, while the rebates protect household finances.
- We also need to remember that carbon pricing is a pillar of our climate plan and projected to achieve about one third of all the pollution reductions it targets. It is more efficient than other types of measures, which could end up costing more and protecting affordability less.
Cap and cut emissions from oil and gas
Q1. What is the approach to cap and cut oil and gas sector emissions?
- Canada is taking action across all sectors to meet its commitment to reduce GHG emissions by 40% to 45% below 2005 levels by 2030 and to reach net-zero emissions by 2050.
- The oil and gas sector is the largest source of emissions in Canada producing 28% of national emissions in 2021. It is also a major employer and contributor to Canada’s GDP.
- On December 7, 2023, the Government published a Regulatory Framework to cap GHG emissions from the oil and gas sector through a cap-and-trade system under CEPA for a 60-day comment period.
- The approach to the emissions cap is designed to ensure predictable emissions reductions while enabling ongoing production. Facilities will have an incentive to reduce emissions to the level of the emissions cap but will have the flexibility to emit up to a maximum.
- It will work together with new and existing policies to reduce oil and gas sector emissions, including carbon pollution pricing, proposed amendments to strengthen the oil and gas methane regulations and the CCUS investment tax credit, for example.
- The Government of Canada will continue to engage with oil and gas companies, provinces and territories, Indigenous organizations and other stakeholders as we develop the emissions cap.
Q2. How would an emissions cap affect oil and gas production, exports, and energy security?
- To be clear, the purpose of the emissions cap is to reduce GHG emissions not to cap oil and gas production in Canada.
- The Regulatory Framework, published December 7, 2023, is clear that the proposed emissions cap is designed to ensure predictable emissions reductions while enabling ongoing production. It is designed to provide the sector with the flexibility to respond to changes in global markets and demand.
- The emissions cap will ensure that the reductions and investments needed to achieve net zero in 2050 are made, which will help support the future competitiveness of the sector.
- We will continue to work closely with provinces and the sector as we develop the details of the regulatory approach and remain attuned to evolving energy security and climate risk considerations.
Q3. Is the oil and gas sector target achievable? If it costs too much won’t it just scare investment away from Canada?
- As proposed in the Regulatory Framework published Dec. 7, 2023, the cap on emissions will set a limit on emissions not on production.
- The design will ensure predictable emissions reductions while enabling continued production and providing flexibility to respond to changes in global markets and demand.
- The proposed emissions cap level and legal upper bound were designed based on extensive engagement with industry on the technologically achievable reductions in the sector by 2030.
- Proposed compliance options, including the use of offsets and contributions to a decarbonization fund, provide flexibility and certainty.
- The proposed approach will ensure that the reductions and investments needed to achieve net zero in 2050 are made, as committed to by many industries within the sector.
- Demand for low carbon fossil fuels is expected to increase over time. Reducing emissions in Canada’s oil and gas sector is expected to help to maintain sector competitiveness.
- The proposed approach is designed to enable increased production in response to global demand, incent investments in decarbonization, and ensure the sector reduces emissions to achieve net zero by 2050.
Q4. What are the most promising decarbonisation pathways for the oil and gas sector?
- Large-scale deployment of multiple technologies are required for oil sands and other oil and gas producers to reduce GHG emissions.
- Some key mitigation pathways include steam displacement (which includes solvent injections), CCUS, co-generation, electrification, fuel switching and energy efficiency applications.
- CCUS can help us tackle emissions from the toughest-to-abate but crucial sectors of Canada’s economy (such as oil and gas and heavy industry); enable low-carbon pathways like hydrogen; and deliver negative emissions to support carbon dioxide removal.
Clean Electricity Regulations
Q1. Why do we need the Clean Electricity Regulations (CER)?
- An expanded, net zero grid capable of supplying much more electricity than our current grid will be a pre-requisite to achieving a net zero economy by 2050.
- While 84% of Canada’s electricity is currently non-emitting, demand for electricity is expected to increase significantly in the coming decades as our population and economy grow and as Canadians switch to electric vehicles, adopt electric home heating, and use electricity to power industry. To ensure this increased demand does not increase emissions, the Government is implementing a series of measures, including the CER. This is being designed to reduce emissions while enabling continued access to an affordable and reliable grid.
- The Government of Canada is complementing the regulations with a suite of measures to support the clean energy transition, including over $40 billion in investments over the next 10 years through investment tax credits, low-cost financing through the Canada Infrastructure Bank, and other funding announced in Budget 2023.
- All G7 countries have committed to net zero electricity by 2035, and the United States has released draft clean power rules and announced investments through the Inflation Reduction Act.
- Creating a clear path forward to net-zero electricity is already helping enhance Canada’s ability to attract industry and investors looking for a clean power advantage. We are already seeing the economic benefits of a clean electricity supply with significant investments being made in Canada’s economic growth. For example, in April 2023, Volkswagen committed to build one of the largest battery factories in the world because of Canada’s ability to supply clean and affordable electricity in the decades ahead. Having clean electricity is a competitive advantage.
Q2. What is the status of the CER and next steps?
- ECCC has received substantial feedback and constructive suggestions for making improvements from provinces and utilities on the draft Regulations.
- Following extensive consultation on the draft regulation, an update to the CER was published on February 16, 2024, proposing various changes to enhance flexibility for operators so that they can continue to deliver reliable and affordable power, while still delivering significant emissions reductions. Initial reactions have been largely positive.
- The changes under consideration are expected to give provinces more flexibility and control to enable them to manage cost and reliability concerns as they build and operate grids in the context of growing electricity demand.
- ECCC continues to engage with interested parties, including through a 30-day public feedback period on the proposed changes which concluded on March 15, 2024.
- [*Redacted*]
Q3. What does the recent update to the Clean Electricity Regulations mean for electricity rates for Canadians?
- Electricity rates in Canada are set by provincial governments and regulators.
- Given the anticipated increased demand for electricity, there will be costs to expand the electricity grid with or without the Clean Electricity Regulations. The costs directly attributable to the CER are expected to be minimal.
- The Canada Energy Regulator has concluded that provinces will need to expand their grids by 2-3 times by 2050 to respond to increased demands coming from population and economic growth, the switch to electric vehicles, the adoption of electric building heating and the electrification of industrial processes such as steel and aluminum production. Such changes are estimated by the Government of Canada to require investments of more than $400 billion. By comparison, the costs that can be directly attributed to the Clean Electricity Regulations, which ensure these investments lead to a cleaner electricity grid and help address climate change, are relatively minimal.
- The Government of Canada has committed more than $40 billion over the next decade to support the build out of a clean electricity grid. It is expected that provinces will be well-positioned to take advantage of this suite of funding measures, which would help them reduce incremental costs and impacts on rates.
- [*Redacted*], the Government of Canada will continue to work with interested parties to refine the design of the CER and address concerns for the reliability and affordability of electricity, while still achieving significant emissions reductions.
- A recent study on electrification from the Canadian Climate Institute found that on average overall household energy costs for Canadians will decline around 12% by 2050. Even with the investments required for equipment such as heat pumps and EVs and for grid expansion, households will benefit from reduced expenditures on costly and unpredictably priced fossil fuels such as gasoline, diesel, and natural gas, which will more than offset increased expenditures on electricity.
Q4. Is the revised approach expected to lead to similar GHG emissions reductions compared to the draft regulations published in the Canada Gazette (August 2023)? What other benefits can Canadians expect from these regulations?
- Following six months of extensive engagement, we heard the need for more flexibility to better account for the critical need of grid reliability and to better accommodate differing regional circumstances to support an affordable net-zero transition for a green economy.
- [*Redacted*]
- The Government of Canada’s modelling for the draft CER projects billions of dollars in net benefits between 2024 and 2050 from reduced GHG and air pollution emissions and operational savings from reduced fossil fuel use.
- The Clean Electricity Regulations can also help drive the development of emerging clean energy technologies.
Q5. Will the CER allow the continued use of fossil fuels like natural gas? Why?
- Although the CER would allow some use of fossil fuels like natural gas post-2035, the regulations would shift the mix of generation sources in Canada’s electricity system towards low- or non-emitting sources more quickly and to a greater extent than would be expected without the Regulations.
- A net-zero electricity grid will require a different mix of generation technologies than have been used in the past, especially for fossil-fuel reliant regional grids. The CER’s flexibilities would allow some natural gas to provide an adequate level of support for reliability and in support of affordability while utilities and system operators make this transition.
- There are many promising emerging non and low-emitting technologies, including energy storage that are not fully yet at commercial scales of deployment. The CER would allow some use of natural gas as backup as these technologies are integrated at a wider scale.
Q6.Why do we need net-zero electricity by 2035, why not by 2050?
- As the Canadian population and economy grow and more Canadians switch to electricity to power their vehicles, heat their homes, and operate their businesses, the total demand for electricity will grow.
- We need to ensure this demand is met with clean electricity so that Canada can reach its net zero by 2050 target.
- The global economy is changing, and clean electricity is in demand as all G7 countries and hundreds of the largest companies in the world commit to net-zero. Investors are turning to countries with non-emitting electricity to meet their own emissions reduction targets and connect to grids that offer reliable and affordable electricity. Building an affordable, reliable, and clean supply of electricity will help Canada remain competitive and attract investments.
Q7. What is the Government of Canada doing to support the transition to net-zero electricity?
In addition to the Clean Electricity Regulations:
- Convening: The Government of Canada is working with provinces, territories, Indigenous peoples, and others to identify and support regional priorities for clean electricity and clean energy. This includes the Canada Electricity Advisory Council, the Indigenous Council for Wah-ila-toos, the Regional Energy Tables and other bilateral forums.
- Complementary policies: The regulations are one component of a broader plan for net-zero climate policies under the Emissions Reduction Plan that includes carbon pricing, Clean Fuel Regulations and Oil and Gas Caps.
- Funding: the Government has put in place a suite of measures totaling over $40 billion over the next 10 years to support provinces and territories, Indigenous partners, utilities, and industry accelerate progress towards a net-zero electricity sector by 2035.
Supplementary:
- Nearly $3 billion Smart Renewables and Electrification Pathways Program.
- $10 billion in low-cost financing from the Canada Infrastructure Bank for clean electricity projects.
- 15% Clean Electricity Investment Tax Credit – estimated cost of $25.7 billion over the lifetime of the incentive – for eligible investments by taxable and non-taxable entities in certain technologies for the generation and storage of clean electricity and its transmission between provinces and territories.
- 30% Clean Technology Investment Tax Credit for eligible investments by businesses in certain electricity generation and storage equipment, low-carbon heating, and industrial zero-emission vehicles and related charging or refuelling infrastructure.
- 30% Clean Technology Manufacturing Investment Tax Credit for eligible investments in machinery and equipment used to manufacture or process clean technologies, and extract, process, and recycle key critical minerals.
- $520 million for the Clean Energy for Indigenous, Rural and Remote Communities programs for renewable energy and capacity-building projects and related energy efficiency measures across Canada. This includes the complementary Indigenous Off-Diesel Initiative that provides clean energy training and funding for Indigenous-led climate solutions in remote Indigenous communities.
- The Canada Growth Fund is devoting $7 Billion to support clean growth projects by providing carbon contracts for difference.
- Innovation, Science and Economic Development Canada is also investing in clean electricity projects via the Strategic Innovation Fund and Net Zero Accelerator initiative.
Q8. How is Canada recognizing the large regional differences in electricity systems?
- The draft CER is a technology-neutral regulation. It includes various flexibilities so that provinces and utilities can maintain a reliable and affordable supply of electricity based on their own circumstances.
- [*Redacted*]
- Our Government has now announced over $40 billion over the next 10 years for clean electricity to assist regions in making the transition. The federal government is working closely with provinces through regional energy tables to identify regional opportunities, priorities, and challenges for moving to clean energy. Opportunities exist for regions to work together to develop interties to move clean power amongst themselves. The recent announcement from Nova Scotia and New Brunswick indicating plans to build a new reliability intertie is an example of such interprovincial collaboration.
Q9. Are there any changes as to when the Clean Electricity Regulations will come into force?
- The public update released on February 16, 2024, does not affect the timelines for the regulations.
- [*Redacted*]
Clean Fuel Regulations
Q1. When did the Clean Fuel Regulations come into force?
- The Clean Fuel Regulations came into force in June 2022. The reduction requirements under the Regulations started on July 1, 2023.
Q2. What do the Clean Fuel Regulations cover?
- The Regulations aim to reduce greenhouse gas emissions from liquid fossil fuels used in Canada for transportation, i.e. gasoline and diesel. The Regulations require liquid fossil fuel suppliers to reduce the lifecycle carbon intensity of the fuels they produce and import for use in Canada. A lifecycle approach accounts for emissions across all stages of fuel production and use, from extraction through processing, distribution, and end use.
Q3. Do the Clean Fuel Regulations duplicate what would be achieved by carbon pollution pricing or the oil and gas cap?
- The Clean Fuel Regulations complement carbon pricing.
- Carbon pricing sends a broad signal across the economy to spur the lowest cost reductions wherever they may be found.
- The Clean Fuel Regulations complement these general signals by sending a targeted incentive to drive transformational changes along the lifecycle of liquid fuels for longer-term capital investments such as carbon capture and storage.
- Actions taken under the Clean Fuel Regulations can also reduce the overall emissions of a refinery helping it to meet compliance under other provincial or federal regulations like the Output-Based Pricing System.
- As the oil and gas emissions cap is designed, it will take into account the Clean Fuel Regulations.
- The price on carbon, Clean Fuel Regulations, and the oil and gas emissions cap will all help Canada meet our emission reduction target, and to put Canada on a path towards achieving the goal of net-zero emissions by 2050.
Q4. What does success look like for the Clean Fuel Regulations?
- The Clean Fuel Regulations are expected to result in significant GHG reductions (up to 26 Mt in 2030) by lowering the lifecycle carbon intensity of gasoline and diesel used in transportation. In addition, the Regulations are driving innovation and support sustainable jobs across multiple sectors of the economy, including in clean technology and low-carbon energy sectors such as biofuels and hydrogen.
- Other jurisdictions that have adopted a low-carbon fuel standard such as California and B.C. have seen increases in low-carbon intensity fuel production and consumption.
Q5. What is the status of the credit market? Are there enough credits available for compliance?
- The Clean Fuel Regulations credit transfer market is operating well and as expected.
- On a national level, the Department estimates that two times the credits required will be available for compliance with the first reduction requirement.
Q6. When will ECCC publish CFR market data to provide more information for regulated parties and investors?
- ECCC understands the importance of market information to investors and regulated parties.
- After April 30, 2024, the Department will have a year’s worth of credit creation data for credit creation categories. Public reporting will follow shortly thereafter.
Q7. What is ECCC’s view on the price adjustment that some Atlantic Provinces have included in their retail regulated fuel prices in response to their analysis of the compliance costs associated with the Clean Fuels Regulations?
- The CFR does not set a price, instead it requires fuel suppliers to reduce the lifecycle carbon intensity of the gasoline and diesel they produce and import for use in Canada.
- Price impacts will depend on the choices of the regulated parties in the oil and gas sector, each of which have the flexibility to find the most cost-effective approaches that work best for them, whether investing in cleaner production or blending with biofuels.
- While reduction requirements under the CFR started on July 1, 2023, refineries have until July 1, 2024, to achieve their 2023 compliance obligation which is designed to be minimal in the early years.
- To ensure the compliance costs and fuel price impacts are well understood, we commissioned and shared an independent study of the CFR by ESMIA (Energy Super Modelers and International Analysts).
- That study was published on January 25, 2024. It found that the fuel price impacts from the CFR are likely to be negligible in 2023 and 2024, with increases of less than half a cent per litre for gasoline.
Clean technology
Q1. Why is clean technology important for reducing emissions and the transition to net-zero?
- Meeting Canada’s climate commitments set out in the Canadian Net-Zero Emissions Accountability Act hinges on a transition to clean technologies across every economic sector, shifting from carbon-intensive technologies to those that can significantly reduce or eliminate greenhouse gas emissions from process and practices.
- Reaching net-zero by 2050 requires current clean technologies to be deployed on a greater scale in parallel with the development of emerging technologies. In 2021, the International Energy Agency (IEA) estimated that emerging technologies would be needed for up to half of the emissions reductions required to achieve net-zero emissions by 2050. In its latest 2023 outlook, the IEA has estimated that this has already been reduced to 35%. This shows both the rapid pace of change and the enormous opportunity that remains.
Q2. What are some of the critical clean technologies in achieving Canada’s 2030 targets and net-zero by 2050?
- Many of the clean technologies needed to achieve our 2030 targets are already commercially available - but we will need to scale up these solutions.
- Canada has an important clean electricity advantage with an 82% non-emitting grid. Renewable energy technologies and interties will help further clean the grid, and Canada is developing a Clean Electricity Standard to ensure we transition to a net-zero energy grid nationally by 2035. A clean grid can lay the foundation for electrification of many applications across the economy and help reduce our use of fossil fuels.
- Accelerating our transition to zero-emission vehicles will be critical and we’ve set a target to transition to 100% zero-emission vehicles for cars and light trucks by 2035.
- Electrifying heat in buildings is also a significant opportunity to reduce emissions and can save consumers money in the long run. Efforts in this area have been advanced through the development of programs such as the Canada Greener Homes Grant and Oil to Heat Pump Affordability Program.
- Carbon capture, utilization and storage and clean hydrogen are emerging technologies that will be required to help decarbonize hard-to-abate industrial sectors such as cement, steel and chemicals, as well as the oil and gas sector.
Q3. What challenges do clean technologies face?
- There are numerous challenges that impact the pace and scale of clean technology adoption and innovation. Clean technologies can be more expensive, incurring higher capital costs than their equivalent emissions-intensive options, which means a mix of incentives, carbon pricing, and/or regulations are needed to encourage sufficient private sector investment and public uptake.
- Given the relatively early stage of the transition in most sectors, clean technologies are also confronted by uneven supply chains and enabling infrastructure; these require time to build out before widespread adoption and cost reductions can take hold.
- Moreover, there tends to be a general lack of awareness among stakeholders about clean technology solutions or the necessity of shifting towards them.
- We also know that emissions from some sectors are harder to abate than others, for example, emissions from heavy industry, oil & gas, medium- and heavy- duty freight, aviation, etc.
- However, the Government of Canada is working to address these challenges, for example, as outlined by the 2030 Emissions Reduction Plan (ERP) Progress Report. Canada is implementing a series of measures designed to support emissions reduction in all sectors of the economy, including hard-to-abate sectors. These include helping industries to adopt clean technology in their journey to net-zero emissions, through funding programs and a suite of clean investment tax credits, and regulatory measures including carbon pricing, methane regulations and the Clean Fuel Regulations, and developing an emissions cap for the oil and gas sector.
Q4. How is the federal government supporting clean technology in Canada?
- The Government of Canada has made significant investments since 2016 to accelerate clean technology deployment and development, with investments of over $120 billion in clean growth and other emissions reduction measures.
- Over the past three years alone, more than 90 clean growth projects valued at a total of more than $50 billion, including private investment, are underway or will soon move forward into construction across Canada.
- Prominent federal measures such as the Canada Growth Fund, the Strategic Innovation Fund – Net Zero Accelerator, the Energy Innovation Program and the Low Carbon Economy Fund, are propelling clean technology research, development and demonstration (RD&D) in emerging innovations and de-risking investment in clean technology deployment to guide decarbonization across industries.
- Underlying regulations and investment tax credits are also providing clear signals across the innovation continuum. Beyond this, the Government continues to undertake numerous enabling actions to encourage clean technology development and adoption, including the activities of the Clean Growth Hub, Clean Technology Data Strategy, and Clean Technology and Climate Innovation Strategy.
- The support to date from the Government of Canada, provinces and the private sector is supporting the development of critical technologies, but not to the point of market saturation where supports are no longer needed.
- The Government of Canada estimates that between $125 to $140 billion in annual private and public investment across all levels of government is needed to reach net zero by 2050, but currently, only $15 to $25 billion is being invested each year. Given the fiscal support already provided by the Government of Canada, it is increasingly important for business, investment, and financial sector leaders to respond to the strong market signals that have been put in place.
Q5. What is the size of Canada’s clean tech sector?
- Clean technology in Canada has been growing in economic importance over the last decade. Canada’s total clean tech market was estimated at $34 billion in 2021, with approximately $9.1 billion in exports and $14.7 billion in imports.
- Clean technology employs more than 211,000 Canadians, and the number of jobs is expected to grow by almost 50% by 2030.
- In Canada, clean tech companies operate across diverse sectors in the economy, from transportation, industry, buildings, and energy to waste and agriculture. Notable clean technology sectors in Canada include clean fuels, rare earth minerals, clean electricity, industrial decarbonization, methane abatement, clean transportation technologies, and energy-efficient equipment.
- According to EDC, key clean tech exports include transportation and vehicle technologies, energy efficiency technologies, clean energy equipment such as wind and solar parts and biofuel technologies. The U.S. remains the main export market for Canadian clean tech producers.
- Canada is home to thousands of clean tech firms with annual revenues worth over $17 billion. The sector is predominantly composed of small- and medium-sized enterprises (SMEs).
- In 2024, 13 Canadian companies were named to the Global Cleantech 100 list, second after the United States.
Q6. Why does clean tech/climate innovation matter to Canadians?
- Clean technology offers significant benefits to Canadians, from environmental benefits to cost savings and clean air, to more than 211,000 well-paying jobs. Creative solutions and innovative technologies are key to helping the world tackle climate change (e.g., electric vehicles, renewable energy, energy efficient heat pumps, etc.), plastic waste, and other environmental challenges we face.
- The global clean technology market is set to exceed $3.6 trillion by 2030, and there is an enormous opportunity for Canadian businesses in clean technology to grow and capture a large share of global markets while improving environmental outcomes.
- Canada is well-positioned to be among the leaders in this area. Canadian clean technology companies receive international recognition for their innovations every year. Canadian ingenuity is creating electric transit buses and carbon-free aluminum.
- By developing and adopting clean technologies, companies and industry can better control costs, meet new regulatory requirements at home and abroad, improve global competitiveness and reduce impacts on climate, water, land and air. Canadians have the opportunity to build on our strengths as innovators and producers of clean technology solutions to help Canada transition to a resilient and prosperous clean growth economy.
UN conference on climate change: COP28
Q1. What were Canada’s goals for COP28 and were they achieved?
- COP28 marked a critical moment in global climate discussions. Countries assessed collective progress made since the adoption of the Paris Agreement to inform the actions needed to keep global warming within 1.5C.
- Canada used COP28 to advocate for ambitious global climate action on mitigation, adaptation, and finance and to advance biodiversity and pollution reduction goals.
- The results were positive and strong. Canada and nearly 200 other countries reached a historic agreement on the Global Stocktake decision. This provides a clear path, agreed to by all countries, to achieve the Paris Agreement’s long-term goals.
Follow-up:
- Many elements of the Global Stocktake decision speak directly to Canada’s priorities and interests. There was, for the first time, a commitment by all countries to transition away from fossil fuels in energy systems. It detailed a series of global efforts to accelerate the energy transition such as tripling renewable energy capacity and doubling the average annual rate of energy efficiency improvements by 2030.
- The Global Stocktake decision also encourages all countries to come forward with ambitious nationally determined contributions to reducing carbon emissions that are aligned with limiting global warming to 1.5 °C. These contributions are essential to mitigate the worst consequences of climate change for Canadians and people around the globe.
- Canada also used the conference to showcase Canadian climate leadership and innovation from actors across the country with events at the Canada Pavilion organized by provinces, civil society, and Indigenous organizations.
Q2. How big is the delegation? How much has the Government spent on COP28? How can you justify the cost of Canada’s participation?
- Over the past several years, UNFCCC COPs have evolved to become large multi-faceted events bringing together state and non-state participants to drive momentum and catalyze climate action.
- The Government of Canada is committed to taking a whole-of-government, whole-of-society approach to climate action. The Canadian delegation reflects the need to participate in expanding negotiations and provide programming to ensure inclusive representation of relevant provincial and territorial governments, civil society, Indigenous and private sector partners, and stakeholders.
- Accreditation as part of Canada’s delegation was necessary for participants to access meeting and event sites. At COP28, 633 in-person participants were accredited and attended as part of the Canadian delegation. This included:
- 114 representatives from the federal government
- 7 representatives of the House of Commons, Senate, and their support
- 77 from provincial governments,
- 12 from municipal governments and groups
- 53 from Indigenous organizations
- 43 from civil society organizations
- 28 from academia
- 17 from youth groups
- 9 from labour organizations and unions
- 8 from international organizations
- 254 from the private sector
- And 5 additional participants participated virtually
- With respect to travel, the federal government covered the costs of 114 federal employees (including 44 from ECCC), four Indigenous Representatives, six youth delegates, six civil society representatives, six Parliamentarians, one Net-Zero Advisory Body Member, five non-public servant Canada pavilion support staff, and 22 Canada pavilion participants belonging to underrepresented groups.
- Nine additional National Indigenous Organizations representatives receive funding for their participation at COP28 pursuant to their funding agreement with the Government of Canada on clean growth and climate change. Delegates other than those outlined above were responsible for their own travel expenses.
- The Government of Canada has incurred $1,353,307.09 in costs to date for the Canadian delegation at the 28th Conference of the Parties (COP28) in Dubai. The costs incurred do not reflect the final costs. There are still invoices and claims as well as recoveries between departments that have yet to be processed.
Q3. How is the government offsetting the carbon footprint resulting from the Canadian delegation’s travel to and from the conference?
- Air travel-related greenhouse gas (GHG) data is available on a departmental basis and is published online.
- Air travel GHG data is generated through the centralized travel booking service and includes departmental public servant travel, which represents most of the travel. This does not include Ministerial travel as it is not booked through the centralized system. This does not include disaggregated data by passenger.
- Environment and Climate Change Canada purchases carbon offset credits in bulk, not by travel to a specific conference or event, to help mitigate the greenhouse gas emissions associated with Ministerial air travel.
- Departments and agencies that generate greenhouse gas (GHG) emissions in excess of 1 kilotonne per year from air travel are required to contribute annually to the Greening Government Fund (GGF) and have been charged a TBS-set fee based on the average total annual air-travel emissions of that organization over the previous three years.
International climate finance
Q1. What are the main objectives of Canada’s climate finance?
- Climate finance is a critical part of Canada’s efforts to support climate mitigation and adaptation action in developing countries in line with the objectives of the Paris Agreement.
- In 2021, Canada doubled its climate finance commitment to $5.3 billion (B) over 5 years to support developing countries to transition to sustainable, low-carbon, climate-resilient, nature-positive and inclusive development.
- To support developing countries in combating the dual crises of climate change and biodiversity loss, a minimum of 20% of $5.3B is being allocated to projects that leverage nature-based climate solutions and projects that contribute to biodiversity co-benefits.
- Canada’s climate finance envelope is comprised of 40% grants and 60% loans, having increased its provision of grants up from 30% under the previous five-year commitment to support improved access by affected communities.
- As part of its $5.3B climate finance commitment, Canada increased its provision of funding towards adaptation to 40% and will double its funding for adaptation from 2019 levels by 2025, in line with the Glasgow Climate Pact. This increase represents more than double the provision of adaptation finance relative to Canada’s previous $2.65B commitment.
- Canada’s climate finance is aligned with our Feminist International Assistance Policy and will continue to support women’s leadership and decision-making in climate action. Canada will ensure that 80% of its climate finance projects integrate gender equality.
- During the five years of the commitment, Canada is focusing its international climate finance on four main thematic areas: clean energy transition and coal phase-out, climate-smart agriculture and food systems, nature-based solutions and biodiversity, and climate governance.
- Canada’s climate finance plays an important role in demonstrating Canada’s commitment to deliver on its part of the collective $100 billion annual climate finance goal through to 2025.
Q2. What results has Canada achieved from its international climate finance?
- To date, Canada’s previous $2.65B climate finance commitment is expected to reduce or avoid over 223.7 megatonnes of greenhouse gas (GHG) emissions and help over 8.04 million (M) people increase their resilience to climate change. The impacts of Canada’s climate finance will continue to fluctuate over time as results of the investments materialize in the long-term.
- Canada’s climate finance has other impacts that are harder to quantify. For example, Canada’s contribution to the National Adaptation Plan (NAP) Global Network has enabled developing countries to build capacity and adopt best practices in developing and implementing NAPs, as well as strengthening gender considerations in NAPs.
- To achieve results, Canada works with partners that have clear accountability frameworks and closely monitors the progress of our support through rigorous performance measurement at the programmatic level.
- Results from Canada’s climate finance investments are published on a regular basis, notably through our Departmental Results Reports, Canada’s National Communications and Biennial Reports to the UNFCCC, the Annual Synthesis Report on the Status of Implementation of the Pan-Canadian Framework, and on our climate finance website.
Q3. Is Canada contributing its fair share of climate finance?
- Yes, Canada recognizes that developing countries are the hardest hit by climate change and that transformational financial investments are needed to help vulnerable communities better address climate change. Canada’s $5.3B climate finance commitment builds on the previous $2.65B commitment (2015-16 to 2020-21) and the $1.2B Fast Start Finance (2010-11 to 2012-13). As such, Canada’s $5.3B commitment is a significant increase compared with previous levels and continued progression towards meeting the collective goal of U.S. $100 billion per year through 2025.
- Canada’s total climate finance contribution goes much further than its core commitment. It includes climate finance mobilized from a variety of sources beyond Canada’s climate finance pledge such as private finance mobilized through blended finance, additional international assistance with a climate component, core contributions to multilateral development banks, and climate relevant financing by Export Development Canada and FinDev Canada. Canada has provided and mobilized over $6.8 billion in climate finance from all sources from 2015-2021, which far exceeds the baseline amount pledged through its public climate finance commitment.
Q4. Are we on track to meet the collective $100 billion goal?
- Canada has been steadfast in its efforts to meet the $100 billion collective goal and has been working with Germany to build trust and increase ambition among contributor countries.
- Based on data from the Organization for Economic Cooperation and Development (OECD), climate finance provided and mobilized towards the $100 billion goal surpassed earlier projections in 2021 and 2022. The OECD Secretary General indicated that the goal was likely met in 2022 and contributors are confident that it will be met in 2023 at the latest.
- While we are confident the goal has been met, data on climate finance delivered in 2023 will not be available until 2025 due to data requirements and reporting processes in place. Providing sufficient time for data on climate finance to be collected, compiled, and reported by contributors and subsequently assessed and analyzed by the Organization for Economic Cooperation and Development (OECD) is an integral part of efforts to ensure transparency and accountability.
Q5. What is Canada doing to support Small Island Developing States (SIDS)?
- One of the key objectives of Canada’s climate finance is to support the climate resilience of the poorest and most vulnerable countries, including SIDS.
- In addition to scaling up support for adaptation finance in its current $5.3B commitment, Canada is working to bolster efforts to address the barriers to accessing climate finance faced by SIDS, which compound the issue of vulnerability.
- For example, Canada supported the creation of the Climate Finance Access Network (CFAN) initiative that supports developing countries build their capacity to structure and secure finance for priority climate mitigation and adaptation investments. Canada is providing a renewed contribution of $5.25M in funding to support CFAN expand its work with climate-vulnerable countries. Canada is also providing $7.5M in bilateral support to Caribbean and Pacific Island SIDS to assist in the implementation and achievement of nationally determined contributions (NDCs) through methane reductions.
Q6. How is Canada addressing the issue of loss and damage?
- Canada is taking concrete measures to address loss and damage in developing countries and to build resilience to safeguard future generations. Loss and damage can result from adverse climate events and can, for example, include damage to infrastructure due to hurricanes or the loss of territory due to sea-level rise to which SIDS are particularly vulnerable.
- Previous measures to address loss and damage include Canada’s $10 million contributions to Climate Risk Early Warning Systems (CREWS), and $1 million contribution to the Systematic Observation Funding Facility (SOFF) to help build early warning systems in developing countries to strengthen the resilience of the most vulnerable.
- At COP28, Canada announced a $16 million contribution to the start-up cost of a global fund to address loss and damage. This contribution will support the fund as it starts to provide vulnerable countries and communities with the resources they need to respond to the worst impacts of climate change.
- Canada has secured a seat on the Board of the global fund to address loss and damage and will continue to shape the Fund’s strategic direction emphasizing the importance of sound governance, the prioritization of the most vulnerable countries and inclusion.
Q7. How much of the $5.3B climate finance envelope is ECCC implementing?
- Over 5 years, ECCC will implement $160M in grants and contributions in 3 thematic areas: Clean Energy and Coal Phase-Out ($50M), Nature-based Solutions ($15M) and Climate Governance ($90M). An Emerging Priority Fund sets aside $5M to retain flexibility to support Canada’s international climate change priorities and allow for responsive and opportunity-driven participation in key initiatives, in particular international events such as the G7/G20 and UNFCCC conferences.
- ECCC’s funding will support developing countries’ transition to clean energy primarily by phasing out coal-fired electricity and promoting equitable access to reliable and cost-effective clean energy solutions and energy efficient technologies, complementing Canada’s leadership through the Powering Past Coal Alliance.
- The funding will also support initiatives that catalyze the private sector’s role in the blue economy, coastal resilience and coral reef conservation to help advance ocean health, reduce vulnerability and build resilience in the most vulnerable coastal regions and communities.
- ECCC will also support projects that strengthen the enabling environments for effective climate governance in developing countries at the global, national and subnational levels.
- For 2023-24, ECCC is allocating a total of $45M in grants and contributions, building on $28M in 2022-23. This includes over $18M in support for clean energy and coal phase-out, $2.5M in funding for nature-based solutions and biodiversity, over $23M for climate governance, and $1.25M allocated for the emerging priorities fund.
Low Carbon Economy Fund
Q1. What is the Low Carbon Economy Fund (LCEF)?
- The Low Carbon Economy Fund is an important part of Canada’s clean growth and climate action plans. It supports projects that help to reduce Canada’s greenhouse gas (GHG) emissions, generate clean growth, build resilient communities, and create good jobs for Canadians.
- The Low Carbon Economy Fund was first funded in Budget 2017 in support of the Pan Canadian Framework on Clean Growth and Climate Change. The up to $2 billion of federal funding announced in 2017 has and continues to leverage investments in projects that generate clean growth, reduce greenhouse gas emissions, and contribute towards Canada’s climate targets.
- The original Low Carbon Economy Fund had two parts: the Low Carbon Economy Leadership Fund, providing up to $1.4 billion to provinces and territories to deliver on their commitments to reduce carbon pollution and contribute to meeting Canada’s 2030 climate targets; and the Low Carbon Economy Challenge including both Champions and Partnerships streams, leveraging investments in projects that reduce carbon pollution.
- Through Canada’s 2030 Emissions Reduction Plan and Budget 2022, the Government of Canada announced it committed additional funding to the Low Carbon Economy Fund. This would extend the Low Carbon Economy Fund through to 2028-2029.
- There are four parts to the recapitalized Low Carbon Economy Fund:
- The recapitalized Leadership Fund will continue to provide support to stimulate provincial and territorial climate action, with a focus on deploying proven low-carbon technologies that will result in GHG emissions reductions in 2030 and align with Canada’s net-zero by 2050 goals.
- The recapitalized Challenge Fund will continue to support the low-carbon economy transition of provinces and territories, municipalities, universities/colleges, schools, hospitals (MUSH), businesses of all sizes, not-for-profit organizations, and Indigenous governments, communities and organizations. The recapitalized Challenge Fund will support the deployment of proven, low-carbon technologies that will result in GHG emissions reductions in 2030, align with Canada’s net-zero by 2050 goals, and generate economic benefits such as job creation.
- Dedicated funding for climate action by Indigenous peoples, with an Indigenous Leadership Fund. This stream funds renewable energy, energy efficiency and low-carbon heating projects owned and led by First Nations, Inuit, and Métis governments, communities and organization. These projects will help meet Canada’s 2030 emissions reduction target and net-zero emissions by 2050. This is a key part of the 2030 Emissions Reduction Plan. As announced in Budget 2022, up to $32.2 million would be directed to the Atlin Hydro Expansion project, which will provide clean electricity to the Yukon and help reduce GHG emissions.
- The Implementation Readiness Fund, which provides funding for activities and investments that increase the readiness to deploy GHG emissions reduction projects and remove barriers to low-carbon technology adoption and 2030 climate mitigation action. Projects funded through the program will focus on developing and enhancing human and/or institutional resources through activities that facilitate the deployment of GHG emissions reduction technology.
Q2. How much funding will be available under the recapitalized LCEF?
- As a part of the 2030 Emissions Reduction Plan, Canada’s Next Steps for Clean Air and a Strong Economy, the Government of Canada is investing in further climate action.
- As announced in Budget 2022, the Government of Canada will be empowering communities to take climate action by expanding the Low Carbon Economy Fund.
- Refocusing government spending will affect funding available under LCEF. This includes $500 million redirected from the LCEF to Natural Resources Canada in the fall of 2023 to support the expansion of programs to support the deployment of heat pumps. Further details will be available in due course.
Q3. How will Indigenous communities and organizations benefit from the new Indigenous Leadership Fund?
- With the creation of the Indigenous Leadership Fund (ILF) there are opportunities to better support Indigenous-led projects that will reduce GHG emissions, while reducing the administrative burden for applicants.
- The ILF stream will foster Indigenous climate change mitigation leadership including through the deployment of renewable energy projects and energy efficiency improvements across Canada. Additionally, the Indigenous Leadership Fund has the potential to deliver numerous co-benefits ranging from environmental protection and economic prosperity to the advancement of Indigenous climate priorities and self-determination.
- Environment and Climate Change Canada continues to work with Indigenous partners to support Indigenous-led emissions reduction projects in Indigenous communities. This includes applying a distinctions-based, collaborative approach to designing the framework and implementation of the Indigenous Leadership Fund.
National Inventory Report
Q1. What are the key highlights from the 2023 National Inventory Report?
- Canada’s greenhouse gas emissions were 670 Mt of CO2 equivalent in 2021. This is an increase of 12 Mt from 2020, the first year of the pandemic, but 53 Mt below 2019 pre-pandemic emission levels.
- Noteworthy changes in emissions between 2020 and 2021 came from:
- Emissions from Transportation increased by 9 Mt largely due to more travelling.
- Emissions from Oil and Gas extraction increased by 4 Mt.
- Emissions from residential fuel combustion decreased by 1.5 Mt, driven by a warmer winter.
- Emissions from agricultural soils decreased 1.4 Mt mainly due to a sharp decrease in crop production following drought conditions on the prairies.
- Emissions from public electricity and heat production also decreased by 1.1 Mt due to further reductions in coal consumption.
- The emissions data for 2021 confirms Canada’s economy continues to decouple from its GHG emissions. The emissions intensity for the entire economy has declined by 42% since 1990.
Q2. Are GHG emissions data available by industrial facility in Canada?
- The Greenhouse Gas Reporting Program collects information on GHG emissions annually from over 1700 facilities across Canada under section 46 of the Canadian Environmental Protection Act. This data is complementary to NIR data, and is available online (Canada.ca/GHG-reporting).
Q3. ls Canada improving methane emissions estimates in future editions of the NIR?
- Continuous improvements to quantify and report Canada’s emissions are essential to ensure Canada’s inventory estimates are based on the best available science and data. This includes regularly engaging with experts and stakeholders to identify knowledge gaps and prioritize input to the scientific process that underlies GHG estimation and reporting.
- In the 2023 edition of the NIR, significant improvements and revisions were made to methodologies for landfills as well as fugitive methane from oil and gas. Additional improvements are expected in a future edition of the NIR to incorporate atmospheric measurements of methane from upstream oil and gas facilities.
Q4. How is Canada consulting with Provinces and Territories on emissions?
- The National Inventory Report is one way federal, provincial and territorial governments take annual stock of emissions reduction progress of the various federal, provincial, territories climate plans.
- Improvements to Canada’s National GHG Inventory Report (NIR) often results in revisions to historical GHG estimates and changes to provincial and territorial GHG estimates. The commitment to quality and evidence-based information includes collaborating with stakeholders to reconcile national, provincial and territorial data towards nationally-consistent data sets.
- As part of its regular consultation process, Environment and Climate Change Canada (ECCC) shares preliminary GHG emissions data with provinces and territories. ECCC reviews and addresses any comments received to the extent possible prior to the NIR’s publishing.
Q5. How are wildfires reported in the National Inventory Report?
- GHG emissions from natural disturbances are reported in section 6.3 of the NIR. The GHG impacts of natural disturbances such as wildfire and severe forest insect outbreaks are reported in Canada’s GHG inventory because understanding total emissions and removals from our managed forest is important in monitoring the total change in terrestrial carbon stocks.
- Emissions of CO2 that result from fire and removals of CO2 that occur as the lands that have burned regrow are tracked under the natural disturbance component. These lands are reported separately until they have regrown to maturity and the carbon loss resulting from the fire is replaced on the landscape.
Why are all fires considered natural?
- All forest fires are tracked under the natural disturbance component of the NIR because the role of humans is uncertain in explaining increases or decreases in areas burned over time. Forest fires have been an integral part of the Canadian landscape for millennia.
Why are they reported separately?
- This approach enables the inventory to assess how forest management activities affect GHG estimates relative to the fire regime. If this approach is not applied natural disturbances would dominate emissions and removals estimates. For example, natural disturbance emissions can vary by over 200 million tonnes of carbon dioxide equivalent (Mt CO2e) from year to year, depending on the area burned by wildfire.
In summary:
- To provide a clear picture of the impacts of human activity over time, the focus of Canada’s GHG inventory report is the emissions and removals that are a direct result of forest management practices. Having a clear understanding of direct human impacts can inform how we develop approaches to reduce carbon emissions and increase the carbon sequestered by our forests.
- Nonetheless, wildfire and other natural disturbance are an important part of the terrestrial carbon cycle in Canada and for this reason, emissions and removals associated with natural disturbances are tracked and reported separately.
Q6. What is being done to ensure accurate forest GHG reporting following the CESD audit on Forests and Climate Change?
- As documented in the Departments’ response to the CESD Audit on Forests and Climate Change, the methodology used for reporting emissions and removals of greenhouse gases from forests in Canada is informed by continual scientific consultation and review.
- Most recently, the 2023 Blueprint for Forest Carbon Science in Canada was completed following extensive consultation with experts and stakeholders.
- An external review of Canada’s NIR by independent experts assembled by the United Nations Framework Convention on Climate Change (UNFCCC) Secretariat was completed in September. The report of recommendations stemming from this review is currently under development by the UNFCCC Secretariat, scheduled for publication in the first half of 2024.
- In addition, actions are underway in accordance with the Management Action Plan prepared in response to the CESD-audit.
Net Zero Accelerator Initiative
Q1. What is the Net Zero Accelerator Initiative?
- The Net Zero Accelerator Initiative (NZA) will provide up to $8 billion in funding for projects that will support innovation, enable Canada to reduce its domestic greenhouse gas (GHG) emissions by 40-45% by 2030 and achieve net zero by 2050, as well as unlock pathways to a healthy and productive decarbonized economy.
- The initiative will support projects that promote the decarbonization of large emitters, accelerate industrial transformation, and advance clean technology development and Canada’s battery ecosystem.
- The initiative will help Canadian businesses seize new opportunities as the world builds a greener global economy.
Q2. What role does Environment and Climate Change Canada have in the initiative?
- I, as the Minister of Environment and Climate Change, support the Minister of Innovation, Science and Industry in the implementation of the initiative including by providing advice and perspective in the context of strategic investments to support Canada’s climate plans.
- As part of enhanced governance efforts, Environment and Climate Change Canada works collaboratively to help ensure that investments drive industrial transition and significant reductions in greenhouse gas emissions. The scale of the investments needs to be consistent with achieving Canada’s climate goals and ability to meaningfully transform Canadian industry to lead and compete in a net-zero emissions future.
Q3. Can you give an example of the types of investments that are being made?
- In July 2021, the Prime Minister announced an important investment. Algoma Steel Inc. will receive up to $200 million from the Net-Zero Accelerator Initiative to retrofit their operations and phase out coal-fired steelmaking processes at their facility in Sault Ste. Marie, Ontario.
- This funding will enable the company to purchase state-of-the-art equipment to support its transition to Electric-Arc Furnace production. This electricity-based process is expected to cut GHG emissions by more than 3 million tonnes per year by 2030 making a meaningful contribution to achieving Canada’s climate goals.
- In July 2021, the Minister of Innovation, Science and Industry announced a $25 million investment in Svante Inc., to support its project to develop and commercialize its novel low-cost carbon capture technology that will prevent significant release of CO2 into the atmosphere from industrial sites like cement and blue hydrogen plants. This innovative industrial point-source carbon capture technology will collect CO2, concentrate it and release it for safe storage or industrial use. Svante is planning to manufacture systems with the ability to capture up to 2,000 tonnes of CO2 per day, depending on the application. This technology is one of the tools that will help achieve Canada’s goal of net-zero by 2050, especially for heavy emitting industries that continue to produce goods Canadians use every day.
- In November 2022, the Government of Canada announced that ten projects under the Call to Action for high-emitting sectors were selected to move forward to the due diligence review process. These companies were assessed as promising early movers that would significantly reduce emissions at existing facilities and contribute to the decarbonization of their industry sectors, including electricity generation, hydrogen production and iron for the steel industry. Based on the companies’ own estimates, these projects could create a reduction in GHG emissions of up to 10 million tonnes per year by the year 2030.
- The companies include:
- Capital Power Corporation
- ENMAX (Shepard Energy Centre)
- Federated Co-operatives Limited (FCL)
- Strathcona Resources Ltd.
- Lafarge Canada Inc.
- ArcelorMittal Mining Canada G.P.
- Suncor ATCO Heartland Hydrogen Hub
- Alberta Power (2000) Ltd. (Heartland Generation)
- Stelco Inc.
- Dow Chemical Canada ULC
Methane emissions reductions
Q1. Why is methane important? Why is it necessary to have a strategy focused specifically on methane rather than all greenhouse gases?
- Methane is a potent greenhouse gas and a short-lived climate pollutant with a global warming potential of more than 25 times greater than carbon dioxide over 100 years, and 86 times greater than carbon dioxide over a 20-year period.
- Methane is responsible for about 30% of the global rise in temperature and half a million premature deaths globally each year. The IPCC has made it clear that there is no pathway to limiting warming to 1.5 degrees without strong, rapid, and sustained reductions in short-lived climate pollutants (including methane) alongside action on carbon dioxide.
- Unlike other GHGs, methane is also an energy source so there is economic value from capturing methane emissions or preventing methane leaks.
- Natural gas is composed almost entirely of methane, and is a valuable resource used by Canadians to heat their homes and power factories. However, a significant amount of the natural gas extracted by the oil and gas industry is wasted due to leaks and intentional venting. In addition to oil and gas, landfills and agriculture are Canada’s other major sources of methane emissions.
Q2. What is the government doing or planning to do about methane emissions?
- At the November 2021 UN Climate Summit (COP26), Canada joined the Global Methane Pledge, along with the United States, the European Union and over 100 other countries. The Pledge aims to reduce global anthropogenic methane emissions economy-wide by at least 30% below 2020 levels by 2030.
- In September 2022, Canada released its methane strategy which outlines measures to reduce methane emissions across the economy, consistent with the Global Methane Pledge.
- The strategy outlines plans for addressing methane from the three sectors that account for over 95% of Canada’s anthropogenic methane emissions: oil and gas (40%), agriculture (29%), and landfills (27%).
- With the measures outlined in Canada’s Methane Strategy, Canada will reduce domestic methane emissions by more than 35% by 2030, compared to 2020 levels. This will exceed the Global Methane Pledge target.
- In 2016, Canada set a target of reducing methane emissions from the oil and gas sector by 40-45 percent below 2012 levels by 2025 and has had regulations in place since 2018 to help achieve it.
- As part of the 2020 COVID-19 Economic Response Plan, the Government launched the $750 million Emissions Reduction Fund to support emission reduction efforts.
- Responding to the global imperative for further cuts, Canada has committed to reduce oil and gas methane emissions by at least 75% below 2012 levels by 2030.
- On December 4,2023, at COP 28, the publication of proposed amendments to strengthen the 2018 oil and gas methane regulations was announced to meet this commitment. The proposed amended regulations will achieve significant methane emission reductions from new and existing upstream oil and gas facilities by expanding the scope of the existing regulations, introducing a focus on maximizing emission reductions, removing some exclusions, and ensuring all practical actions to lower emissions that are considered both achievable and cost effective are in place by 2030.
- As part of our ambitious methane abatement plan, a $30 million investment was announced to establish a Methane Centre of Excellence to accelerate methane measurement and mitigation through increased government-led research efforts, project funding and connecting Canadian experts to exchange knowledge and expertise.
- Regulations are also being developed to increase the number of landfills that collect and treat methane. Consultations on these regulations have been extensive and began with a discussion paper in January 2022. An initial comment period on a draft regulatory framework was launched in the fall of 2022. An opportunity to comment on the draft regulation and cost -benefit analysis was provided in late 2023/winter of 2024. [*Redacted*]
- Canadian farmers and industry partners who are taking action to reduce emissions, sequester carbon and make their operations more sustainable, productive, and competitive are being supported through various initiatives.
- The Government of Canada has programs in place to assist in the implementation of a wide range of beneficial management practices that can support efficient nutrient management and reduction of greenhouse gas emissions in the agriculture sector. Between 2021 and 2022, more than $1.5 billion in initiatives were announced to support the sector in developing and adopting emissions reducing practices and technologies. This includes the Agricultural Methane Reduction Challenge, which will provide up to $12 million to innovators advancing low-cost, scalable, and economically viable practices, processes, and technologies that can reduce enteric methane emissions from the cattle sector. In addition, federal, provincial and territorial Ministers of Agriculture have launched a new agreement on a Sustainable Canadian Agricultural Partnership. This five-year agreement will inject $3.5 billion in funds over 2023- 2028 to support the sustainability, competitiveness, and innovation of the agricultural and agri-food sector.
Q3. What is the status of the government’s commitment to develop an economy-wide methane plan as per the Environment Minister’s mandate letter?
- In September 2022, Canada released its strategy to reduce methane emissions across the broader Canadian economy, consistent with the Global Methane Pledge.
- With the measures outlined in the Strategy, Canada will reduce domestic methane emissions by more than 35% by 2030 compared to 2020 levels. This will exceed the Global Methane Pledge target of 30% that Canada signed on to in 2021.
- It focuses on the three sectors that account for over 95% of Canada’s anthropogenic methane emissions: oil and gas (40%), agriculture (31%), and landfills/waste (20%).
Q4. Is the Global Methane Pledge target of reducing methane economy-wide by 30% by 2030 achievable? How are you going to achieve that target?
- In September 2022, Canada released its strategy to reduce methane emissions across the broader Canadian economy, consistent with the Global Methane Pledge.
- With the measures outlined in Canada’s Methane Strategy, Canada will reduce domestic methane emissions by more than 35% by 2030 compared to 2020 levels. This will exceed the Global Methane Pledge target of 30% that Canada signed on to in 2021.
- Our government’s progress on addressing oil and gas methane shows that significant methane reductions are achievable in Canada.
- In 2016, Canada set a target of reducing methane emissions from the oil and gas sector by 40–45% below 2012 levels by 2025, and in 2018 we put regulations in place to help achieve it.
- Canada has now committed to reduce oil and gas methane emissions by at least 75% below 2012 levels by 2030.
- On December 4, 2023, at COP 28, the publication of proposed amendments to strengthen the 2018 oil and gas methane regulations was announced to meet this commitment.
- As part of the announcement, the ambitious commitments of numerous large oil and gas companies to reducing methane emissions by 2030 were highlighted, some to near-zero and others to 80 to 90%. The commitments by British Columbia and Alberta were also noted to explore ways to achieve a similar target. These commitments emphasize that Canada’s oil and gas methane reduction target is ambitious but achievable.
- [*Redacted*]
- By going further on oil and gas methane reductions, introducing new methane regulations for landfill methane, and exploring opportunities to address methane from agriculture, we are confident that we can achieve economy-wide methane reductions consistent with the Global Methane Pledge.
Q5. Are the Government’s methane plans going to impact farmers?
- Our government is exploring ways to reduce methane emissions from all of the top-emitting sectors including agriculture.
- We will be consulting with farmers and the agricultural industry about the best opportunities and approaches for reducing methane from agriculture.
- Our government is committed to supporting Canadian farmers and industry partners who are taking action to reduce emissions, sequester carbon and make their operations more sustainable, productive, and competitive.
Thermal coal export ban
Q1. Why is the government ending exports of thermal coal?
- The Government of Canada has long recognized that unabated coal power-generation is the most carbon-intensive source of electricity and that addressing this source of emissions is critical in the fight against climate change. To address this important carbon source, Canada has shown leadership over the past few years both domestically and internationally.
- In November 2021, at the UN Climate Change Conference (COP26), the Government of Canada announced its intention to ban thermal coal exports by 2030. This makes Canada the first country in the world to make this commitment to address climate change.
- The impacts of climate change are already being seen, with the most severe impacts happening in the developing world. Ending emissions from coal power generation is one of the single most important steps the world must take in the fight against climate change. It will also lead to cleaner air and healthier communities for hundreds of millions of people around the world.
- Moving away from exporting thermal coal also makes good economic sense as the falling costs of renewables and low-carbon energy are providing more clean energy options in many countries.
Q2. What is the government doing to end exports of thermal coal?
- The Government of Canada is exploring options for implementing an export ban on thermal coal. This includes an assessment of socio-economic and environmental impacts, alignment with other policies and potential impacts on trade. An update on the next steps will be provided following assessment of the options.
Zero-emission vehicles
Q1. What is the role of zero-emission vehicles in GHG emissions reduction?
- Canada is taking action across all sectors to meet its commitment under the Paris Agreement to reduce GHG emissions by 40% to 45% below 2005 levels by 2030 and to reach net-zero emissions by 2050.
- Recognizing that the transportation sector accounts for about 27% of Canada’s GHG emissions, the Government is taking multiple actions to reduce these emissions including expanding the number of zero-emission vehicles (ZEVs) on Canadian roads.
- We have published Regulations to require that 20% of light-duty vehicles offered for sale are zero emission by 2026, 60% by 2030 and 100% by 2035.
- We are looking at introducing similar requirements for selected classes of medium- and heavy-duty vehicles.
- We will also update our emission standards for light- and heavy-duty vehicles to align with the forthcoming U.S. EPA standards.
- The Government is also investing in key areas such as consumer rebates for ZEV purchases, consumer education and awareness, expanding charging infrastructure, etc.
Q2. Is Canada’s ZEV target too ambitious?
- Canada is not alone in setting ambitious ZEV targets. Quebec, B.C., California and at least 15 U.S. States have similar ZEV mandates. Globally and in North America, EV sales continue to increase year over year.
- We are complementing the sales requirements with measures to make ZEVs more affordable, significantly expand charging infrastructure, and lead by example via federal procurement rules.
Q3. How does Canada compare to other countries in terms of ambition?
- The Netherlands, Sweden and Denmark have a target of 100% of light-duty vehicle sales to be ZEVs by 2030. Norway has committed to get there by 2025. Quebec and British Columbia in Canada, the UK, Japan, and Thailand, as well as California and other states that comprise up to 40% of the U.S. market have committed to 100% light-duty ZEVs by 2035. China is pursuing a 25% by 2025 ZEV sales target, and the European Union is regulating GHG performance standards to achieve 100% ZEV sales by 2035.
- Since Glasgow in 2021, there have been numerous announcements and commitments to transitioning the on-road fleet to zero-emission vehicles. These were supported by Canada – and many other countries, governments, and businesses.
- The Breakthrough Agenda on Road Transport aims for ZEVs to be the new normal, and to be accessible, affordable, and sustainable in all regions by 2030.
- During the Transport Day Declaration in 2021, governments, businesses, and others committed to work towards all sales of new cars and vans being zero emission globally by 2040, and no later than 2035 in leading markets, and Canada joined the Accelerating to Zero Coalition (A2Z) Coalition at COP27.
- For heavy-duty vehicles, under the Global Drive to Zero MoU, leading countries committed to working together to enable 100% zero-emission new truck and bus sales by 2040 with an interim goal of 30% zero-emission vehicle sales by 2030.
Q4. How is Canada going to support the existing on-road medium and heavy-duty vehicle fleet?
- Minister Wilkinson’s mandate letter includes a requirement to develop a plan for making investments to retrofit large trucks currently on the road, and supporting the production, distribution, and use of clean fuels, including low or zero carbon hydrogen.
- Canada is not alone in setting ambitious transportation decarbonization targets. Under the Drive to Zero MoU, leading countries committed to working together to enable 100% zero-emission new truck and bus sales by 2040 with an interim goal of 30% zero-emission vehicle sales by 2030.
- Since announcing the federal ZEV sales targets, our departments have held a series of engagement and consultation sessions with the vehicle manufacturing industry, the broader private sector, provinces, and territories, as well as the freight sector, to better understand their concerns and needs.
Q5. How are GHGs from passenger automobiles and light trucks currently regulated?
- GHGs from new passenger automobiles and light trucks are regulated federally, with progressively more stringent GHG emission standards over the 2011 to 2026 model years that are aligned with the standards in the U.S.
- The U.S. has indicated its intent to publish more stringent GHG emission standards for post-2026 vehicles with an initial proposal released in spring 2023. Canada will align our regulations with these new U.S. standards.
- Heavy-duty vehicles are regulated under separate regulations. These also set progressively more stringent GHG emission standards for the various types of heavy-duty vehicles.
Q6. What ZEV-related investments were included in Budget 2022 and the 2022 Fall Economic Update?
- In support of Canada’s LDV and MHDV ZEV targets, Budget 2022 is making several significant investments:
- $1.7 billion (3 years) to extend the iZEV program until March 2025 (TC).
- $500 million (from existing) in large-scale urban and commercial ZEV charging and refuelling infrastructure (CIB).
- $400 million (5 years) for the Zero-Emission Vehicle Infrastructure Program (ZEVIP) to fund the deployment of ZEV charging infrastructure in sub-urban and remote communities (NRCan).
- $2.2 million (5 years) to renew the Greening Government Operations Fleet Program (NRCan).
- $547.5 million (4 years) to launch a new purchase incentive program for MHDV ZEVs (TC).
- $33.8 million (4 years, with $42.1 million in remaining amortization) to work with provinces and territories to develop and harmonize regulations and to conduct safety testing for long-haul zero-emission trucks (TC).
- $199.6 million (5 years, $0.4 million ongoing) to expand the renamed Green Freight Program to support increased assessments and retrofits (NRCan).
- The 2022 Fall Economic Statement proposes a refundable tax credit equal to 30% of the capital cost of investments in industrial zero-emission vehicles and related charging or refueling equipment such as hydrogen or electric heavy-duty equipment used in mining or construction.
Q7. How are electric vehicle (EV) batteries being managed at end of life?
- Management of EV batteries at their end-of-life would fall under provincial and territorial jurisdictions. In addition, their management is dependent on the available infrastructure and capabilities such as appropriate recycling facilities of the respective jurisdiction.
- Given the size and weight of EV batteries, and the value of the minerals and metals they contain, such batteries are not expected to be disposed in landfill; rather they would be recovered through various stakeholders (e.g. automotive recyclers, dealerships) at the end of their useful life. Some batteries would go on to be refurbished, so functioning components could be re-combined into batteries and reused as electric vehicle batteries or repurposed as batteries in other applications (wheelchairs, e-bikes, or energy storage solutions). Other batteries, or no longer viable components, would be sent to a recycling facility for electric vehicle batteries for material recovery.
- While on-going initiatives demonstrate effort in moving towards minimizing waste and creating a circular economy in Canada, we acknowledge that there are ongoing focus areas, including the collection/analysis of data concerning the complete lifecycle of EV batteries in Canada and potential policy implications for various levels of government.
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