Climate change: Appearance before the Standing Committee – May 3, 2022

Climate change at a glance

Climate science confirms need to reduce greenhouse gas emissions

• It is unequivocal that human influence has warmed the atmosphere, ocean and land – the scale of recent change is unprecedented.
• Rapid, large-scale and sustained reductions are needed to limit global warming below 2°C – net-zero emissions by 2050 are required to stabilize global temperature.

Canada represents a small share of global emissions, but remains one of the highest emitters per capita

• In 2018, Canada ranked 10th GHG emitting country/region.
• In 2018, Canada’s per capita household GHG emissions increased 3.5% to 4.1 tonnes per person when other countries (i.e. UK, France, Norway and Germany) per capita household emissions ranged from 1.0 to 2.3 tonnes.

The costs of climate change

• Canada is experiencing warming at 2x the global rate, with the north warming at almost 3x.
• Over the last decade, the average cost of weather-related events has risen to the equivalent 5-6% of annual GDP growth.
• Extreme weather events in 2021 caused $2.1 billion in insured damages in Canada, which does not include costs such as public sector response and recovery, uninsured damages, and indirect economic losses.
• In the decades to come, health impacts of climate change will intensify and costs will increase. The magnitude of costs will depend on mitigation and adaptation decisions made today.

Clean technology and climate action

• Global clean technology activity is expected to exceed $3.6 trillion by 2030.
• The environmental and clean tech sector grew at 25% from 2012 to 2019, outpacing the overall Canadian economy.
• In 2022, 13 Canadian companies were named to the Global Cleantech 100 list, second after the United States.
• Historical and projection of clean technology exports to 2025.

Canada’s efforts to address climate change reflects its emissions reality

• Canada’s largest emitting economic sectors are Oil and Gas, Transportation and Buildings.
• Each jurisdiction faces unique circumstances, including demographics, geography, and economic fundamentals.
• Efforts to address climate change are projected to reduce Canada’s GHG emissions.
• Canada’s economy is growing more rapidly than its GHG emissions.
• Canada and 194 other countries adopted the Paris Agreement in 2015, committing to reduce GHG emissions and hold the global average temperature increase to well below 2°C above pre-industrial levels, and pursuing efforts to limit the increase to 1.5°C.

Carbon pollution pricing

Q1. What is carbon pricing and why is it important?

• Pricing carbon pollution is widely recognized as the most efficient way to reduce 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.
• Pricing carbon pollution 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 (2023-3020) 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?

• Carbon pollution pricing is designed to address 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. This approach minimizes the risk that businesses will move from Canada to jurisdictions that do not price carbon.
• 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 an 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.

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 send a strong price signal while lowering costs compared to a full carbon price.
• Another way to address the risk of carbon leakage is with a border carbon adjustment. This policy applies a price on imports based on their embedded emissions. It helps level the playing field between domestic and foreign producers.
• Canada has also started exploring whether a BCA makes sense in the Canadian context. We will be 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, ensuring a fair and predictable environment for businesses, fostering green innovation, and promoting global ambition on climate action.

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 in order 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 26% of national emissions in 2019. It is also a major employer and contributor to Canada’s GDP.
• The Government has committed to cap emissions from the oil and gas sector and ensure they decline in line with our economy wide net-zero objective. In the recently announced Emissions Reduction Plan, the Government forecasted that the oil and gas sector could make a mitigation contribution of 31% by 2030 relative to 2005.
• New and existing policies will contribute to oil and gas sector reductions including the new 75% methane reduction target for oil and gas; the CCUS investment tax credit; and R&D for CCUS. However, more action will be needed.
• We have not designed the emissions cap yet. The government is considering a range of options to achieve these emissions reductions. The details of how best to design and implement this cap will require close collaboration with industry, provinces, Indigenous partners, and civil society.
• The Government will release a plan to launch formal engagement by publishing a discussion paper and consult on the design of the emissions cap this springdocument in the coming weeks.

Q2. How would an emissions cap affect oil and gas production, exports, and energy security?

• To be clear, the purpose of the cap is to reduce GHG emissions not to cap oil and gas production in Canada.
• Canadian exports of oil and gas are important to energy security in North America and at global levels.
• In designing the cap, we will consider how best to mitigate carbon leakage risks to avoid exacerbating energy security concerns in the current global context.
• 90% of Canada’s O&G exports go into or through the U.S. for processing, with much of the Canadian production also used in the U.S.
• We will work closely with provinces and the sector to manage competitiveness challenges 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?

• The goal is ambitious, but there are significant opportunities to reduce emissions in the oil and gas sector.
• The oil and gas sector has cut back activities in recent years in response to low oil prices, but as demand and prices rebound, now is a good time to help direct the sector’s considerable capital toward low-carbon innovation.
• We will work closely with provinces and the sector to manage competitiveness challenges and remain attuned to evolving energy security and climate risk considerations.
• These and other considerations will be explored in a discussion paper that will initiate formal consultations on the cap later this spring.

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.

Clean Electricity Standard

Q1. How will the Government of Canada support jurisdictions that face significant challenges in reaching Canada’s clean electricity goals by 2035?

• The Government of Canada understands that the transition to net-zero will require major investments in clean electricity generation, storage, and grid modernization to meet increasing demand from electrification in other parts of our economy as grid operators simultaneously decarbonize generation.
• As part of Canada’s climate plan, the federal government is providing support for investments in renewable and clean energy and technology solutions.
  • The Government has committed an additional $17.6 billion in new, green recovery measures included in Budget 2021, and Budget 2022 allocated close to $900 million in funding to expand non-emitting energy deployment and development, as well as to connect regions to clean power.
  • In addition, as part of its $10-billion Growth Plan, the Canada Infrastructure Bank has identified a long-term target of $5 billion for clean power projects to support renewable generation and storage and to transmit clean electricity between provinces, territories, and regions, including to northern and Indigenous communities. Budget 2022 also announced a broadened role for the CIB to invest in private sector-led infrastructure projects to accelerate Canada’s transition to a low-carbon economy.
  • The return of Output-Based Pricing System (OBPS) proceeds in some provinces (approx. $80 million) through the Future Electricity Fund will support provincially managed clean electricity grid options (interties, grid modernizations, etc.). The Government of Canada launched a callout for projects in February 2022.
  • Through Budget 2022, the Government of Canada presented the final design of an Investment Tax Credit to encourage the creation of carbon capture and storage projects and increase their feasibility.
• The Government of Canada has committed to engaging with provinces and territories through the creation of a Pan-Canadian Grid Council to promote infrastructure investments, smart grids, grid integration and electricity sector innovation. Budget 2022 provides $2.4 million for the creation of the Council.
• The Government of Canada will also work closely with provinces and territories, utilities and potential investors to attract new investments in non-emitting generation, grid upgrades and interties. For example, the Government of Canada and the Canada Infrastructure Bank are currently collaborating with provinces and regional utilities to advance the Atlantic Loop intertie project.

Q2. Will workers and their communities be affected by the transition to net-zero electricity?

• The Government is committed to helping workers, communities, and businesses prepare for the challenges and opportunities that the low-carbon energy transition will present. Creating good, well-paying jobs in the low-carbon economy and ensuring that workers have the right tools and skill sets is essential to building a sustainable and prosperous future for Canada.
• In the 2030 Emissions Reduction Plan: Canada’s Next Steps for Clean Air and a Strong Economy, the government committed to skills training, including through a new Futures Fund for Alberta, Saskatchewan, and Newfoundland and Labrador. Along with the government’s commitment to a new Clean Jobs Training Centre, this will help workers have the tools to succeed.
• The Government has a strong track record in ensuring a people-centered approach to clean energy transition. It is currently delivering $185 million to assist coal workers and their communities to develop new skills and diversify local economies.
• The Government is consulting Canadians to inform legislation on a Just Transition including by convening a Just Transition Advisory Body to ensure a people-centered net-zero transition.
• The clean energy sector has the potential to grow significantly, resulting in even more careers and opportunities for Canadians.
• The Government will work with provinces/territories and labour organizations to ensure workers affected by the transition are involved in the design and implementation of a successful transition to clean power.

Q3. Will a Clean Electricity Standard increase electricity costs for Canadians?

• The Government will work with each province and territory to design a standard that reduces emissions while enabling electricity generators to minimize impacts to ratepayers and maintain reliability.
• The Government will support this goal through investments in energy efficiency, smart grids, and affordable renewable energy.
• Fossil fuel-free electricity can also protect consumers from market volatility and exposure to global events that affect the price of natural gas and oil that utilities use to generate electricity.

Supplemental

• The Government of Canada and the Canada Infrastructure Bank are collaborating with provinces and regional partners to advance the “Atlantic Loop” intertie project, which could greatly reduce emissions and maintain electricity affordability in the Atlantic region, as well as other regional initiatives.

Q4. How will the Government of Canada reduce economic impacts on emissions-intensive-trade-exposed industries (EITEI)?

• Expanded access to clean electricity is a foundational component of clean economic growth in Canada.
• As the electricity sector transitions to net-zero emissions, the Government of Canada is committed to ensuring that electricity remains reliable and affordable so that industries do not face pressure to relocate operations to other jurisdictions without climate policies in place (also known as carbon leakage).
• Canada’s electricity is already among the cleanest in the world. In the future, if Canada’s trading partners, including the U.S. and the EU, levy import fees based on the carbon-intensity of products (known as Border Carbon Adjustments, or BCAs), Canadian industries will have a head start in producing less carbon intensive products, thereby reducing their exposure to these fees.

Q5. What role will nuclear generation technologies play in allowing provinces to decarbonize their electricity systems?

• Nuclear energy is already an important part of Canada’s current non-emitting energy mix, and we remain committed to providing responsible stewardship to support a strong and safe nuclear sector.
• Nuclear energy is internationally-recognized by countries and organizations alike as playing an important role in meeting Paris Agreement climate targets and achieving net-zero emissions economy-wide by 2050.
• Canada will need non-emitting power to ensure a reliable and stable grid when wind and solar are not available. This non-emitting power could come from sources such as hydroelectricity or emerging sources such as geothermal, hydrogen, or small modular reactors. Provinces and territories will make these choices depending on the technology availability, costs, and local circumstances (e.g. geography, available resources, existing infrastructure, economic benefits, etc.).
• Renewable resources vary by region, and decisions on the generation mix ultimately rest with the provinces and territories. Various provinces have expressed a clear interest in utilizing small modular reactor technologies to reduce emissions, decarbonize heavy industry and spur economic development.
• The Government launched a Small Modular Reactor Action Plan in late 2020, building on the SMR Roadmap released in 2018, to lay out the next steps to develop and deploy this technology. Budget 2022 proposes $120.6 million to support research and regulatory development to enable deployment of SMRs.

Q6. How might a Clean Electricity Standard fit into the current regulatory environment for reducing the use of fossil fuels in energy (e.g. Clean Fuel Standard; Output-Based Pricing System Regulations; coal and natural gas electricity regulations)?

• A Clean Electricity Standard, in the context of the full set of measures put in place and proposed by the Government, can set us on the path to ensure Canada’s electricity generation achieves net-zero emissions.
• The Clean Electricity Standard will be designed to work in harmony with existing regulations, including the phase-out of conventional coal generation, natural gas regulations, the clean fuel regulation, and carbon pricing, in particular the Output-Based Pricing System Regulations (OBPSR).

Clean Fuel Regulations

Q1. What is the timeline for the publication of the final Clean Fuel Regulations?

• The final Clean Fuel Regulations are on track to be published in spring 2022.
• At that time, an updated Regulatory Impact Assessment Statement will also be published. It will include an up-to-date cost benefit analysis for the Regulations.

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 will require liquid fossil fuel suppliers to reduce the carbon intensity of the fuels they produce and import for use in Canada.

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 will 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 will 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 cap is designed, it will take into account the Clean Fuel Regulations.
• The price on carbon, Clean Fuel Regulations, and oil and gas cap are needed in order to help meet Canada’s current 2030 GHG emission reduction target under the Paris Agreement target, and to put Canada on a path towards achieving the goal of net-zero emissions by 2050.

Q4. Why is the Government of Canada proposing to change the stringency and the trajectory of the carbon intensity reduction requirements?

• The increase in stringency takes into account recent announcements and new measures put forward by the Government of Canada (e.g., the increased carbon price to $170/tonne by 2030, the CCUS investment tax credit, and the plan to establish a cap on oil and gas emissions).
• The more ambitious CFR will allow the Regulations to deliver significant incremental emissions reductions taking into account these updated and forthcoming measures. It will also ensure that the CFR drives significant new investment in clean technologies and fuels.
• The new proposed stringency represents a balance of ambition and achievability. We anticipate that actions will be necessary from all compliance pathways in order to meet the ambitious new target.

Q5. Why didn’t ECCC propose an even higher stringency?

• The new proposed stringency represents a balance of ambition and achievability. We anticipate that actions will be necessary from all compliance pathways in order to meet the ambitious new target.
• Compliance pathways under the CFR include emission reduction projects in the oil and gas sector like carbon capture and storage, low carbon intensity fuels like biofuels, and advanced vehicle technologies like EVs.
• While the CFR will play a large part in Canada’s emission reduction plan, it is not the only tool available. Complementary climate policies including the price on carbon, new methane regulations, and forthcoming the oil and gas cap will help Canada reach our 2030 emissions reductions target of 40 to 45 per cent and net-zero emissions by 2050.

Q6. What does success look like for the Clean Fuel Regulations?

• The CFR are expected to result in significant GHG reductions by lowering the lifecycle carbon intensity (CI) of liquid fossil fuels used in transportation (i.e., gasoline and diesel). In addition, the CFR will increase the uptake of clean fuels and technology.
• 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.

Q7. Indicators that the CFR are working well?

• ECCC will monitor the credit trading market and credit creation. This will provide insight into the uptake of technologies being implemented in the oil and gas sector, the low CI fuels used to displace fossil fuels and the uptake of advanced vehicle technology being driven by the CFR.
• The amount of credits created and used can be used to calculate an overall reduction in the CI of gasoline and diesel for the purposes of the regulations.

Q8. What will be happening in the market?

• ECCC expects credit creation from all three compliance categories: 1) reducing the lifecycle CI of liquid fuels; 2) supplying low-carbon fuels; and 3) fuel-switching in transportation.
• The CFR has mechanisms that will allow ECCC to adjust crediting opportunities in the oil and gas sector if a specific technology becomes commonplace.
• The Government is lowering CFR compliance costs by providing more time for early credit creation before regulated parties face any regulatory obligations. This will provide more time for investments to come online, and will enable voluntary credit creators like biofuel suppliers and EV charging companies to contribute to the pool of credits.
• In addition, flexibilities like the compliance fund will provide a soft cap on the market price of credits.

Emissions Reduction Plan

Introduction

Q1. What are the highlights of the 2030 Emissions Reduction Plan?

• This plan outlines our next steps to deliver clean air, good middle class jobs, and a strong economy for Canadians. Among other measures, Canada’s 2030 Emissions Reduction Plan will do that by:
  • Helping to reduce energy costs for our homes and buildings, while driving down emissions and boosting climate resiliency through the development of the Canada Green Buildings Strategy. This includes initiatives such as working with provinces, territories and other partners on the adoption of the highest tier building codes; advancing community-level home retrofits; and facilitating deep energy retrofits for large buildings. The Strategy will build upon existing initiatives and set out new policy, programs, incentives and standards needed to drive a massive retrofit of the existing building stock, and construction to the highest zero carbon standards. Additional investments to support communities to upgrade homes and buildings, including affordable housing, are being made including over $450M in contribution and loan funding to support the low-income stream of the Greener Homes Loan Program. Making it easier for Canadians to switch to electric vehicles through investments in zero-emission vehicles (ZEV) charging infrastructure and incentives to make it more affordable for Canadians to buy and drive new electric vehicles. To date, funding has been announced for over 25,000 chargers. More than 136,000 Canadians have received an incentive on their purchase of a new electric vehicle. The Government will also put in place a regulated sales mandate to ensure at least 20 per cent of new vehicles will be zero-emission by 2026 and at least 60 per cent by 2030, on a path towards 100 per cent ZEVs by 2035, supported by new investments in purchase incentives ($1.7 billion) and chargers. The Government is also working to align Canada’s emission regulations for heavy-duty vehicles with the most stringent standards in North America.
  • Positioning the oil and gas sector to cut pollution and be the cleanest global producer. The Government of Canada is projecting an oil and gas sectoral contribution of a 31% drop in emissions by 2030 compared to 2005 levels (a 42% reduction from 2019 emission levels). The projected contribution level will guide the government as it works in consultation with industry, provinces, Indigenous communities, and stakeholders to define and implement the cap on oil and gas sector emissions at a pace and scale needed to achieve net-zero by 2050, support clean technologies to further decarbonize the sector, and work to create sustainable jobs. We are also developing regulations to reduce oil and gas methane by at least 75 per cent from 2012 levels by 2030.
  • Powering the economy with zero emissions electricity. Transitioning to greener electricity sources will keep the air clean. It will also create jobs and economic growth with the construction of new power sources and retrofitting and fuel-switching existing power plants and buildings. To ensure success, the Government of Canada will work with provinces and utilities to develop a Clean Electricity Standard to ensure that the electricity grid is net-zero emitting by 2035, to establish a Pan-Canadian Grid Council, and to establish Region Energy Tables to bring key stakeholders together around action plans to reduce emissions and grow the local, clean economy. Together these efforts will help provide a clear path forward on projects like the Atlantic Loop initiative.
  • Helping industries to adopt clean technology in their journey to net-zero emissions. Canada is positioning our industries to be green and competitive. This includes increasing the stringency of the Clean Fuel Standard and creating greater incentives for clean technologies and fuels such as increasing funding to support the adoption of clean technologies on farms (e.g. smart irrigation infrastructure). The Government of Canada will also introduce a tax credit to incentivize the development and adoption of carbon capture, utilization and storage (CCUS) technologies.
  • Investing in nature and natural climate solutions with an additional $780 million to the Nature Smart Climate Solutions Fund to deliver additional emission reductions from nature-based climate solutions. The Fund supports projects that conserve, restore and enhance wetlands, peatlands, and grasslands to store and capture carbon.
  • Federal GHG Offset System to stimulate demand for projects across Canada that reduce GHG emissions, sequester carbon, and generate economic opportunities, Canada will continue to develop protocols under the system, including for projects that focus on nature-based climate solutions.
  • Supporting farmers as partners in building a clean, prosperous future. Farmers are key to reaching Canada’s climate targets, making sure family businesses can succeed in a changing climate, and keep food on people’s plates. The Government of Canada is ramping up our investments and partnerships with the agriculture sector to collaborate on ambitious action that further reduce emissions in moving toward net-zero emissions by 2050, and maximize the potential of agriculture soils to sequester carbon. This will include tripling funding for the Agricultural Clean Technology program by broadening and expanding the scope of the program (for example, to support initiatives that contribute to the fertilizer emissions target and Global Methane Pledge).
  • Creating good, middle-class jobs in every province and territory. Taking action to reduce emissions will position Canada and Canadians to become leaders in clean energy, clean technology, natural resources management, nature-based solutions, agri-food, and more. This will create and support middle class jobs and keep Canadian workers on the leading edge in a net-zero emissions economy.

Q2. You say this plan gets you to 40% emissions reductions. Have you given up on achieving 45%?

• The projections included in the 2030 Emissions Reductions Plan utilize a combination of two modelling approaches. It captures projections for the greenhouse gas emissions reductions that could be achieved from existing and planned climate measures, while also identifying economically-efficient potential reductions from each sector of the economy that could be pursued to achieve the 2030 target. This modelling approach is widely used by other countries in charting their courses to net-zero.
• Canada’s pathway to 2030 is based on today’s understanding of the potential for each sector to reduce emissions by 2030. Given the economic interdependencies and interactions within and between sectors, the exact areas for emissions reduction potential may shift in the future as Canada further decarbonizes, costs of abatement technologies change and other opportunities emerge.
• The Government of Canada expects that complementary climate actions from the provinces and territories, municipalities, Indigenous peoples, and businesses – as well as with the acceleration of clean technology innovation and deployment – would lead to further emission reductions in the lead up to 2030. Canada will continue to update its modelling projections, including in Canada’s next Biennial Report in December 2022 and first Emissions Projection Plan progress report expected in late 2023.

Modelling

Q3. Your modelling shows that you are now at 36% below 2005 emission levels. How will Canada achieve its 2030 target of a 40% reduction?

• This plan shows a credible pathway to achieving Canada’s 2030 emissions reduction target of 40% below 2005 levels. It highlights the emissions reduction potential for all economic sectors to reduce emissions by 2030 and includes concrete action that the Government will take to reach our target.
• Canada’s strengthened climate plan – A Healthy Environment and A Healthy Economy – released in 2020, positioned Canada to reach 31% below 2005 levels. The additional measures in the 2030 Emissions Reduction Plan build on this progress and bring us to a reduction of approximately 36-37% below 2005 levels – an additional reduction of 33 million tonnes of GHGs.
• Furthermore, the 2030 ERP highlights additional measures for each economic sector to achieve further reduction so that we can reach 40% below 2005 levels.
• The Government will consult with partners and stakeholders on key measures such as the emissions cap for the oil and gas sector, the Canada Green Buildings Strategy, a comprehensive CCUS strategy, a Green Agricultural Plan for Canada, as well as additional efforts to drive down emissions in all modes of transportation, including air, rail, and marine. These measures are still under development, and therefore, they are not yet included in the current modelling. As we develop these measures, we will account for them in our upcoming progress reports in 2023, 2025, and 2027, as required under the Act.
• This is why we are confident that the 2030 ERP provides a credible pathway to achieving Canada’s 2030 emissions reduction target of 40% below 2005 levels.

Q4. What is the modelling approach for the 2030 Emissions Reduction Plan?

• The 2030 Emissions Reductions Plan uses economic modelling to show a pathway to achieving Canada’s 2030 target, including the potential for each sector of the economy to reduce emissions by 2030. This modelling approach is widely used by other countries in charting their courses to net-zero.
• Projections for the 2030 Emissions Reductions Plan utilize a combination of two modelling approaches. It captures projections for the greenhouse gas emissions reductions that could be achieved from existing and planned climate measures, while also identifying economically efficient potential reductions by each sector of the economy that could be pursued to achieve the 2030 target.
• The plan also includes several major climate actions that are still under development (for example, oil and gas emissions caps, clean electricity standard, and the net-zero buildings strategy) but are unable to be modelled until more details are finalized.
• Broken down by sector, Canada’s pathway to 2030 is based on today’s understanding of the potential for each sector to reduce emissions by 2030. Given the economic interdependencies and interactions within and between sectors, the exact areas for emissions reduction potential may shift in the future as Canada further decarbonizes, costs of abatement technologies change and other opportunities emerge.
• Canada will continue to update its modelling projections, including in Canada’s next Biennial Report in December 2022 and first Emissions Projection Plan progress report expected in late 2023.

Q5. Environmental groups say that the Carbon Capture, Utilization and Storage (CCUS) tax credit is yet another subsidy. Why are you putting that in place?

• All of the major global decarbonisation studies indicate that CCUS will play a critical role in enabling the transition to a net-zero economy.
• Carbon capture, utilization, and storage (CCUS) is a particularly significant opportunity for Canada given our existing experience and expertise with the technology. Projections show it will play a critical role in enabling a prosperous net-zero economy in Canada by 2050, but that will be one among many elements needed.
• CCUS will be needed for three reasons in particular:
  • It can help us tackle emissions from the toughest-to-abate but crucial sectors of Canada’s economy (such as process emissions, oil and gas, and heavy industry);
  • enable low-carbon pathways like hydrogen; and
  • deliver negative emissions to support carbon dioxide removal.
• Canada is implementing a number of measures to help drive the market for CCUS, including federal and provincial carbon pollution pricing regimes, the federal Clean Fuel Standard, as well as a new Investment tax credit for CCUS.
• Through Budget 2021, the Government of Canada committed to providing $319 million to support research and development to improve the commercial viability of CCUS technologies. This funding will help Canada achieve its goal of net-zero by 2050 while being a supplier of choice for cleaner energy and innovative new technologies around the world.
• Budget 2022 proposes a refundable investment tax credit for businesses that incur eligible CCUS expenses, starting in 2022. The investment tax credit would be available to CCUS projects to the extent that they permanently store and captured CO2 through an eligible use. The CCUS investment tax credit is a part of the government’s broader plan to work with industry towards the goal of decarbonization, including through initiatives like the Clean Growth Fund and Net-Zero Accelerator.

Electricity and clean energy

Q6. How does this plan support the further adoption of clean energy?

• The Emissions Reduction Plan sets out continued and enhanced support for the deployment of commercially ready renewable energy technologies to support grid decarbonisation through an additional $600 million investment in the Smart Renewables and Electrification Pathways Program.
• Investments in emerging technologies such as geothermal and tidal power, small modular reactors (SMRs), carbon capture, utilization and storage (CCUS), and electricity storage will allow Canada to be a world leader in non-emitting electricity and smart grids.
• To support the development and deployment of these technologies, the Government will make additional investments, including $250 million to support predevelopment work of large clean electricity projects – in collaboration with provinces and territories – through the Electricity Predevelopment Program.
• The Government will also establish the Pan-Canadian Grid Council to provide external advice on how best to direct clean electricity infrastructure investments.

Agriculture and natural areas

Q7. What is in this plan for farmers and the agriculture sector?

• Farmers not only keep food on our tables, they are also landowners and partners in the fight against climate change.
• The Government of Canada will provide additional funding to top up the current successful applicants of the Agricultural Climate Solutions: On-Farm Climate Action Fund, broaden support to additional key climate mitigation practices, extend the program past its current sunset of 2023/24, and support adoption of practices that contribute to the fertilizer emissions target and Global Methane Pledge.
• The Government will also:
  • Invest $150 million for a resilient agricultural landscapes program to support carbon sequestration, adaptation and address other environmental co-benefits
  • Provide $330 million to triple funding for the Agricultural Clean Technology program by broadening and expanding the scope of the program
  • Invest $100 million in transformative science for a sustainable sector in an uncertain climate and net-zero economy for 2050. This funding will support fundamental and applied research supporting a path to net-zero emissions, knowledge transfer, and developing metrics

Q8. The agriculture sector accounts for ~10% of Canada’s GHG emissions, why is the sector only expected to reduce 1% of emissions below the 2005 levels based on the backcasting approach in the ERP?

• The 2030 ERP presents a credible pathway to meeting Canada’s 2030 target by identifying concrete climate actions and emissions reduction potential on a sector-by-sector basis, including agriculture.
• In particular, the ERP is clear that existing and proposed new measures are expected to lead to up to 13 million tonnes in agricultural-related reductions by 2030, taking into account both reductions in emissions and increased carbon sequestration in agricultural soils. The total number is based on previously announced measures (e.g., the Fertilizer emissions target and activities supported by Budget 2021 funding such as Agriculture Climate Solutions Living Labs, On-Farm Climate Action Fund, etc.), as well as new proposed measures including the additional $1B announced in the ERP.
• The new support announced in the ERP reflects the nature and readiness of the sector, with its close to 200,000 private farms, the availability of practices and technologies, and the sector’s capacity to adopt climate solutions in the short-term.
• The 1% projected sectoral contributions shown for the Agriculture sector in the ERP does not reflect all the contributions that the sector will make to Canada’s climate objectives as the potential reductions presented for each sector represent one possible pathway to achieving the 2030 target.
• Based on UNFCCC reporting requirements, some of these measures will reduce emissions as measured in the agriculture sector, while others will contribute to reductions in the land use sector.
• We believe that a reduction of 13 million tonnes is realistic, meaningful, and necessary, and will not impact Canada’s food security or our agriculture industry.

Consultation and collaboration

Q9. How did provinces and territories contribute to the 2030 Emissions Reduction Plan?

• Provinces and territories – as well as Indigenous peoples, the Net-Zero Advisory Body, the public, and key stakeholders – were all engaged when establishing this 2030 Emissions Reduction Plan. Throughout the plan, the important insights provided by these groups have been reflected.
• Supporting a clean electricity sector was identified as a priority for a number of provinces and territories, building on efforts to phase-out coal-fired electricity and increase the production of renewable energy.
• Provinces, territories and municipalities also prioritized emissions reduction efforts in the buildings sector, with support for greater alignment of programs and incentives between governments.
• The electrification of the transportation sector is an important climate measure for many provinces and territories. Provincial and municipal governments have an important influence on transportation choices and can make significant contributions in this area.

Q10. Is the Government expecting/requiring provinces and territories to increase their climate action and ambition?

• The 2030 Emissions Reduction Plan provides a credible pathway to the lower range of our target, i.e., 40% below 2005 levels.
• The science is clear. Canada must do more and faster to combat climate change. Driving deeper reductions will require accelerated climate action beyond the federal jurisdiction.
• Enhanced climate ambition from provinces and territories, municipalities, industry, the financial sector, as well as the acceleration of clean technology innovation and deployment – will drive further reductions. These collective efforts will give Canada the accelerated momentum that is needed to achieve the upper bound of Canada’s emissions reduction target and put us on track to net-zero emissions by 2050.

Q11. How does Canada’s trajectory to 2030 account for provincial and territorial actions and ambition?

• Provincial and territorial efforts to reduce emissions are fundamental to meeting Canada’s 2030 climate objectives.
• The environment is an area of shared jurisdiction between federal, provincial and territorial governments, and provinces control the policy levers for many key emissions sources.
• For example, provinces have jurisdiction over most types of industries, including mining and manufacturing, meaning that they also have jurisdiction to regulate emissions from these industries.
• The Government of Canada works closely with provinces and territories to achieve shared climate objectives. A number of funding programs, covering a wide range of sectors, have launched in recent years, including the Low Carbon Economy Fund, and the Natural Climate Solutions Fund.
• As announced in Budget 2022, the Government of Canada will advance and enhance the Low-Carbon Economy Fund through a $2.2 billion recapitalization. The funding aims to leverage further climate actions from provinces and territories, municipalities, universities, colleges, schools, hospitals, businesses, not-for-profit organizations, and Indigenous communities and organizations.
• Further investments including $780 million to the Nature Smart Climate Solutions Fund to deliver additional emissions reductions from nature-based climate solutions to support projects that conserve, restore and enhance wetlands, peatlands, and grasslands to store and capture carbon.
• Budget 2022 also proposes $55.1 million to establish an Old Growth Nature Fund in collaboration with British Columbia, non-governmental organizations, and Indigenous and local communities.
• ECCC consults with provinces and territories to make sure that their policies and measures are properly reflected in the projections.

Q12. How did Indigenous partners contribute to the Emissions Reduction Plan?

• The full, effective and meaningful participation of Indigenous partners in the transition to net-zero is key. When engaged on the development of this plan, Indigenous governments and representative organizations collectively stressed the importance of working on a nation-to-nation, Inuit-Crown, and government-to-government basis. In their submissions, Indigenous partners:
  • Noted the urgency of protecting their territories, homelands, resources, languages, traditions and foods for future generations and that lived realities are inseparable from the effects of climate change.
  • Encouraged expanded efforts to support remote, northern and Indigenous communities transition off diesel power, and to advance community-owned and led renewable energy projects.
  • Emphasized that energy efficiency and retrofits are a priority for many Indigenous governments, but so is the housing crisis they are facing. Nearly 20% of Indigenous people live in housing that needs major repairs, and 20% live in housing that’s overcrowded.
• In addition, Indigenous peoples are well placed to support natural climate solutions due to their role as stewards of their traditional territories. Indigenous Knowledge has a vital role to play in supporting natural climate solutions in Canada.

Q13. How is UNDRIP and Indigenous knowledge taken into account in the plan?

• The Government of Canada acknowledges that Indigenous peoples experience disproportionate effects of climate change.
• Consistent with the Paris Agreement’s call to respect, promote and consider Indigenous rights when taking action on climate change, the Government is committed to renewed nation-to-nation, Inuit-Crown and government-to-government relationships with First Nations, Inuit, and Métis, based on the recognition of rights, respect, cooperation and partnership.
• The Government of Canada also supports the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) and acknowledges that Indigenous Knowledge systems and ways of doing must be a cornerstone of Canadian climate policy.
• While more work needs to be done to ensure that Indigenous climate leadership is fully integrated into Canada’s climate action, Canada has an ongoing commitment to improve the reflection of UNDRIP in all of its policy and programming and to work with Indigenous partners to better support their climate priorities.

Inefficient fossil fuel subsidies

Q1. What is being done to stop providing fossil fuel subsidies?

• In 2009, Canada as a part of the Group of 20 (G20) Leaders committed to rationalizing or phasing out inefficient fossil fuel subsidies. The government recently accelerated its commitment to do so from 2025 to 2023.
• The Government of Canada’s efforts to reform fossil fuel subsidies have resulted in the phase-out or rationalization of eight tax expenditures that supported fossil fuel exploration or production.

Q2. What progress has the government made on the G20 commitment?

• The Government has made important progress on the G20 commitment to rationalize and phase out inefficient fossil fuel subsidies with the rationalization of eight tax expenditures for the fossil fuel sector to date that eliminate preferential tax treatment, including:
  • Phase-out of the accelerated capital cost allowance for oil sands (announced in Budget 2007; completed in 2015)
  • Reduction in the deduction rates for intangible capital expenses in oil sands projects to align with rates in conventional oil and gas sector (announced in Budget 2011; completed in 2016)
  • Phase-out of the Atlantic Investment Tax Credit for investments in the oil and gas and mining sectors (announced in Budget 2012; completed in 2017)
  • Reduction in the deduction rate for pre-production intangible mine development expenses to align with rate for the oil and gas sector (announced in Budget 2013; completed in 2018)
  • Phase-out of the accelerated capital cost allowance for mining (announced in Budget 2013; completed in 2021)
  • Allowing the accelerated capital cost allowance for liquefied natural gas facilities to expire as scheduled in 2025 (announced in Budget 2016)
  • Rationalize the tax treatment of expenses for successful oil and gas exploratory drilling (announced in Budget 2017; completed by 2021)
  • Phase out tax preference that allows small oil and gas companies to reclassify certain development expenses as more favorably treated exploration expenses (announced in Budget 2017; completed in 2019)
• In June 2018, the Minister of Natural Resources along with Argentina’s Energy and Mining Minister announced that Canada and Argentina would be partnering to perform peer reviews to ensure both countries are on track to phase out inefficient fossil fuel subsidies. The peer review process will increase transparency on Canada’s actions to fulfil the G20 commitment and further reaffirm our commitment to climate action and to sustainable economic growth at home and abroad.
• To make sure Canadians are heard from, in March 2019, the Minister of Environment and Climate Change launched a consultation on the Government’s draft framework to review measures outside the tax system. The consultation invited comments from all Canadians with an interest in Canada’s climate change commitments and policies and concluded in June 2019.
• The December 2021 mandate letters have also directed Ministers of Environment and Climate Change, Finance and Natural Resources to develop a plan to phase out public financing of fossil fuels both internationally and nationally.
• Budget 2022 proposes to eliminate the flow-through share regime for fossil fuel sector activities. This will be done by no longer allowing expenditures related to oil, gas, and coal exploration and development to be renounced to flow-through share investors for flow-through share agreements entered into after March 31, 2023.

Q3. Can you provide the definition of efficient and inefficient fossil fuel subsidies?

• Members of the G20 committed to phasing out or rationalizing inefficient fossil fuel subsidies that encourage wasteful consumption. There is intentionally no definition of “inefficient fossil fuel subsidies,” so that countries can define this term in the context of their national circumstances.
• However, the G20 commitment does provide some consideration by indicating that inefficient fossil fuel subsidy reform “will not apply to support for clean energy, renewables, and technologies that dramatically reduce greenhouse gas emissions.”

Q4. In terms of reviewing inefficient fossil fuel subsidies, Canada has committed to undergo a peer review process under the G20. When will the government complete the peer review?

• Our department is working closely with Finance Canada who is leading the peer review process under the G20 commitment.
• ECCC is working with Finance Canada and other departments to develop an approach that reflects the feedback we have received from the CESD audit, targeted and public consultations undertaken in 2019, and lessons from the 6 countries that have completed the G20 peer review so far. The pace of the review and analysis has been accelerated to meet the Government’s commitment to phase out and rationalize inefficient fossil fuel subsidies by 2023.

Q5. Why would government continue to provide any funding to the fossil fuel sector?

• The fossil fuel sector is a significant part of the Canadian economy. The Government of Canada recognizes that environmental commitments, such as net-zero, do not mean shutting down the oil and gas sector, but rather transforming it to become cleaner and more sustainable. As such, it will be an important player in helping Canada achieve net-zero by 2050.
• The Government of Canada remains committed to fulfilling the G20 commitment to phase out and rationalize inefficient fossil fuel subsidies in a way that aligns with Canada’s vision for transitioning to net-zero.

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 the objectives of the Paris Agreement.
• In 2021, Canada doubled its climate finance commitment to $5.3 billion (B) over the next 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 will be allocated to projects that leverage nature-based climate solutions and projects that contribute to biodiversity co-benefits.
• Canada is increasing its proportion of grant funding to 40%, and its provision of funding towards adaptation to a minimum of 40% to help developing countries build resilience.
• 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.
• Over the next five years, Canada will focus 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.

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 228 megatonnes of greenhouse gas (GHG) emissions and help over 6.6 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 successful 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?

• 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.
• But 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. For example, between 2015 and 2019, Canada’s total climate finance contribution amounted to $4.02B.

Q4. Are we on track to meet the collective $100 billion goal by 2020?

• OECD estimates that climate finance provided and mobilized by developed countries increased from US$58.5B in 2016 to US$79.6B in 2019 (2020 data is not yet available).
• Co-led by Canada and Germany, the Climate Finance Delivery Plan to 2025, based on OECD analysis recognized that developed countries will not have met the goal in 2020. However, recent increased donor pledges show significant progress being made in 2021 and 2022. The goal will likely be reached in 2023 and exceeded in 2024 and 2025.
• In support of scaling up climate finance, Canada is taking an innovative approach to mobilizing private sector financing and partnering with multilateral development banks and bilateral partners to help remove market barriers to private investments in developing countries by using targeted amounts concessional finance.

Q5. What is Canada doing to support Small Islands 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 new $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 support developing countries build their capacity to structure and secure finance for priority climate mitigation and adaptation investments.
• Canada also contributed $60M to the World Bank’s Renewable Energy in Small Island Developing States program to support SIDS to expand their renewable energy and energy efficiency, including pursing gender equality across energy value chains.

Q6. 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 FY2021-22, ECCC allocated a total of $6.24M in grants and contributions to the Climate and Clean Air Coalition (CCAC) ($6.175M) and to the global phase-down of HFCs under the Montreal Protocol ($0.065M).
• In addition, the department has spent $4.2M in funding from the $2.65B commitment that was reprofiled in FY2021-22 to fulfill existing engagements with developing country partners and Canadian implementing organizations.

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.
• There are two parts to the current Low Carbon Economy Fund:
  1. The Low Carbon Economy Leadership Fund provides 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.
  2. The Low Carbon Economy Challenge includes both Champions and Partnerships streams, which together provide approximately $450 million toward projects that reduce carbon pollution. This funding is open to all provinces and territories; municipalities; Indigenous governments, communities and organizations; businesses; and not-for-profit organizations. Projects leverage Canadian ingenuity across the country to reduce GHG emissions and generate clean growth.
• Through Canada’s 2030 Emissions Reduction Plan and Budget 2022, the Government of Canada announced it committed an additional $2.2 billion to the Low Carbon Economy Fund. This would extend the Low Carbon Economy Fund through to 2029-2030.

Q2. How much funding will be available for future intakes under 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 the 2030 Emissions Reduction Plan and Budget 2022, the Government of Canada will be empowering communities to take climate action by expanding the Low Carbon Economy Fund through a $2.2 billion recapitalization over seven years.
• The renewed Low Carbon Economy Fund will support climate action by Indigenous peoples with a new $180-million Indigenous Leadership Fund. This will support clean energy and energy efficiency projects led by First Nations, Inuit, and Métis communities and organizations.
• Environment and Climate Change Canada is currently engaging partners and stakeholders to refine the design of this advanced and enhanced Low Carbon Economy Fund. Program design and parameters are under consideration. The breakdown of funding available according to program streams will be shared in due course.

Q3. How will Indigenous communities and organizations benefit from the new Indigenous Leadership Fund?

• With the creation of the new Indigenous Leadership Fund, there will be opportunities to better facilitate the participation of Indigenous communities in the clean energy sector, while addressing barriers to reduce administrative burden for future applicants.
• The new stream will foster Indigenous clean energy leadership, including through the deployment of renewable energy projects and energy efficiency improvements across Canada. Additionally, the new 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 looks forward to working with Indigenous partners to co-develop a program framework to support Indigenous-led emissions reduction projects in Indigenous communities. This includes supporting a distinctions-based, collaborative approach to designing the framework of the new Indigenous Leadership Fund.

National Adaptation Strategy

Q1. What is the National Adaptation Strategy and why do we need one?

• Canada’s climate is warming rapidly, and across the country Canadians are witnessing and experiencing the devastating impacts of climate change.
• Adaptation is critical to protect Canadians from the negative effects of climate change, and ambitious and collaborative adaptation action that includes all Canadians is required to address and prepare for continuing and worsening impacts.
• That’s why the Government of Canada is working with provinces, territories, Indigenous peoples, and other key partners and experts to develop Canada’s first National Adaptation Strategy.
• The Strategy will establish a whole-of-society blueprint for climate change adaptation in Canada, which includes Indigenous peoples, provinces, territories, and other key partners and stakeholders, and strengthens linkages and collaboration among their individual efforts and plans.
• By bringing together all partners and encouraging cross-cutting and collaborative action, the Strategy will outline a shared vision for a resilient Canada, establish priorities for collaboration, and align actions for faster, coordinated, and systemic adaptation to the impacts of climate change.

Q2. How is the Strategy being developed?

• Development of the Strategy is well underway and the Strategy will be finalized by fall 2022, in advance of COP27.
• Carrying out extensive engagement with partners and stakeholders across Canada is a foundational component of developing the Strategy to ensure that the Strategy advances adaptation actions that are equitable, advance reconciliation with Indigenous peoples, and leave no one behind.
• To date, Canada has engaged with provinces and territories, Indigenous peoples, and over 100 experts, representing academia, youth, professional associations, the private sector, environmental organizations, and others, to develop transformational goals and medium-term objectives for the Strategy.
• This spring, Canada will build on these efforts by expanding engagement to include the public, and focusing developing the actions that the Strategy will advance.

Q3. What will the Strategy accomplish?

• The Strategy will be action-oriented – it will include a variety of proactive and collaborative adaptation actions, and establish clear roles and responsibilities for adaptation across Canada.
• These actions will cut across priority systems for adaptation – including infrastructure, health and well-being, the natural environment, the economy, and disaster resilience and security – focusing on supporting long-term structural changes and mechanisms for better adaptation, as well as advancing immediate actions to protect the populations and areas that are most at risk today.
• In fall 2022, alongside the release of the Strategy, Canada will release a federal adaptation action plan to outline the federal government’s role and commitments to advancing adaptation.
• The Government of Canada will continue to work with provinces and territories and Indigenous peoples on new ways to advance adaptation action together.
• By advancing immediate action and establishing effective mechanisms for collaboration, this Strategy will help protect Canadians for the impacts of today, while also laying the foundation for more effective and continued efforts on adaptation as Canada’s climate continues to change.

National Inventory Report

Q1. What are the key highlights from 2022 National Inventory Report?

• After fluctuations in recent years, Canada’s greenhouse gas (GHG) emissions decreased to 672 megatonnes of carbon dioxide equivalent (Mt CO₂ eq) in 2020 (the most recent year for which data are available for this report), net decreases of 66 Mt or 8.9% from 2019 and 69 Mt or 9.3% from 2005.
• The year 2020 was marked by the COVID-19 pandemic, coinciding with a decrease in emissions of 66 Mt or 8.9% across numerous sectors. Notable examples include Transport (-27 Mt or -12%) largely due to fewer kilometers driven and a decrease in air traffic; and Public Electricity and Heat Production (-7.4 Mt or -11%) due to decreased coal consumption partially offset by an increase in natural gas consumption.
• During the period covered by this report (1990–2020), Canada’s economy grew more rapidly than its GHG emissions. As a result, the emissions intensity for the entire economy (GHG per gross domestic product [GDP]) has declined by 39% since 1990 and by 26% since 2005.

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 improvement is a key principle upon which Canada’s annual greenhouse gas inventory is developed. Important method improvements were implemented in the 2021 edition of the NIR (methane emissions from landfills) and more were implemented in the 2022 edition (fugitive methane emissions from upstream oil and gas). The enhanced methods use Canadian-specific studies and knowledge, facilitate the adoption of new scientific data, and better capture the impact of improvements in technologies and industry practices on emissions.

Q4. How is Canada consulting with Province 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.

Net Zero Accelerator Initiative

Q1. What is the Net Zero Accelerator Initiative?

• The Net Zero Accelerator will provide up to $8 billion in support of projects that will support innovation, enable Canada to reduce its domestic greenhouse gas emissions, as well as unlock pathways to a healthy and productive decarbonized economy.
• The initiative will support projects that promote the decarbonisation 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. Emphasis includes consideration of scale in order 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 greenhouse gas emissions by more than 3 million metric tonnes per year by 2030 making a meaningful contribution to achieving Canada’s climate goals.
• In March 2021, the Prime Minister and the Premier of Quebec announced an equal investment totalling nearly $100 million to Lion Electric for the establishment of a highly automated battery-pack assembly plant in Saint Jérôme. Lion Electric will be the first Canadian manufacturer of medium and heavy-duty vehicles to have state-of-the-art, automated battery-pack manufacturing facilities.
• 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 carbon dioxide into the atmosphere from industrial sites like cement and blue hydrogen plants. This innovative industrial point-source carbon capture technology will collect carbon dioxide, 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.

Net-Zero Advisory Body

Q1. What is the mandate of the Net-Zero Advisory Body?

• The Net-Zero Advisory Body (NZAB) has a mandate to provide independent advice to the Minister of Environment and Climate Change (ECC) with respect to achieving net-zero emissions by 2050, including advice related to:
  • greenhouse gas emissions targets;
  • greenhouse gas emissions reduction plans; and
  • any matter referred to it by the Minister.
• The mandate also includes conducting engagement activities related to achieving net-zero emissions.
• Its advice will include measures to catalyze long-term, low-carbon economic growth across the Canadian economy.
• With a legislated basis, the NZAB is intended to be a permanent body providing advice along the way to 2050.

Q2. Is the Net-Zero Advisory Body independent?

• Yes, the NZAB is independent and apolitical. The NZAB will give independent advice to the Minister.
• NZAB members represent themselves as individuals, not the organizations that they are employed by or affiliated with.
• Each member brings their own expertise and experiences to the roles.
• The Canadian Net-Zero Emissions Accountability Act (CNZEAA) provides a statutory basis for the NZAB and adds certainty and clarity to their mandate.
• On February 21, 2022, pursuant to CNZEAA, ten members of the NZAB were appointed by the Governor-in-Council.
• While the NZAB is supported by a Secretariat based within Environment and Climate Change Canada (ECCC), its decisions, materials, discussions, and reports are not subject to departmental approvals.

Q3. Who has the Net-Zero Advisory Body met with so far?

• The NZAB has met with a range of domestic and international experts who have completed net-zero pathways, including:
  • Canada Energy Regulator
  • Canadian Climate Institute
  • Canadian Centre For Policy Alternatives
  • David Suzuki Foundation & University of Victoria
  • Haut conseil pour le climat (France)
  • Indigenous Clean Energy
  • International Energy Agency
  • International Institute for Sustainable Development
  • McKinsey & Company
  • National Academies Of Sciences Engineering And Medicine
  • *Redacted*, Carleton University, Transition Accelerator
  • *Redacted*, Princeton University
  • UK Climate Change Committee
  • Trottier Energy Institute
• To inform the advice on Canada’s 2030 Emissions Reduction Plan, the NZAB conducted a range of engagement activities over the course of summer and fall 2021 and early 2022. The NZAB:
  • Heard from sector and scientific experts, decision-makers, the public, businesses and industry, and civil society organizations and associations, including those representing workers and Indigenous peoples;
  • Hosted 15 discussions and briefings with decision-makers and sectoral experts;
  • Received more than 1,200 submissions and comments via its website; and
  • Held roundtables to hear from representatives of 58 organizations.

Q4. What work has the Net-Zero Advisory Body done this year?

• During the first three months of its mandate, the NZAB met with a range of domestic and international experts who had developed net-zero pathways.
• In June 2021, the NZAB released its pathways summary which identifies ten observations – essential values and principles – that they believe are essential to defining net-zero pathways that are achievable and lead to a fairer, healthier, and more secure future for all Canadians.
• The NZAB also set lines of inquiry and priorities for analysis and engagement.
• On March 21, 2022, the NZAB publicly released its advice to the Minister of Environment and Climate Change to help inform the Government of Canada’s 2030 Emissions Reduction Plan.
• The NZAB’s first annual report will be completed within the next year.

Q5. What are the Net-Zero Advisory Body’s lines of inquiry?

• The NZAB’s lines of inquiry are the subject matter that it is exploring in detail this year, on which it will provide advice on to the Minister.
• Its current lines of inquiry are governance, oil and gas, buildings, and transportation.

Q6. Who are the members of the Net-Zero Advisory Body?

1. Marie-Pierre Ippersiel, co-chair (QC)
2. Dan Wicklum, co-chair (AB)
3. Catherine Abreu (NS)
4. Gaetan Thomas (NB)
5. John T. Wright (SK)
6. Kim Thomassin (QC)
7. Kluane Adamek (YK)
8. Linda Coady (BC)
9. Sarah Houde (QC)
10. Simon Donner (BC)
11. Yung Wu (ON)

• The NZAB brings a range of experiences and expertise to its work, including in backgrounds in science, business, labour, policy-making, rural economic development, and Indigenous governance.

Q7. What requirements does the Canadian Net-Zero Emissions Accountability Act place on the Minister of Environment and Climate Change in relation to the Net-Zero Advisory Body?

• The Minister may determine and amend the terms of reference of the advisory body and must make any terms of reference or amendments to those terms available to the public.
• When recommending a member for appointment, the Minister must consider the need for the advisory body as a whole to have expertise in, or knowledge of certain areas.
• The Minister must make the NZAB’s annual report available to the public within 30 days after receiving it. Within 120 days of receiving the report, the Minister must publicly respond to the advice included in the NZAB’s report, including any national greenhouse gas emissions target that is recommended by the advisory body if the Minister has set a target that is different from it.
• When setting or amending a national greenhouse gas emissions target or establishing or amending an emissions reduction plan, the Minister must, in the manner the Minister considers it appropriate, provide the governments of the provinces, Indigenous peoples of Canada, the NZAB and interested persons, including any expert the Minister considers appropriate to consult, with the opportunity to make submissions.
• When establishing a greenhouse gas emissions reduction plan, the Minister must take into account the United Nations Declaration on the Rights of Indigenous Peoples, the submissions provided by the advisory body and advice it provided in its annual report, and any other considerations that are relevant to the purpose of the Act.
• When setting a greenhouse gas emissions target, the Minister must take into account:
• the best scientific information available;
  • Canada’s international commitments with respect to climate change;
  • Indigenous knowledge; and
  • submissions provided by the NZAB and advice it provided in its annual report.

Q8. What advice has the Net-Zero Advisory Body provided on setting cap and targets for the oil and gas sector?

• On November 1, 2021, I, in my role as Minister of Environment and Climate Change, together with the Minister of Natural Resources, sent the Net-Zero Advisory Body (NZAB) a joint letter requesting specific advice on key guiding principles to inform the development of quantitative five-year targets for emissions reductions in Canada’s oil and gas sector.
• We thank the NZAB for accepting our request. Their guiding principles are critical to our collective goal of defining an ambitious and achievable path to a prosperous net-zero emissions economy by 2050 and have helped to inform the 2030 Emissions Reduction Plan.

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 methane emissions.
• 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.
• We are developing a methane strategy to reduce methane emissions across the economy, consistent with the Global Methane Pledge.
• The strategy will outline plans for addressing methane from the three sectors that account for over 90% of Canada’s anthropogenic methane emissions: oil and gas (40%), agriculture (29%), and landfills (27%).
• In 2016, Canada set a target of reducing methane emissions from the oil and gas sector by 40-45 per cent 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 by providing support to struggling companies in the sector.
• In late 2021, we published a report on the effectiveness of the suite of federal actions we have taken to achieve this 2025 goal. The report concluded that Canada is on track to meet its 2025 target for methane emission reductions from the oil and gas sector.
• Responding to the global imperative for further cuts, Canada has committed to reduce oil and gas methane emissions by 75% below 2012 levels by 2030. A discussion paper was published in March, 2022, to initiate consultation on Canada’s approach to achieving this commitment.
• We are also developing regulations to increase the number of landfills that collect and treat methane. We began consultations on these regulations with a discussion paper in January 2022.
• We will also be supporting Canadian farmers and industry partners who are taking action to reduce emissions, sequester carbon and make their operations more sustainable, productive and competitive.

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?

• Our government is developing a methane strategy to reduce methane emissions across the broader Canadian economy, consistent with the Global Methane Pledge, which aims to reduce global anthropogenic methane emissions across economic sectors by at least 30% below 2020 levels by 2030.
• It will focus on the three sectors that account for over 90% of Canada’s anthropogenic methane emissions: oil and gas (40%), agriculture (29%), and landfills/waste (27%).
• We expect to publish the strategy later this year, well before the COP27 conference in November.

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?

• Our government is developing a strategy to reduce methane emissions across the broader Canadian economy, consistent with the Global Methane Pledge.
• 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 per cent below 2012 levels by 2025, and in 2018, we put regulations in place to help achieve it.
• In late 2021, we published a review report on the effectiveness of the suite of federal actions we have taken to achieve this 2025 goal. The report concluded that Canada is on track to meet its 2025 target for methane reductions from the oil and gas sector. This sets a strong foundation for continued progress on reducing methane emissions.
• Canada has now committed to reduce oil and gas methane emissions by at least 75% by 2030 below 2012 levels. A discussion paper was published in March 2022 to initiate consultation on Canada’s approach to achieving this commitment.
• We also plan to develop regulations to increase the number of landfills that collect and treat methane,. We began consultations on landfill methane regulations by publishing a discussion paper in January 2022.
• 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.

Returning proceeds from carbon pollution pricing

Q1. 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 have voluntarily adopted the federal fuel charge and/or the Output-Based Pricing System (OBPS) can choose to have those proceeds returned directly.
• In jurisdictions where the federal fuel charge applies on an involuntary basis, the majority of direct proceeds are returned to households through Climate Action Incentive payments. Most households will get back more in Climate Action Incentive 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. This includes returning proceeds to farmers, to Indigenous peoples through co-development of distinctions-based mechanisms, and to emissions intensive and trade exposed small and medium-sized businesses.
• OBPS proceeds collected from the current or past backstop jurisdictions of Saskatchewan, Manitoba, Ontario and New Brunswick are being returned through the OBPS Proceeds Fund to further support industrial decarbonization and clean electricity initiatives.

Q2. What is the Government of Canada’s plan to return fuel charge proceeds in 2022-2023?

• At this time, the federal fuel charge applies to the provinces of Alberta, Saskatchewan, Manitoba and Ontario. The Government remains committed to ensuring that proceeds are returned to the jurisdiction of origin though a combination of Climate Action Incentive payments and federal programming.
• Budget 2022 announced that Environment and Climate Change Canada will return proceeds through direct payments to support emission-intensive, trade-exposed small and medium-sized enterprises in backstop jurisdictions. Through these payments, the Government will return approximately $1.6 billion in fuel charge proceeds beginning in 2022-23. Further details will be available in due course.

Q3. 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 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. Initial discussions to support formal negotiations are underway.
• Available funding depends on the amount of proceeds collected from OBPS regulated facilities during a given compliance period. Approximately $161 million was collected from the federal OBPS for the 2019 compliance period. The following table shows the estimated funding available.

OBPS Proceeds Fund (Proceeds for 2019)

Province	DIP estimated funding available (in millions)	FEF estimated funding available (in millions)
Manitoba	$5.3	$0.3
New Brunswick	$0.9	$5.9
Ontario	$68.3	$17.0
Saskatchewan	$6.9	$56.3

Q4. 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 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.

Q5. How will the Government of Canada return proceeds to Indigenous groups or governments?

• Canada committed to work on a distinctions-basis to co-develop the mechanisms by which a portion of fuel charge proceeds would be returned to First Nations and Métis recipients in jurisdictions where the federal fuel charge applies, beginning in 2020-21. The purpose of this approach is to provide long-term, flexible mechanisms that better support Indigenous-led climate action.

Sustainable Finance Action Council

Q1. What is the purpose and the mandate of the Sustainable Finance Action Council?

• The SFAC was established in May 2021 to bring together public and private sector financial expertise to support the growth of a strong, well-functioning, sustainable finance market.
• Sustainable finance enables the mobilization and alignment of private sector investments towards climate and environmental objectives, promotes financial stability related to climate risk, and supports a smooth transition to a net-zero economy.
• The Sustainable Finance Action Council is made up of 25 senior executives who represent a regionally diverse list of leading Canadian banks, insurance companies and pension funds, which combined have more than $10 trillion in assets. The council is chaired by Kathy Bardswick, former President and Chief Executive Officer of The Co-operators Group and inaugural President of the Canadian Institute for Climate Choices.
• The SFAC’s principal mandate is to make recommendations on critical market infrastructure needed to attract and scale sustainable finance in Canada including: enhanced assessment and disclosure of climate risks and opportunities; better access to climate data and analytics; and common standards for sustainable and low-carbon investments.

Q2. What is sustainable finance and why is it important for reaching Canada’s climate goals?

• The transition to net-zero emissions by 2050 is estimated to require hundreds of trillions of dollars in global investment. In Canada alone, this transition may require $2 trillion over the next three decades.
• Canada’s financial sector will play a key role in raising and guiding the necessary funds. To do so, the financial sector will need to incorporate environmental, social, and governance factors throughout financial decision-making.

Q3. What is the Government doing to advance sustainable finance in Canada?

• Climate-related financial disclosure is a key component of sustainable finance to ensure that the risk of climate change is reflected. This is why the SFAC’s early emphasis has been on enhancing climate-related financial disclosures aligned with the recommendations of the Task Force on Climate-related Financial Disclosure (TCFD).
• Budget 2021 announced that Crown corporations with assets over $1 billion will be required to make climate-related financial disclosures starting in 2022.
• In the December 2021 ministerial mandate letters, the Government expanded on its support for climate-related disclosures committing to work with provinces and territories to move toward mandating disclosures. This will require federally regulated institutions including financial institutions, pension funds and government agencies to issue climate-related financial disclosures and net-zero plans.
• In March 2022, the Government of Canada published its Green Bond Framework in advance of an inaugural green bond issuance of $5 billion. The Framework defines eligibility criteria and provides example expenditures aligned with the International Capital Markets Association Green Bond Principles. Green bonds will support Canada’s green transition by offering investment opportunities in both climate and environmental measures, while also fostering the development of Canada’s sustainable finance market.

Q4. Is the goal of sustainable finance to divest from fossil fuel sectors?

• The Government of Canada recognizes that no credible plan to achieve significant emissions reductions by 2030, and net-zero emissions by 2050, can neither ignore the emissions-reduction and the innovative potential of heavy industry, including the Canadian energy sector, nor the intersection between ambitious decarbonization and ensuring a just transition and economic opportunity for communities and individuals across Canada.
• Sustainable finance is intended to ensure that environmental, social, and governance considerations are taken into account in financial decision-making. This includes highlighting and mitigating risks or climate change, but also opportunities posed by future climate change. It is not intended to drive capital towards or away from specific sectors of the economy.

Q5. How do you respond to the Bank of Canada and the Office of the Superintendent of Financial Institutions recently released Climate Change Scenario Analysis report that indicates that the transition to net-zero will be extremely costly?

• The Government welcomes this report from the Bank of Canada and the Office of the Superintendent of Financial Institutions. Similar to other sectors of the economy, it is important that Canada’s financial sector assess their stability and resilience in the face of climate change, and make changes needed to adapt to its impacts.
• Their exercise is an important first step in helping financial institutions and the public sector improve their ability to analyze the financial risks tied to climate change.
• The analysis is based on international standards for climate scenarios used by central banks and the report presents illustrative scenarios that should not be considered predictions. They were deliberately designed to highlight some of the financial and economic risks related to the transition to a low-carbon economy. The report does not provide an assessment of Canada’s domestic climate policies and their impact on the financial sector
• The scenarios show how the transition to a low-carbon economy can lead to financial impacts for certain companies and the institutions that finance them. The analysis also shows that whatever path is chosen delaying action exacerbates the risks to the financial sector and to the economy as a whole.

Zero-emission vehicles

Q1. What is the role of zero-emission vehicles in GHG emissions reduction?

• Canada is taking action across all sectors in order to meet its commitment under the Paris Agreement to reduce GHG emissions by 40% to 45% below 2005 levels by 2030 and to reaching net-zero emissions by 2050.
• Recognizing that the transportation sector accounts for about 25 per cent of Canada’s GHG emissions, the Government is taking multiple actions to reduce transportation emissions, including to expand the number of zero-emission vehicle (ZEVs) on Canadian roads.
• We are going to introduce a regulated mandate to require that at least 20% of light duty vehicle sales are zero emission by 2026, at least 60% by 2030 and 100% by 2035.
• We are also going to introduce a similar requirement for selected classes of medium- and heavy-duty vehicles offered for sale to be zero emission by 2040.
• We will also continue to align emission standards for light and heavy-duty vehicles with the most stringent performance-based standards in North America.
• 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 States have similar ZEV mandates.
• We are complementing mandates with measures to make ZEVs more affordable, significantly expand charging infrastructure, and lead by example via federal procurement rules.

Q3. Your Department recently completed consultations. What are the views of industry, stakeholders to the Government’s ZEV targets?

• The traditional automakers want the Government to continue to align our emission standards with those of the U.S.
• The U.S. is expected to release draft regulations for more stringent performance based standards of the 2027-30 model years.
• ENGOs do not think our ZEV targets are ambitious enough.
• Provinces with sales mandates in place have requested that the federal ZEV regulations take into account their existing regulations.
• All stakeholders have pointed to the importance of complementing regulations with measures that match President Biden’s proposed EV tax credit, new investments in EV charging, etc.

Q4. How does Canada compare to other countries in terms of ambition?

• The transition to ZEVs will require a suite of regulations and enabling measures to support industry and Canadians in the ZEV transition. No country in the world has high ZEV adoption without providing consumer incentives and ensuring adequate charging infrastructure.
• 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, 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 sales target and the European Union is regulating GHG performance standards to achieve 100% ZEV sales by 2035.
• Norway is the world leader in ZEV sales. It has already achieved 74% through a set of strong disincentives and incentives, including sales tax exemptions for ZEVs, making them cheaper than internal combustion engine vehicles.
• In Glasgow last year, there were 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 Glasgow Breakthrough 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, 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.
  • Canada with the support of the U.S. and Europe proposed a target of at least 50% ZEV sales by 2030 at the recent Major Economies Forum.
  • 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.

Q5. How is Canada going to support the existing on-road medium and heavy-duty vehicle fleet?

• Minister Wilkinson’s mandate letter incudes 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 our sales targets our departments have held a series of engagement 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.

Q6. 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 standards are company-unique in that each company’s performance is determined through its sales-weighted fleet average emissions performance for a given model year, expressed in grams per mile of carbon dioxide (CO2) equivalent based on standardized emissions tests.
• Companies can use banked or purchased credits to comply if their performance exceeds their compliance standard.
• The average compliance value for new passenger automobiles has decreased from 255 g/mi in 2011 to 194 g/mi representing a 24% average reduction in GHGs. The standards for light trucks have decreased by 17%.
• Heavy-duty vehicles are regulated under separate regulations. These also set progressively more stringent GHG emission standards for the various types of HDVs.

Q7. What ZEV-related investments are included in Budget 2022?

• In support of Canada’s LDV and MHDV ZEV targets, Budget 2022 is making a number of 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)