Canada's Emission Trends 2014: annex 3


Annex 3: Alternate Emissions Scenarios

Emissions projections depend on a number of economic and energy variables, which make them subject to uncertainty, and thus most appropriately viewed as a range of plausible outcomes. Future developments in technologies and the rate of resource extraction cannot be foreseen with certainty. Typically, these key uncertainties are addressed through examining alternative cases. The sensitivity analysis presented here focuses on two key uncertainties: future economic growth, and the evolution of oil and natural gas price and production.

In Table A.9, the emissions outcomes of these alternative cases are presented independently and in various combinations. These alternative cases explore the interaction of energy markets and economic growth, and their impact on emissions, under a range of assumptions.

Under a scenario where oil and gas prices are assumed to be 29% higher than in the reference case in 2020, and annual average growth in GDP between 2012 and 2020 is expected to be 2.7% (compared with 2.2% in the reference scenario), emissions could reach 781 Mt of CO2 eq (not including the contribution from LULUCF) in 2020.Footnote 24 Alternatively, under a scenario with slower GDP growth (average growth of 1.5% between 2012 and 2020) and lower world oil and gas prices (29% lower than the reference case in 2020), emissions could be as low as 716 Mt CO2 eq, (not including the LULUCF contribution) in 2020.

Assumptions

The fast and slow GDP growth extremes were derived by applying the assumptions from the 2013 Annual Energy Outlook by the U.S. Energy Information Agency for fast and slow economic growth for population and productivity in the macroeconomic framework of the model. Also applied were high and low population growth assumptions for Canada, based on impacts derived from Statistics Canada’s 2010 population growth projections for high and low population growth. The fast and slow GDP growths were then solved endogenously within the model.

Table A.9: Economic Growth and Population from 2012 to 2020
Assumption
Low

Reference

High
Average Annual GDP Growth Rate 1.5% 2.2% 2.7%
Average Annual Population Growth Rate 0.8% 1.1% 1.3%

Oil and gas prices and production for all scenarios are based on projections from the National Energy Board. In the baseline scenario, the world oil price is projected to grow from $96/bbl (barrel of oil) in 2012 real Canadian dollars (2012 C$) in 2012 to $102/bbl in 2020. The natural gas price is also predicted to increase in the baseline scenario, from the 2012 value of $2.63/GJ to $4.72/GJ (per gigajoule) in 2020.

Table A.10: Oil and Gas Price and Production in 2020
Assumption Low
Reference
High
Crude Oil Price: WTI (2012 C$/bbl) 72 102 132
Crude Oil Price: Alberta Heavy (2012 C$/bbl) 57 81 104
Crude Oil Production (1000 bbl/day)Footnotea 4188 4721 5282
Natural Gas Price: Henry Hub (2012 C$/GJ) 3.30 4.72 6.04
Natural Gas Production (billion cubic feet) 3611 4861 5781

The high price scenario sees prices of $132/bbl (2012 C$) for oil and $6.04/GJ for natural gas in 2020. Crude oil and natural gas production are both increased (by 11% and 19% in 2020, respectively) under the high price scenario relative to the baseline forecast. This scenario is used alone and in combination with different GDP growth assumptions.

A low price scenario is also included, where the world oil price drops to $72/bbl (2012 C$) by 2020, and the natural gas price increases more slowly to $3.30/GJ in 2020. Crude oil and natural gas production see relative decreases of 11% and 26% in 2020 under the low price scenario. The low price scenario is similarly combined with different GDP growth assumptions.

These high and low cases for oil and natural gas prices were provided by the National Energy Board as the probable range of future energy prices used within their analysis.

Figure A.4 illustrates how differing price and GDP growth assumptions in various combinations might impact Canadian GHG emissions through 2020.

GHG emissions in the fast-GDP-growth scenario are about 7% higher in 2020 than 2012 levels. As economic activity increases, there will unquestionably be a higher demand for energy and a corresponding increase in emissions. In contrast, emissions are expected to be much lower if the Canadian economy grows at a slower pace. When combined with high oil and gas prices, emissions could be 10% higher than 2012 levels by 2020. Expected growth of the economy is the primary driver of expected emissions growth. Any variation in this path will lead to a different set of projections about expected future emissions. Table A.11 quantifies the results of the full range of emissions alternatives illustrated in Figure A.4.

The growth in emissions is expected to slow down as energy prices increase and consumers are provided with a greater incentive to make more efficient choices. However, the increase in price also drives higher production in the oil and gas sector, which generally offsets this effect. Emissions from the oil and gas sector in the high world oil and gas prices case rise by 52 Mt from 2012 to 2020, whereas they rise by only 4 Mt in the low price scenario.

The range in total projected emissions from all scenarios rises as we extend our projection further into the future. As a result of the assumptions made about the growth in Canadian GDP and the future evolution of oil and natural gas price and production, the range is roughly 65 Mt in 2020.

Table A.11: Sensitivity Analysis Summary for 2020 in Mt CO 2 eq (excluding LULUCF)
Scenarios 2020 Change between
2005 and 2020
Slow GDP 724 -12
Fast GDP 779 43
Low World Oil and Gas Prices 745 9
High World Oil and Gas Prices 755 19
Slow GDP, Low World Oil and Gas Prices 716 -20
Slow GDP, High World Oil and Gas Prices 747 11
Fast GDP, Low World Oil and Gas Prices 771 35
Fast GDP, High World Oil and Gas Prices 781 45
Reference 746 10
Sensitivity Range 716 to 781 -20 to 45

Figure A.4: Projected GHG Emissions Under Full Range of Alternative Economic Assumptions (excluding LULUCF)

Figure A.4 (see description below)
Text description of Figure A.4

Figure A.4 presents nine time series line graphs on a chart spanning the years 2012 to 2020. Each line represents a unique scenario for projected GHG emissions based on alternative economic assumptions. The scenarios are derived using different assumptions of two drivers of emissions, GDP and energy prices. For GDP the assumptions are Slow Growth in GDP or Fast Growth in GDP. For energy prices (both crude oil and natural gas), assumptions are Low Prices or High Prices. Each of the assumptions and combination of assumptions is represented by a single projection plotted as a time series line graph. These scenarios account for eight lines and the last line is the reference line, representing the reference scenario GHG emissions projection. Each line begins at 699 Mt in 2012. The highest point reached is the Fast GDP + High Prices scenario. It peaks at 781 Mt in 2020. The second highest scenario is Fast GDP which peaks at 779 Mt in 2020. The next scenario is the Fast GDP + Low Prices and it peaks at 771 Mt in 2020. The fourth highest scenario is High Prices and it peaks at 755 Mt in 2020. Next, the Slow GDP + High Prices scenario reaches its peak at 747 Mt in 2020. The sixth highest scenario is the Reference scenario. It peaks at 747 Mt in 2020. The next scenario and third from the bottom is the Low Prices scenario. It peaks at 745 Mt in 2020. The scenario second from the bottom is Slow GDP which peaks at 724 Mt in 2020. The lowest emissions scenario is Slow GDP + Low Prices and it reaches a peak of 716 Mt in 2019 and remains at 716 Mt in 2020.

 

Report a problem or mistake on this page
Please select all that apply:

Thank you for your help!

You will not receive a reply. For enquiries, contact us.

Date modified: