Minister’s response to the Net-Zero Advisory Body’s Second Annual Report Advice

Ms. Sarah Houde
Co-chair
Net-Zero Advisory Body
Vice-President Sustainability
Intelcom|Dragonfly
sarah_houde@yahoo.fr

Simon Donner, Ph.D.
Co-chair
Net-Zero Advisory Body
Professor
Institute for Resources, Environment and Sustainability
Department of Geography
The University of British Columbia
simon.donner@ubc.ca

Dear Ms. Houde and Dr. Donner:

As Minister of Environment and Climate Change, I welcome the Net-Zero Advisory Body's (NZAB’s) second annual report under the Canadian Net-Zero Emissions Accountability Act. This report contains three volumes: Volume 1 (Synthesis Report); Volume 2 (Canada’s Bottom Line: Carbon Budgeting and Canada’s 2035 Target); and Volume 3 (Closing the Gap: Reaching Canada’s 2030 Emissions Target). These volumes provide valuable advice on different aspects of Canada’s climate objectives. They have helped shape Canada’s 2035 target and will inform the implementation of key measures of the 2030 Emissions Reduction Plan.

The Government of Canada recognizes the importance of the engagement performed by the NZAB to inform its work. The What We Heard Report published in 2023 highlighted the extent of the NZAB’s engagement activities with stakeholders and partners. The Government is looking forward to hearing the outcome of the NZAB’s ongoing engagement.

The Government of Canada deeply appreciates the NZAB’s expertise, which informs the Government's policies through a diversity of perspectives. For example, the NZAB’s first annual report provided advice that directly informed Environment and Climate Change Canada’s ongoing efforts to improve the transparency and accuracy of its modelling. In addition, the Department released Canada’s Preliminary Greenhouse Gas Emissions (1990–2023) by the end of 2024, consistent with NZAB’s call to reduce the lag in greenhouse gas emissions reporting. Budget 2024 included further commitments to streamline the regulatory process for major projects that are key to achieving net zero, in line with the recommendation from the NZAB’s first annual report.

Canada’s bottom line

Volume 2 of the NZAB’s second annual report outlined recommendations for Canada’s 2035 emissions reductions targets. The NZAB recommended that Canada adopt a carbon budget; set a 2035 target of 50 to 55 percent below 2005 levels; and track and address Canada’s excess emissions by enhancing international climate financing, pursuing negative emissions opportunities, and exploring internationally financed emissions reductions.

Carbon budgets

The NZAB recommended that Canada adopt a national carbon budget of between 10,198 and 11,034 megatonnes of carbon dioxide equivalent for total domestic emissions of greenhouse gas issued between 2031 and 2050. The NZAB also recommended breaking down the budget into five-year interim milestones starting in 2031. The Government of Canada recognizes the scientific merits of measuring cumulative emissions over a defined period as a means of estimating the total amount of temperature increase that would be likely to result from these emissions. However, the adoption of a carbon budget as a policy and accounting tool poses many implementation considerations that will need to be further explored. I look forward to working with the NZAB to learn more about the efficacy of carbon budgeting.

2035 emissions reduction target

The NZAB recommended an emissions reduction target of 50 to 55 percent below 2005 by 2035. This recommendation takes into account modelling from the Canadian Climate Institute, the ambition of some of Canada’s international partners, affordability, competitiveness, Indigenous reconciliation, and the carbon budget analysis. The NZAB acknowledges the need to meet this target primary through mitigation measures while considering other mechanisms such as international climate financing, negative emissions opportunities, and internationally financed emissions reductions.

Pursuant to the Act, the Government of Canada set a target to reduce greenhouse gas emissions by 45 to 50 percent below 2005 levels for the year 2035. The Government will strive to be as ambitious as possible while balancing a range of other considerations affecting Canadians.

The Government of Canada’s decision is informed by the advice of the NZAB as well as several additional requirements prescribed by the Act. These include

• The Best Available Science – The Government considered peer-reviewed research, major international assessments, Canadian climate assessments, and the latest emissions data.
• Indigenous Knowledge – The federal government sought written and oral submissions from Indigenous communities, conducted a literature review of Indigenous self-determined climate change plans, and held numerous engagement sessions with Indigenous Peoples.
• Canada’s International Commitments – The Government of Canada reviewed Canada’s international climate change commitments and developed a set of analytical parameters to highlight the most relevant commitments.

In setting the 2035 target, the Government of Canada also considered the results of an online public engagement portal launched in early 2024, inviting Canadians and stakeholders to share their thoughts on climate action and the appropriate level of ambition for the 2035 target. Submissions from provinces and territories and Indigenous partners were also sought separately. These were supplemented by internal analysis informed by experience in designing, implementing, and evaluating climate policies.

Ensuring a prosperous net-zero transition is an unprecedented undertaking that requires a careful balancing of considerations. The Government of Canada is confident that the target maximizes ambition in light of Canada’s capacity to act while being responsive to the immediate financial realities faced by households and businesses. The target is aligned with what is required to deliver net-zero emissions by 2050; advances the energy transition while being responsive to Canada’s role as energy exporter; and minimizes the risks of carbon leakage, loss of competitiveness, and capital flight that could compromise progress achieved domestically.

Excess emissions

Canada has demonstrated international leadership and co-operation on climate change for many years and will continue to advance initiatives that support countries around the world to find solutions and take concrete action to achieve their emissions reduction goals. Canada is a leader in international climate finance. Under Canada’s $5.3-billion International Climate Finance envelope (2021–2026), up to 60 percent of funds are used to support mitigation actions in developing countries, including many of the most emissions-intensive economies today.

Negative emissions, such as through permanent carbon dioxide removal, will make necessary contributions to Canada’s net-zero objectives and the achievement of a stable global climate system. Environment and Climate Change Canada recently published the preliminary draft Direct Air Carbon Dioxide Capture and Geological Storage federal offset protocol, which will stimulate investment, innovation, and deployment of direct air capture technology by providing a source of revenue for these types of projects. As part of its Carbon Management Strategy, Canada will continue to advance technology-enabled carbon dioxide removal approaches while maintaining a focus and priority on other mitigation actions. To this end, the Government of Canada will continue to explore the role technologies that permanently remove carbon dioxide can play in Canada's climate plan.

The Government of Canada is exploring the role that could be played by internationally transferred mitigation outcomes. If the Government of Canada decides to allow the acquisition, sale, or use of internationally transferred mitigation outcomes under the Paris Agreement, these could offer another opportunity to address Canada’s excess emissions and could provide flexibility to achieve the country’s emissions reductions targets while supporting sustainable development domestically and abroad, as well as strengthening international co-operation.

Closing the gap

Volume 3 of the second annual report is the NZAB’s response to my request for additional measures the Government of Canada could take to achieve its 2030 target. Five pieces of advice were provided:

1. finalize announced measures,
2. address negative interactions,
3. strengthen industrial carbon pricing,
4. secure additional emissions reductions form the oil and gas sector, and
5. evaluate and pursue additional actions.

Environment and Climate Change Canada continues to analyze all aspects of these recommendations, and some are already being actioned. For example, in December 2024, the Government of Canada finalized the Clean Electricity Regulations, which will ensure a net-zero electricity grid by 2050.

Some of the NZAB’s recommendations, such as those on industrial carbon pricing, will continue to be considered through existing mechanisms. The Government will conduct an interim review of the federal backstop criteria to ensure they are sufficient to keep markets equally stringent and functional and will update if necessary. The review will assess provincial and territorial systems to ensure that systems continue to meet the benchmark criteria for the 2027–2030 period and maintain strong demand in credit markets.

Other recommendations will require more time to consider and will require engagement with partners to discuss the implications of implementing the advice given other evolving factors, including potential U.S. trade measures.

Once again, I would like to thank the NZAB for its ongoing work providing expert advice to the Government of Canada on how to achieve net-zero emissions by 2050 as well as Canada’s 2030 emissions reduction target. I look forward to the advice that will come from the NZAB’s new lines of inquiry, namely net-zero energy systems, net-zero governance, net-zero industrial policy, and excess and negative emissions. The work performed by the NZAB directly supports—and provides valuable insights to inform—the Government of Canada’s efforts to reduce emissions in every sector of the economy, examine new measures and strategies that can be implemented to respond to changing circumstances, and collaborate with partners, including provinces and territories, to achieve net zero by 2050.

Please accept my best regards.

Sincerely,

The Honourable Steven Guilbeault, P.C., M.P.