Gattinger: Ottawa’s Emissions Reductions Plan Missing Key Ingredients For Success
Ottawa released its long-awaited Emissions Reduction Plan this week. A voluminous 271 pages, the plan charts the government’s path for climate policy to 2030.
Delayed since December, it’s being released in a very different context: the war in Ukraine that’s propelled energy security to the top of government agendas, the Liberal-NDP agreement that’s raised questions about NDP influence on Liberal climate policy, and rising energy prices, skyrocketing housing markets and inflation that are all putting affordability at the heart of Canadians’ concerns.
Affordability, reliability and energy security seem to be better integrated in this plan than previous plans, where they were scarcely mentioned, if at all. That’s a good thing. So is the plan’s attention to implementation and how the numerous measures at the economy-wide and sectoral levels relate to one another. There is more whole-of-government thinking in this plan. That’s real progress.
But there remain big gaps in how the plan’s ambitious emissions reductions models square with the day-to-day realities of energy and climate decision-making in Canada’s complex federal energy systems.
The plan hinges on building new energy infrastructure (lots of it), securing private sector investment (boatloads of it), ensuring ongoing public support for emissions reduction (when affordability tends to trump climate) and undertaking deep intergovernmental collaboration (the likes of which are unprecedented). More on this later.
Start with what’s in the plan. Ottawa has committed to reducing GHG emissions 40 per cent from 2005 levels to 2030, a decline from 730 MT in 2019 to 443 MT in 2030. The plan sets out reductions by sector, with the largest contribution coming from oil and gas (from 191 MT in 2019 down to 110 MT), a reduction of 42 per cent.
This is a showstopper. The government committed last fall to capping and cutting emissions from the oil and gas sector on the road to 2050, with a detailed approach to be developed this year in collaboration with industry and the provinces. While the new plan refers to the 42 per cent reduction as a ‘projected contribution,’ there’s no question Ottawa is putting a line in the sand at 2030.
There’s also no question that to achieve these reductions so rapidly would likely require production cuts, something the government repeatedly assured the sector it would not impose. One wonders what this move will do to Ottawa’s relationships with industry, that to this point have been collaborative.
And what message does it send to investors, who companies have been reassuring that they’re working closely with Ottawa on designing the cap program? Reducing emissions in oil and gas will require historic investments in technologies like carbon capture, utilization and storage, and developing new capabilities in areas like hydrogen and bitumen beyond combustion. If Ottawa’s plan deals a blow to investor confidence, will the needed investment dollars be forthcoming?
Canada will have to rise to these challenges for the government’s plan to stand a chance of success.
What else is in the document? We get mainly a listing of tools, chiefly spending, taxing, and regulation.
On the spending front, Ottawa has committed an additional $9 billion to support building retrofits, community climate action, switching to electric vehicles, renewable electricity, electrification, nature-based climate solutions and sustainable agricultural practices. This is on top of the roughly $20 billion it committed last year to climate action. Ottawa is also putting in place mechanisms to unlock private investment through measures like its new Green Bond program, accelerated capital cost write-offs and the forthcoming investment tax credit for carbon capture, utilization and storage.
On the tax front, the major plank is the price path for the carbon tax to $170 per tonne by 2030 announced in the fall 2020 climate plan. On regulation, the plan lists multiple measures, including a zero emission passenger vehicle sales mandate ramping up to 100 per cent by 2035, increasing the stringency of the clean fuel regulations, developing a clean electricity standard for a net zero grid by 2035, reducing methane emissions at least 75 per cent below 2012 levels by 2030, and creating standards to transition off fossil fuels for heating. More on this last measure below.
Will all of this slash emissions 40 per cent by 2030? According to the plan’s modelling, yes. But there are big gaps between the simulated world of models and the real worlds of energy and climate decision-making.
The first relates to energy infrastructure and technology deployment. The plan’s success hinges on getting things built and financed and getting technology developed and deployed at a pace the likes of which are unprecedented. But Canada struggles to get major projects financed, permitted and built. Lightning speed is not a word that comes to mind for investors.
Longer timelines are sometimes for all the right reasons — like the time it takes to build successful project partnerships between industry and Indigenous communities, partnerships in which Indigenous people are increasingly taking equity positions. This takes time — often lots of it. 2030 looms large through this lens.
But some of the infrastructure challenges are for all the wrong reasons. Despite Ottawa’s efforts to reform major project decision-making, the federal impact assessment process seems more uncertain, unclear and unpredictable than ever. Investors see Canada as a challenging place to do business with some companies thinking about downing tools and looking elsewhere to invest.
Add to this that Canada has an enduring technology deployment and scale-up problem, and one wonders whether the new plan’s ambitions can be realized.
The second big gap is on energy reliability and affordability. Durable emissions reductions require approaches that integrate climate and energy imperatives. Without reliable affordable energy, the country will fast lose public and investor support for emissions reductions.
The government frames the plan as attending to affordability and reliability, but it’s not clear how this will play out in practice. Plans for the electricity sector seem especially prone to price increases and reliability challenges. Public enthusiasm for emissions reductions wither in the face of high prices and blackouts. The United Kingdom is seeing this play out in real time, with high electricity prices and unreliable power due in part to climate policy eating rapidly into public support for net zero.
There are dangers in leaning too heavily on wind and solar. Wind and solar have their place to be sure, but so do nuclear, hydro and natural gas. That nuclear investments were excluded from the federal government’s Green Bond program seems especially short-sighted, particularly for a government committed to developing and deploying small modular nuclear reactors.
As for natural gas, it plays a crucial role in providing peak power in electricity systems. Backing it out completely may prove counterproductive: in Ontario, the Independent Electricity System Operator estimates that removing gas from the province’s electricity system by 2030 would lead to a 60 per cent increase in residential electricity bills and blackouts, both of which would challenge public support for emissions reductions.
Likewise, electrifying too quickly and deeply risks compromising reliability and affordability. Unlike other forms of energy, the supply and demand of electricity need to be balanced in real time on the grid. If demand grows too quickly supply may be unable to keep pace, leading to higher prices and blackouts. Backing natural gas out of the end use energy system for things like home heating and industrial processes risks putting too much pressure on the grid. It also reduces the potential to repurpose existing energy infrastructure for new uses like hydrogen blending. What is needed are approaches that optimize energy systems for emissions reductions as we’ve seen with the recent Québec Hydro-Énergir deal in Quebec.
Last but definitely not least is the challenge of intergovernmental collaboration and partisan politics. Unprecedented alignment and collaboration among governments is a key element of the ERP’s success. And yet, we continue to see conflict and lack of collaboration between Ottawa and the provinces — notably Alberta. Add to this partisan polarization and it is difficult to develop thoughtful approaches to emissions reductions. The deal between the Liberals and NDP could provide some stability for a few years, but it may prove instead to amplify polarization between the federal Conservatives and Liberals and between Ottawa and the provinces.
So what’s to be done?
None of this is reason to abandon emissions reductions in Canada. Far from it.
Rather, we need to overcome these obstacles. We need project decision-making systems that are functional, clear and predictable, that foster and adapt to rapid technological change and deployment, and that are seen as legitimate in the eyes of investors, communities, governments and Canadians alike. We need to put reliability and affordability at the heart of emissions reductions decision-making.
Broadening the policy focus from climate objectives to energy imperatives will create emissions reductions that stick. And we need thoughtful collaboration among governments at all levels and of all stripes. This is the toughest challenge for Canada. The new agreement among Alberta, Ontario, New Brunswick and Saskatchewan on small modular nuclear reactors is the sort of thing we need more of. A lot more of.
It's no secret Canada has struggled to reduce emissions. Ottawa’s new climate plan is the most detailed and comprehensive yet. That’s a good thing. But it’s missing some key ingredients. Closing the gaps will be crucial for the plan to rise to its ambitious objectives.