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The government of Canada took the next step towards its goal of
net-zero carbon emissions by 2050 in December, releasing a climate
action plan that details how it would invest billions of dollars
and create new incentives for the transition to a clean-energy
economy.
The plan, known as "A Healthy Environment and a
Healthy Economy," would increase the country's carbon tax by
C$15/metric ton (mt) annually through 2030, beginning in 2022. From
the 2021 rate of C$40/mt, it will rise to C$170/mt in 2030; at that
point, it would add an estimated C$0.38/liter (US$1.13/gallon) to
the cost of gasoline and diesel fuel.
Canada's carbon taxes are rebated to consumers through
legislation in the Greenhouse Gas Pollution Pricing
Act, and the new plan would keep the rebates intact, while
shifting the payments to consumers from annual to quarterly. "We
are going to continue to increase the price on pollution and give
more money back to Canadians and their families," Prime Minister
Justin Trudeau said when announcing the plan 11 December.
The plan includes C$15 billion in new investments,
including:
C$964 million for grid modernization to support renewable power
distribution
C$1.5 billion for "green and inclusive community
buildings"
C$2.6 billion for home energy efficiency upgrade grants
C$2 billion for retrofits of commercial and other large
buildings
An additional C$287 million over two years for the Incentives
for Zero-Emission Vehicles program
C$150 million over three years to build electric vehicle (EV)
charging stations
100% tax write-off for commercial purchases of light, medium,
and heavy-duty ZEVs
The plan would reduce greenhouse gas emissions by 40% compared
with 2005 levels by the end of this decade, compared with the
current goal of a 30% reduction.
Reaction
Reaction across Canada's industrial spectrum was generally
positive. "Electricity will be central to Canada achieving net-zero
carbon emissions. That's why the electricity sector is pleased to
see clean and affordable power at the center of the climate plan
announced by the federal government," said Francis Bradley,
president and CEO of the Canadian Electricity Association.
"Canada is already a world leader in clean power. More than 80%
of the electricity produced is non-emitting, and the sector has
reduced GHG emissions by more than 45% since 2005. New technologies
including hydrogen, small modular reactors, carbon capture and
utilization, and energy storage, will help us reduce the rest," he
said.
Despite the significant increase in the cost of motor fuels due
to the rising carbon tax, members of Canada's oil industry said
they are generally supportive of the bill. In the final plan, the
government withdrew an earlier proposal to impose the Clean Fuel
Standard on all types of liquid, gaseous, and solid fuels. Instead,
it applies only to liquid fuels, and it would require annual
reductions in the carbon intensity of each fuel produced on a
lifecycle basis.
"We note the positive decision by government to limit the
application of the Clean Fuel Standard to liquid fuels in response
to concerns raised by Canadians as well as the business community,"
Tom McMillan, president of the Canadian Association of Petroleum
Producers, said in a statement.
The association also backs the C$1.5 billion to be directed into
a Low-Carbon and Zero-Emissions Fuels Fund to increase the
production of low-carbon fuels, McMillan said. "New technologies
and innovation, particularly those developed by the natural gas and
oil industry will play a major role in ensuring Canada can meet its
domestic emissions reduction goals while contributing to global
emission reductions by providing lower emission natural gas and oil
to world markets," he added.
For environmental groups, the plan is full of positives as well,
in particular the carbon tax and the proposed C$3 billion addition
to the Net-Zero Accelerator Fund to decarbonize large emitters and
scale up clean energy and carbon sequestration technologies.
But they said the government could take concrete actions now to
demonstrate its net-zero commitment. "Increased spending on climate
initiatives and the promise of creating 2 million climate jobs are
great news, but Canada needs to do more if we're going to meet our
Paris Agreement promises. We need stronger 2025 and 2030 targets
and plans to meet them," said Amara Possian, Canada Campaign
director for 350.org.
As an example, Possian said that a project to triple the
capacity of the Trans Mountain Pipeline, which delivers crude and
refined products from Canada to the US, should be halted. "Today's
announcement is exactly the kind of increased climate action that
the Parliamentary Budget Officer and the Canada Energy Regulator
warned will make the Trans Mountain Pipeline obsolete," she
said.
Environmental Defence Canada explained one flaw in the proposal
that it would like to see fixed in final legislation: the lack of a
firm cap on carbon, or "carbon budget," as interim requirements.
"Not only does the legislation stipulate targets rather than
budgets, the first five-year target is 10 years away. 2030, not
2025…. The government does not have to do anything if Canada is not
on track, only develop yet another plan," it stated.
However, the program does bring a new level of accountability to
carbon reductions, said Robert Hornung, president and CEO, Canadian
Renewable Energy Association. "C-12 is an effort to formalize the
net zero target. More importantly, it's a mechanism to ensure
transparency and accountability…for performance. There's been some
discussion that you could pass net-zero goals into law, and then
another government can change the law. But C-12 would set interim
targets and reporting that provides a framework and accountability
to hold the nation accountable. C-12 sets up the goalpost," Hornung
explained.
Renewables
For Canada's renewable energy industry, the program has numerous
potential benefits, Hornung told IHS Markit. "It's clear that the
government is hoping that the biggest of emission reductions will
be signals set through a carbon price—and, frankly, we think
this makes sense. This will encourage the private sector to play a
leading role," he said.
"The plan provides a very transparent and steadily increasing
pricing of carbon," he added. "This is significant, and we think it
will be a powerful signal to investors … now having the sense of
long-term trends in pricing of carbon to determine viability of a
power project."
According to Hornung, the plan also explicitly links the
expansion of clean electricity production and the supporting
infrastructure with the nation's long-term goals. "The plan
references what many models have shown: that a doubling or tripling
of the electricity sector will be needed…. A number of initiatives
in the plan will encourage electrification, such as EV purchases,
EV infrastructure, and funds available now to explore
electrification of heavy industry. We see these also as very
positive," Hornung said.
The plan also supports the evolution of the power industry,
Hornung said. "A common theme you will find in any study on how
Canada will get to net zero will be the need to improve the
interconnections of our energy grid. In many ways, we are more
connected north-south with the US than within Canada east-to-west.
There are many opportunities for improving efficiency through
better interconnections," he said.
Funds in the plan to improve the transmission grid also can
support distributed power that renewables can cost-effectively
provide. "There's going to be a significant shift in the energy
grid as we shift from large production centers to a decentralized
grid, to one where we will have lot more production along the
transmission system and behind the meter. We will need to ensure
that system operators have better insight into what's happening in
the power distribution system," he said.
And looking out further, the plan can be leveraged by developers
who see Canada's abundant renewable power potential as a source for
generating emissions-free hydrogen, he said. "Solar and wind have
demonstrated incredible reduction in costs over last decade, and
now we are seeing an increasing shift of interest to exploration of
hydrogen storage," he said. "Canada has been behind on that
[technology], but we hope this will facilitate our industry."
Next steps
The next step is for the legislature to pass funding to
implement the promises of the Health Environment and Health Economy
plan. "A lot of the funding will be formally approved through a
budget in the spring," Hornung explained. "But a lot of design work
on programs can begin immediately, with the funds on green energy
[planned to] be allocated over four-year period."
Meanwhile, Canada's provinces have a major role to play as well,
he said. For example, he credited Quebec for a $7-billion,
five-year strategy announced this fall to accelerate
electrification of buildings and transportation that he called "by
far the most advanced in Canada."
The commitment in Quebec is especially important because
Canadian law prohibits corporate buyers from contracting directly
for electric power, like they can do in the US. So, for the
renewable power industry to get the commitment for long-term power
purchases, it needs a deal with a regional utility such as
Hydro-Quebec, rather than a big power user such as Amazon or
Google.
Posted 11 January 2021 by Kevin Adler, Chief Editor