Follow through on policies still in development, strengthen some measures, and add a few targeted measures.
Introduction
Canada’s climate policies are successfully reducing emissions, but current efforts do not put the country on track to meet the legislated 2030 emissions reduction target of 40 to 45 per cent below 2005 levels. Our previous work found that Canada’s current policy mix can reduce emissions by 34 to 36 per cent below 2005 levels–if proposed policies are fully implemented. Projections from Environment and Climate Change Canada similarly found that the policies outlined in the federal Emissions Reduction Plan Progress Report leave a gap to Canada’s 2030 target.
To address this gap, the Net Zero Advisory Body (NZAB) asked the Institute to explore additional policy actions that could put Canada on track for its 2030 target and help inform their advice to the federal government. We worked with Navius Research to quantify strengthened and additional policy options to move beyond the current policy mix to meet Canada’s 2030 emissions milestone (see our technical annex for more detail).
So, how can the country reach this goal? We identified three ways to deliver deep emissions reductions that can get Canada on track to the 2030 target. In priority order, these are: follow through on policies still in development, strengthen some measures, and (judiciously) add a few new targeted measures.
Which climate policies can help close the gap to 2030?
To identify opportunities to close the gap to Canada’s 2030 target, we quantitatively and qualitatively assessed a suite of actions. We constructed scenarios to both identify where further emissions reductions could be achieved by 2030 and what policy packages could deliver those reductions.
We first modelled a scenario designed to hit the 2030 target at lowest cost to identify potential opportunities across sectors. We then modelled five policy package scenarios to explore whether strengthened and new policy options could unlock these opportunities to get Canada on track to 2030. Three of the five scenarios met Canada’s 2030 target.
We then assessed the policy options across multiple criteria and developed a set of priority policy opportunities that helped inform NZAB’s advice to the Minister of Environment and Climate Change. Our technical annex provides more details on the specific policies assessed and the reductions from each scenario.
As Figure 1 illustrates, the policies outlined in the Emissions Reduction Plan Progress Report account for the majority of reductions, underscoring the importance of following through on current policies and implementing proposed ones (blue bar). Strengthening some of those policies (green bar) can significantly accelerate progress leaving a relatively small set of reductions required from additional actions (yellow bar). We unpack each of these steps in more detail below.
Step 1: Follow through on policies in development
Of the current and proposed policies, policies still in development account for about 25 per cent of this step’s reductions, mostly from the upstream oil and gas sectors. To achieve these reductions, the federal government should swiftly implement the proposed oil and gas emissions cap and amendments to regulations to cut upstream oil and gas methane by 75 per cent, including through equivalency agreements with provinces. While other proposed policies play a smaller role in 2030—including the Clean Electricity Regulation, medium- and heavy-duty vehicle emissions standards, and landfill methane regulations—they are important for longer-term emissions reductions in 2035 and beyond.
As we noted in a previous Insight, there is no question that current policies are working; by 2030 these measures account for three quarters of the reductions from the first step. Large-emitter trading systems (LETS) covering oil and gas, electricity, and heavy industry sectors are the single biggest driver of reductions. Existing policies for personal transportation, including the federal fuel charge and the emissions regulations, also contribute to emissions reductions. Weakening or backtracking on current policies would undermine progress and increase the gap to Canada's emissions reduction targets.
Step 2: Strengthen existing policies
Second, governments can strengthen existing and proposed policies to help Canada get on track. This step is the second largest source of emissions reductions from our analysis (Figure 1).
The upstream oil and gas, electricity and heavy industry sectors account for about half of the reductions in this second step. Governments could strengthen the LETS benchmarks covering these sectors, expand the scope and strengthen the announced oil and gas emissions cap, and increase the stringency of methane regulations for upstream oil and gas. Our previous analysis has pointed to the potential for interactions between these policies (and others) in Canada’s current policy mix, which can lead to too many credits in LETS markets, thereby driving credit prices down and reducing the incentives for facilities to decarbonize. Strengthening the LETS performance benchmarks is one approach to avoid this risk. Expanding Carbon Contracts for Difference (CCfDs) could also help signal to investors and companies that the pricing from LETS is here to stay, which could encourage the necessary low-carbon capital investments.
The freight transport sector is a large contributor to Canada’s emissions but current policies have a relatively small impact by 2030. Our analysis found potential additional reductions in this sector, largely from fuel switching to biofuels, alongside small increases in hydrogen and electricity consumption. Increased stringency of the Clean Fuel Regulation (CFR) and emissions regulations for medium- and heavy-duty vehicles can help capture these additional reductions. Increasing the stringency of the CFR also contributes to more reductions for personal transportation.
Step 3: Adding new climate actions
While implementing and strengthening current and proposed policies can get Canada most of the way to the 2030 target, getting on path to Canada’s climate objectives may require some additional actions. Developing and implementing new policies between now and 2030 presents practical challenges; however, carefully implementing a select number of targeted new measures could complement existing policies.
In the buildings sector, current policies including the recently released Canada Green Building Strategy leave many cost-effective reductions on the table. For progress in this sector, we identified the potential for regulations that require all new and replacement heating systems to be non-emitting this decade. Provincial governments can also play a strong role in reducing emissions in this sector—in fact, B.C. already has a similar requirement on the books.
To further reduce emissions in the light manufacturing sector, governments could introduce efficiency mandates for low-temperature industrial heat, whereby manufacturers would be required to adopt equipment that met emissions standards, such as heat pumps or using waste heat, when purchasing new equipment.
Reductions from additional actions in Figure 1 also include contributions from Land Use, Land-Use Change and Forestry (LULUCF) accounting, nature-based climate solutions (NBCS), and agricultural soils, as reported in the Emissions Reduction Plan Progress Report. The federal government could continue to develop and expand NBCS to capture these reductions.
There may also be a limited role for credible internationally transferred mitigation outcomes (ITMOs) to meet Canada’s climate commitments, though we did not assess ITMOs in this analysis.
Governments need to act now to accelerate emissions reductions
While pursuing these three steps could bring Canada’s 2030 climate target within reach and help put the country on a net zero path, this future is not a given. Our modelling shows actions governments can take to drive steep emissions cuts in the near future, but these actions will require stringent policy beyond what is currently in place or proposed. Attention to implementation will be crucial to ensure policymakers can minimize any potential negative economic impacts for households or industry and maximize policy effectiveness.
But the biggest risk to meeting the country’s climate targets is delay. Canada is making progress cutting emissions, but the pace and scale of reductions needs to accelerate. Our analysis shows that it’s technically achievable, but whether it happens in practice will depend on how quickly and effectively governments implement policies that match their climate ambitions.
Alison Bailie is a Senior Research Associate at the Canadian Climate Institute, Dave Sawyer is the Principal Economist at the Canadian Climate Institute, Brad Griffin is a 440 Megatonnes advisor and the Director of Simon Fraser University’s Canadian Energy and Emissions Data Centre. Anna Kanduth is the Director of 440 Megatonnes at the Canadian Climate Institute.
Modelling data provided by Navius Research.