Canada’s Energy Future Report Must Go Further to Support Climate Action
Today, the Canada Energy Regulator (CER) published its flagship Canada Energy Future 2021 report, the federal government’s most important source of energy supply and demand forecasts. This information is critical for guiding public and private sector decision making. But there is a major catch: the forecasts in this report fail to provide the information that policy-makers and the business community need to transform Canada’s climate ambitions into concrete action. This is crucial for ensuring that Canada is able to do its part alongside other countries to help keep global average temperature increases below 1.5°C from pre-industrial levels.
Reaching climate targets requires the right information
As part of its national contribution to help meet the Paris Agreement target of limiting temperature rise to 1.5°C, Canada has committed to reaching net-zero emissions by 2050. In the nearer term, Canada has also pledged to slash emissions by 40–45% by 2030, relative to 2005 levels.
Reaching these targets requires scaled up policy action from federal and provincial governments and business action from the private sector. Having the right information to guide these policies and decisions is a critical piece of this puzzle.
The Canada Energy Future 2021 report acknowledges that more work is needed to transform Canada’s energy system to meet net-zero targets but fails to provide the critical scenarios that could help guide us there. The report includes two core models (the Evolving Policies and Current Policies Scenarios), which provide energy sector projections to 2050 based on different levels of policy ambition to mitigate climate change.
A discussion of net-zero goals is also included but is not fully modelled with in-depth supply and demand projections to the extent of the two core scenarios. The report does provide some net-zero modelling for the electricity sector, projected to 2050, but does not provide an in-depth core scenario.
Canadian governments and businesses need a fully modelled scenario to 2050 for our energy sector in line with the Paris Agreement’s 1.5°C target.
Canadian governments and businesses need a fully modelled scenario to 2050 for our energy sector in line with the Paris Agreement’s 1.5°C target. Without this scenario, public and private actors lack the information they need to make economic decisions to ensure Canada can decarbonize effectively and in a way that supports a just transition as it joins other countries in moving toward net-zero emissions.
Catching up with the global conversation
In this 2021 report, the CER has updated its Evolving Policies Scenario, which integrates announced federal, provincial, and municipal climate policies and charts a forward-looking forecast to 2050. However, this scenario assumes that Canada’s oil production will peak at 2.1 billion barrels/year in 2032, and its natural gas production will peak at 5,657 billion cubic feet/year in 2040.
These production levels are entirely misaligned with a net-zero world. The Production Gap 2021 Report indicates that governments worldwide plan to produce more than twice the amount of fossil fuels than would be consistent with a 1.5°C scenario in 2030. Other governments are already addressing this gap. The Beyond Oil and Gas Alliance, launched by Denmark and Costa Rica at COP 26, brings climate leaders together who have committed to phasing out fossil fuel production. We are seeing this leadership in Canada already; Quebec has joined the initiative, announcing plans to ban new fossil fuel exploration and production licences.
CER’s Evolving Policies Scenario does define the gap between current policy trajectories and Canada’s stated ambitions for both 2030 emissions reduction targets and the longer-term goal of net-zero emissions by 2050. The Evolving Policies Scenario indicates that fossil fuels will still make up the majority of Canada’s energy mix in 2050, which is out of step with net-zero goals.
Neither of CER’s scenarios integrate net-zero targets as a starting point, and so there are outstanding questions on how Canada can meet its Paris Agreement obligations. The CER scenarios are widely used by policy-makers and the private sector, but these models are out of step with the policy decisions that Canada needs to make. So now we need the CER to contribute to climate ambition by guiding decision-makers on how to chart that path to net-zero. A fully modelled scenario aligned with the Paris Agreement goals is critical for assessing government spending and providing Canadian businesses with the tools they need to assess climate risk.
The CER already has other examples to draw from on how to do this. The International Energy Agency’s (IEA) Net Zero by 2050 report, as well as its recent World Energy Outlook, foregrounded net-zero by 2050 goals, illustrating a global roadmap for oil, gas, and renewable energy. These reports, released in 2021, were groundbreaking developments in charting energy futures—and Canada should follow their lead. Canada needs a similar domestic scenario that charts a pathway to the deep decarbonization of our energy system.
Providing certainty for investors, policy-makers
The CER’s attention to Canada’s updated climate policies (including updated carbon pricing) in the 2021 report is welcome, but it demonstrates the need for more thorough analysis in 2022 and beyond. A fully-modelled 1.5°C scenario would provide certainty to investors, reduce the possibility of stranded assets, and help us close policy gaps. Without this scenario, Canadian firms and investors could make choices that increase financial risk, given that the risks of continuing investment in fossil fuels will not be properly quantified.
Canadian governments need this scenario to help them make policy that supports a just transition and economic diversification.
Canadian governments need this scenario to help them make policy that supports a just transition and economic diversification. This data will help inform where federal and provincial governments should (and should not) be investing public money. Recent federal commitments to establish an oil and gas emissions cap, along with Canada’s decision to join several other countries at COP 26 in pledging to phase out international public finance for fossil fuels, are important steps. But rolling out effective policy to meet these pledges would benefit from clearer data about how Canada’s energy sector must transform to meet net-zero by 2050.
The IEA’s recent reports underscore the urgency of ending investment in new coal, oil, and gas production—as well as the opportunities that exist for scaling up the use of renewables and improving energy efficiency. But we need to know what levels of fossil fuel production are consistent with reaching our net-zero targets and minimizing economic risk.
What Canada and the international community need
The CER should publish, on an annual basis, a fully modelled scenario in line with warming of 1.5°C. This scenario must include net-zero emissions by 2050 in Canada’s energy sector and should use an oil price in line with recent analysis from the IEA. Like the IEA, such a scenario must be the central scenario in future Energy Future reports.
People across Canada need to know how our energy systems can transform to create the future we want. Canadian policy-makers and businesses deserve guidance on how and where they need to go to reach national climate goals. The CER can provide this critical guidance and help Canada chart its path to a climate-safe future where workers and communities thrive. This can also send an important signal to other countries also looking for models on how to decarbonize quickly, effectively, and in line with a just transition.
You might also be interested in
Why Government Support for Decarbonizing Oil and Gas Is a Bad Investment
This policy brief analyzes whether providing government support for decarbonization is an effective use of resources and finds that public dollars are more effectively spent supporting readily available and proven low carbon technologies instead.
Why Canada’s Energy Security Hinges on Renewables
This policy brief demonstrates how renewables sources can provide energy security to Canadians.
Why Canada Needs to Plan for a Steep Decline in Global Oil Demand
This policy brief shows that Canada can expect global oil demand to permanently decline in the very near term, as electric vehicle uptake and other societal changes pick up speed.
Energy Charter Treaty Withdrawal Announcements Reflect Reform Outcome is Insufficient for Climate Ambition
The wave of announcements from several EU member states of their plans to withdraw from the Energy Charter Treaty reinforce that efforts to reform the controversial accord have been insufficient to support ambitious climate action.