Research Study: “Canada’s Greenhouse Gas Emissions: Developments, Prospects, and Reductions,” Government of Canada, Parliamentary Budget Officer, April, 2016
A recent April 2016 report on emissions, prepared by the Government of Canada’s Parliamentary Budget Officer (PBO) entitled Canada’s Greenhouse Gas Emissions: Developments, Prospects and Reductions, is an important climate change research study with implications for Canada’s strategy for the Paris Agreement. It offers an independent analysis to Parliament of emission trends in our economy; and, speaks to cost risks on matters over which Parliament has authority. This research was requested by Parliament to assist them in formulating a proposed course of action on climate change.
Study description, findings and implications for Paris Agreement policies and programs in Canada
Prior to the Paris Accord, countries submitted their post-2020 plans to reduce GGE to a) inform their country’s parliamentary debate as well as, b) achieve their country’s long term objective in the global negotiations. Canada’s target was set at a 30% reduction of emissions below 2005 levels by 2030. The study states that Canada could significantly lower emissions by (a) reducing emissions from coal use and (b) improving fuel-efficiency of vehicles. The study recommends more detailed analysis and forecasts of the contributions of managed forests, in removing GHGs. The study also suggests that oil and gas price projections will result in a stopping of oil sands growth.
The study states that a 30% emissions reduction target means removing more than the equivalent of all emissions from today’s cars and trucks. Actions so far by various levels of government, though substantial, do not achieve this target. The study suggests that what is required is a price for abating CO2 emissions of about $100 per tonne of carbon dioxide equivalent (CO2e). This impact would expect to increase the price of a litre of regular gasoline by about 24 cents for vehicles.
The PBO study indicates that Canada contributed less than 2% of global CO2 emissions in 2010, making it a small player on a world scale, i.e., in its electricity-generating sector, relying on hydro and in Ontario on nuclear power. However, this conceals that Canada is a producer and user of fossil fuels. Each sector has increased its capacity to produce goods with fewer emissions. Thus Canada’s level of emissions are expected to increase only slightly by 2030 while its intensity of emissions will continue to decline.
The study also notes there are significant risks in a large-scale move to lower emissions including `a patch-work’ of abatement programs across different sectors and regions that may lead to unnecessarily higher costs. For instance, coal regulation and auto efficiency standards have implicit carbon prices associated with them, introducing new measures such as compounded costs. As well, standard abatement measures could have an uneven impact across regions, thereby undermining pricing consensus. Another concern is ‘carbon leakage.’ If energy costs increase in Canada through carbon pricing, will production move to other countries with less stringent regulations?
Not surprisingly the PBO study sees the bulk of reductions coming from the highest emitters—oil and gas production and distribution, transportation, and electricity generation. A key area with considerable potential is carbon capture and storage although there are varying projections of the costs involved.
Why the study is important to Canada
Canada has formally ratified the Paris agreement. The PBO study assumes that there is a need to reduce emissions and discusses the measures to get there. Change will impact the economy as non-GHG sources of energy are currently more costly than cheap coal, natural gas or oil products. The PBO study indicates that with carbon pricing to meet 2030 targets, cost to income per capita could be between 1 and 3%, relative to where wages would be in the absence of carbon pricing. The cost to Canada’s economy of allowing a temperature increase of 2 degrees Celsius or more could be substantial as well.
This study offers a roadmap and has been acknowledged by Parliament. In discussion with PBO staff who wrote the research study, it was noted there is not a Parliament approval process for it, nor is it legislation. It is a respected independent opinion and parallels similar findings from Environment Canada. The Environment and Climate Change Ministry has supported carbon pricing and expects to develop consistent policies that compliment carbon pricing. This is consistent with the research study. A national carbon pricing plan for 2018 for provinces and territories to adopt a price per tonne of $10 to start, rising to $50 per tonne by 2022 was announced October 3 by our government. This is much lower than what the report recommends but it is a starting point vs having the policy fall apart.
Canada’s Greenhouse Gas Emissions: Developments, Prospects and Reductions, is an important climate change research study toward Canada’s strategy for the Paris Accord.