Thank you very much, Chair.
This is going to run in a slightly different direction.
Canada’s GHG inventory provides a clear historical record of the size and direction of our sectoral emissions. While our population and economy have been growing, power production emissions have fallen steadily, building and transport emissions have been roughly flat, and non-oil and gas industry emissions are falling slowly, while emissions from the oil and gas sector have, over the course of my career, grown enough to offset almost all of the reductions in other sectors. This pattern has been consistent for the last 30 years or so.
In short, we are going too slow but in the right direction in most sectors, and very quickly in the wrong direction in oil and gas. These dynamics mean we will almost certainly not hit our 2030 targets, and will probably not hit our 2050 Paris Agreement goals without significant changes. Our existing policies are simply too weak or missing in some sectors. How do we address this in a politically realistic way?
To start, in most cases for household, institutional, transport and light industrial emissions, we have options to cleanly electrify the sector, often with some organizational and infrastructure changes. Usually, this means higher upfront costs and lower costs over time, if we make enough clean electricity cost-effectively, with overall savings. Electric vehicles, building efficiency, heat pumps and electric appliances are all examples.
Because households often make decisions on the basis of factors other than cost, we have seen that carbon pricing has not proved highly effective in that sector. We may be better off regulating these sectors based on performance, for example, with tradable overcompliance credits for supplying firms, and providing early, limited and falling subsidies to support early demand and supply.
However, heavy industry and large businesses are not easily regulated. Every industrial sector process is different, and almost every industrial facility is tailored to local circumstances. There is no one-size-fits-all answer, and there are usually lots of low-cost but complicated options and a few high-cost but simpler ones. Industries are usually, to some extent, exposed to trade and global policy developments as well, as we have seen in the last year or so.
Business also tracks all revenues and costs very closely, which means carbon pricing works well in this sector, with tweaks to protect competitiveness, such as Canada’s output-based pricing system or border carbon adjustments. These policies must be carefully calibrated, or the policies' effectiveness can collapse. These dynamics are well understood but require a competent oversight agency and clear expectations of stringency by all parties.
Some industries do not yet have solutions. This is where most of my research lies. They need help and to co-operate with others to develop clean technologies. Even once available, these technologies may cost more than their dirty equivalents, and while the final cost to the consumer may be small, the cost may be very high for firms.
Domestic and global governments and firms need to work together to create lead markets for these products, with clean government procurement and flexible lead market regulations.
Missing our 2030 targets is bad but recoverable. What will cost us dearly is if we never get to net zero at all, because the global temperature will keep rising until we do. The raw truth is that all investment must be low, net zero or negative emitting as soon as possible. The good news is that Canada is well equipped to gain from the global shift to a net-zero society built around the use of clean electricity and minimal unabated fossil fuels. Canada’s needs are different, but why shouldn’t the world’s best cold-weather electric vehicles, buildings, heat pumps and clean power generation equipment of all kinds be designed, tested and built here? This would be very consistent with our industrial history.
Global mitigation brings not just costs but export opportunities. We can build wind in Labrador and use it to turn our high-quality iron ore into clean iron that can be exported at three times or more the value we export it for today while reducing the cost of decarbonization for our own steel sector.
There are also opportunities for Alberta and Saskatchewan as producers of low-GHG chemicals and fuels if they prepare now, for example with tight fugitive controls, clean electrification and targeted CCUS.
In summary, Canada and its provinces are at a crossroads between being an eventual rust belt petrostate with deep regional tensions and transforming into a competitive, wealthy and equitable electrostate. Specific policy recommendations include the following: maintain the clean electricity regulations provinces need to formally add climate goals to the laws enabling utility mandates and municipal planning and zoning; maintain the zero-emissions vehicle standard and industrial carbon pricing, even if the schedules need to shift while holding net zero in sight; support provinces in mandating flexible net-zero building standards for all building projects, starting with hybrid heat pump cooling and heating as a benchmark; and rationalize funding and create programs for industrial transformation supported by green procurement, using reverse auction contracts for difference to minimize costs.
Thank you.