Executive Summaries Mar 30, 2023

Carbon Neutrality in Canada – Where Are We Now?

By passing the Canadian Net-Zero Emissions Accountability Act (“CNEAA”) on June 29, 2021 and releasing in 2022 its first Greenhouse Gas (“GHG”) Emissions Reduction Plan for 2030, Canada is aiming to be carbon neutral by 2050. So now, let's look at how this complex process will allow Canada to meet its international commitments.

In December 2015, the Paris Agreement was adopted by 195 nations at the 21st session of the Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (“UNFCCC”). The Agreement is a landmark treaty that aims to strengthen the global response to the threat posed by climate change.

Among other things, it is intended to limit the rise in average global temperature to below 2°C above pre-industrial levels and to continue the efforts to limit the rise in temperature to 1.5°C. Experts agree that significant steps must be taken to achieve this goal.

Canada's Plan

In the CNEAA, “net-zero emissions” means a scenario in which GHG emissions to the atmosphere are fully offset by removal of those gases over a period of time.

The CNEAA sets out “milestone years” of 2030, 2035, 2040 and 2045 in order to achieve carbon neutrality as a national target by 2050.

Section 9 of the CNEAA required the Minister of the Environment to prepare an initial GHG emission reduction plan for 2030 within 6 months of the CNEAA coming into force, which was June of 2021. This first plan, made public in 2022, sets out Canada's interim GHG emission reduction target for 2026.

With Canada's current emissions reduction path, this 2026 interim target has been set at a 20% reduction from 2005 levels. While this is not an official Canadian target that can be compared to the nationally determined contribution for 2030, tracking progress towards this target will serve as a benchmark for judging the effectiveness of the various measures Canada has in place.

The Emissions Reduction Plan outlines how the GHG emissions target, key actions, and strategies outlined in the plan will enable Canada to achieve carbon neutrality by 2050.

Second Government Initiative

In February 2021, before the CNEAA came into force on June 29, 2021, the Minister of the Environment announced the creation of a Carbon Neutrality Advisory Panel.

This independent group of experts has the mandate to engage with Canadians and advise the Minister of the Environment on ways to achieve carbon neutrality by 2050.

The organization's main goal is to formalize Canada's GHG emission reduction targets and to concretely involve the federal government with Canadians and the international community to take the necessary measures to achieve its climate goal.

Impacts of the CNEAA on Provinces and Territories

Without any sanctions or strict measures to enforce it, the CNEAAcan therefore be seen as the federal government's word of honour on the international level. The impact on the provinces depends on how the federal government intends to ensure that its objectives are met through more stringent regulation of areas under its jurisdiction.

However, we can already see a willingness among provinces and territories to follow suit and adopt measures to reduce their GHG emissions to achieve carbon neutrality. Since Canada's ratification of the Paris Agreement, most provinces and territories have accepted the federal government's offer and have signed cooperation agreements.

As such, the carbon neutral ambitions of the provinces and territories are mirrored in the targets and objectives they have set for themselves and in the legislative, regulatory and incentive measures they have adopted, most of which are voluntary.

The first 2030 GHG emissions reduction plan published in 2022 calls for emissions to be 40% lower than 2005 levels by 2030. The goal is to make the transition to a low-carbon economy.

Sectors where the recovery measures apply can be identified in the series of GHG emission reduction plans:

  • Oil and Gas;
  • Transportation;
  • Buildings;
  • Heavy industry;
  • Agriculture; and
  • Electricity and Waste.

As of 2019, each Canadian province and territory has a comparable price on carbon pollution. Not only does this help fight climate change, it also puts money back into people's pockets. Canada's approach is flexible.

Each province or territory can design its own pricing system based on local needs or choose the federal pricing system. The federal government sets minimum national standards that all systems must meet to ensure that they are comparable and effective in reducing GHG emissions. Should a province decide not to put a price on carbon pollution or come up with a system that does not meet these standards, the federal system automatically applies, by default. This is why the federal system is referred to as a Backstop.

Is Carbon Neutrality Possible by 2050?

Experts are unanimous on the issue: if we keep going at the current pace, policies implemented by the various countries signatory to the Paris Agreement will not be sufficient to keep global warming at 1.5oC above pre-industrial levels. Fossil fuel use alone is responsible for around 66% of CO2 and other GHG emissions.

While the increase in GHG emissions from the energy sector is generally greater in developing countries, per capita emissions from these countries remain well below those of developed countries such as Canada or the United States. In Canada, energy production and use accounts for 80% of GHG emissions across the country.

As one of the ten largest energy producers in the world, Canada, like other countries that have taken the lead in the fight against climate change, will obviously have to ensure that the effectiveness of its new measures is rigorously monitored. Tighter measures are expected in the coming years, especially in the fossil fuel and transportation industries.

Achieving Canada's GHG emission reduction and carbon neutrality targets for 2050 will require greater efforts in these fields and a prompt transition of its energy economy to renewable energy sources.

In this regard, the Canadian government has already shown its hand by adopting an ambitious carbon pricing policy, and has even committed to exceeding the targets set by the Paris Agreement through the adoption of Canada's Enhanced Climate Plan in 2020.

Check out our strategic file about the role played by businesses in the fight against climate changes, which includes a series of articles written by our experts.

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