Advice on a Long-term Strategy on Energy and Climate Change

Section I: Introduction

This study is a first.

While other studies have raised general issues about how climate change will affect Canada?s economy and environment, this study is the first to focus on what a low carbon future might look like for Canada over the next 45 years. In this analysis, NRTEE members focused on two questions. How can Canada protect and enhance its national interest with regard to energy and climate change issues between now and the mid-21st century? And what do we need to do right now to achieve this?

Canada can meet multiple goals at the same time

The scenario developed as part of this study examines one way that Canada can reduce energy-related greenhouse gas (GHG) emissions by 60 per cent by 2050 (compared with current levels). This exercise allowed the NRTEE to explore what would likely be involved if Canada were to contribute to global stabilization of GHG emissions by significantly reducing energy-related emissions by mid-century. This challenge is considerable, given that Canada has a growing population, an economy that is growing faster than the population, and an oil and gas sector that is growing faster than the economy.

The first and perhaps most important finding of the analysis is that it can be done, at least from a technological standpoint. In other words, a scenario using existing and near-term technology only was developed in which energy-related greenhouse gas emissions are reduced to less than half their current levels, even with a future that includes a larger population (45 million), a larger economy (more than double in real terms) and growth in oil and gas production that outstrips growth in domestic demand.

Although reductions of this magnitude provide significant challenges, the necessary technologies can also bring significant opportunities for the Canadian economy and its environment. Along with reducing the threat of catastrophic climate change and meeting the energy needs of a growing economy, they will also lead to major improvements in the quality of Canada?s air. These actions will also provide opportunities for Canada to develop a more sustainable economy, to become a world leader in sustainable technology and to continue its role as a major energy exporter. With environmental technology representing a global growth area, a robust domestic market will provide a solid base for Canada?s exporters.

A dual focus on increasing the efficiency of how we use energy and on reducing carbon intensity in energy production

An important finding of the scenario is that there can be a Canadian solution to making significant GHG reductions by mid-century, but significant reductions can be achieved only if energy and climate change policy addresses both energy use and energy production ? in other words increasing energy efficiency and reducing carbon intensity.

Developing this scenario also helped to focus on some priorities. While the analysis shows that the contribution of all existing GHG reduction technologies associated with energy use and production will be necessary to achieving a 60 per cent GHG reduction for 2050, there are some priority areas whose contributions are so large that they become fundamental to setting Canada on a trajectory towards sustained and significant GHG emission reductions. The priority areas (falling in both the energy use and energy production categories) are:

• Energy use: Increasing energy efficiency is key ? by doing so we could achieve approximately 40 per cent of our goal of a 60 per cent reduction. The question is not which technologies to deploy, but how to deploy nearly all of the potential greenhouse gas (GHG) reduction technologies. How to effectively deploy many different technologies in several sectors is an important policy issue.
  
  
• Energy production:

i) Oil and gas sector: Canada?s growing role as a major energy exporter is compatible with deep GHG emissions, but only if carbon capture and sequestration (CCS) is perfected. Resource extraction in the 21st century needs to take into account GHG reduction and adaptation to a carbon-constrained world economy ? this benefits Canada both environmentally and competitively as a leading provider of world energy.

ii) Electricity generation: To reduce GHG emissions by 60 per cent, the electricity sector will need to be transformed between now and 2050. As with the oil and gas sector, clean coal technology involving CCS plays an important role. After CCS, the largest reductions pertaining to electricity generation are from co-generation and renewables (particularly wind, but including all other forms of renewable energy).

As noted above, GHG reduction in these priority areas would also provide substantial co-benefits. Carbon capture and storage and ?clean coal? technology virtually eliminate other forms of air pollution, such as emissions of SO2, NOx, mercury and particulate matter.

Similarly, renewables and other non-emitting electricity sources have a beneficial effect on air quality. Energy efficient buildings such as the new Manitoba Hydro headquarters in Winnipeg provide better indoor air quality and therefore a healthier work environment that can increase productivity. Increasing efficiency in transportation also addresses one of the most enduring problem areas with regard to improving air quality.

Urgent need for a signal showing that GHG reduction remains a priority over the long-term

The chief difficulty in significantly reducing GHG emissions is not the lack of relevant technologies ? rather it is the lack of long-term signals indicating that ongoing GHG reduction will remain a priority.

Such signals are needed to help the private sector make short-term and long-term investment decisions that take GHG reductions into consideration. Investment decisions are being made every day on new equipment, new processes, new facilities and new buildings, many of which will still be operational in 2050. These investments will have to be revisited later at a higher price if they do not take into account the sustainable options that are currently available. A clear commitment to long-term GHG reductions will provide the signal that will allow investment decisions to be made in the context of sustainable growth and capital stock turnover, so that reductions can be achieved with a minimum of disruption.

The NRTEE suggests that the government examine how to convey an enduring commitment to significant GHG emissions reductions that will contribute to global stabilization of atmospheric carbon levels. This overall goal can be implemented through many different policy signals that can be adjusted over time (e.g., short-term technology and GHG reduction targets, regulation, voluntary initiatives). The overarching commitment, however, must be clearly stated very soon.

The bottom line that the NRTEE wants to convey through this report is it that addressing the challenge of climate change opens up opportunities that can be accomplished with benefits for Canada?s economy, environment, and society. The broad deployment of existing and near- term technologies, taken together, can in fact achieve long range and significant reductions in energy-related GHG emissions even in the face of growth in Canada?s population, economy and oil and gas sector.

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