Reaching net zero will require a bolder plan

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CALGARY – The cost of transitioning the Canadian economy to net zero emissions is estimated at $ 2 trillion over the next 30 years, but funds are available to finance the transition, according to the country’s largest financial institution.

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“Altogether that sounds like an intimidating number, but when you break it down it’s manageable for an economy like Canada,” said John Stackhouse, senior vice president, office of the CEO of the Royal Bank of Canada, and co-author of the report published Wednesday. “We’re looking at $ 60 billion to $ 80 billion a year, which is a lot less than what we spend on health care, for example. This is what we aspire to spend on child care.

RBC released a report titled “The $ 2 trillion Transition: Planning for Canada’s Place in a Net Zero World,” which charts a possible path for the country to reduce its emissions in line with a net zero emissions target. ‘by 2050 and budget for the cost of the lag. That’s roughly the equivalent of Canada’s annual GDP last year, which was just under $ 2 trillion last year, according to Statistics Canada.

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In total, the Toronto-based bank estimates that the government and the private sector need to spend $ 56.4 billion a year in six different sectors to meet its net zero goals. Broken down, the report fixes the price at $ 25 billion per year for building electric vehicle infrastructure in the transportation sector, $ 13.7 billion for emission reductions in the oil and gas sector, 5, $ 4 billion for the renovation of old buildings, $ 5.4 billion in the electricity sector, $ 4.4 billion in heavy industries and $ 2.5 billion in the agricultural sector annually.

Altogether it seems like an intimidating number, but when you break it down it’s manageable for an economy like Canada.

John Stackhouse, Senior Vice-President, Office of the Chief Executive Officer, Royal Bank of Canada

For the oil and gas industry, which is the largest source of emissions in Canada, the study drew on a 2014 report from the Pembina Institute and a 2019 report from Vancouver-based Navius ​​Research, to anticipate the costs of carbon capture and storage and the costs of implementation. a clean fuel standard.

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Canadian industry has asked the federal and provincial governments of Alberta for help in deploying carbon capture, use and storage technology to reduce their emissions, and Ottawa has responded by offering incentives. tax for the deployment of technology. The two sides are still in discussions as to whether tax breaks can be applied when the captured carbon can be pumped into wells to recover more oil in a process called enhanced oil recovery.

Even as the country’s largest oil and gas producers implement emission reduction technologies, oil sands production is expected to remain a key emissions driver, according to the RBC report. The sector’s total emissions are expected to drop from around 70 million tonnes of CO2 in 2020 to 46 MT in 2030, but could be further reduced to 30 MT with a “significant reduction in carbon,” notes the RBC report.

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The projected cost of emissions reductions in the oil sands is expected to be $ 5.5 billion per year.

While the price to pay to achieve the net zero goals is gargantuan, RBC’s Stackhouse believes there is enough money available to fund the transition.

“Capital is not a problem. At RBC, we’ve committed $ 500 billion to sustainable finance. For good projects, good opportunities, there is a lot of capital. The world is looking for these kinds of opportunities, ”Stackhouse said.

“What we’re really struggling with is making collective decisions about how to solve these challenges, even what needs to be done,” he said.

The Canadian government has set a goal of achieving net zero carbon emissions by 2050, but has come under heavy criticism for its lack of interim emission reduction targets and for failing to meet its current emissions targets .

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The RBC report shows that carbon emissions in Canada have increased 87% in the oil and gas industry over the past 30 years, from 102 million tonnes of CO2 in 1990 to 191 MT in 2019. Emissions have increased. also increased by 38% in the transport industry to reach 186 MT, 28 percent of buildings in Canada at 91 MT and 28 percent in the agricultural sector at 57 MT.

On the other hand, the Canadian electricity, heavy industry and waste sectors recorded emission reductions during the same period. Carbon emissions from the country’s electricity supply recorded the largest drop in emissions of any sector, dropping 34 MT, or 35%, from 95 MT in 1990 to 61 MT in 2019.

Carbon emissions from the country's electricity supply showed the largest drop in emissions of any sector.
Carbon emissions from the country’s electricity supply showed the largest drop in emissions of any sector. Photo by Todd Korol / Reuters

The report says the country has taken a “piecemeal approach to environmental regulation and climate protection,” which has resulted in Canada missing all of its climate targets. The authors argue that a new approach, with multiple national strategies, is needed to achieve current goals.

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“Achieving net zero will require a bolder plan, initiating change for decades to come, not just years to come,” the RBC report said.

The RBC report highlights eight policies the country could follow to meet its net zero goals. These include a national electrification policy, a national strategy for green jobs, an industrial strategy on carbon capture, a national plan for sustainable agriculture, a promotion of electric vehicles, modernization of buildings and the creation of a carbon adjustment tax at the border with the United States on goods originating from the most emitting regions.

Stackhouse said there would likely be some resistance to these policies, especially since they would force changes in some of Canada’s largest industries, but said, “We have to weigh that against the likelihood that if we do nothing, decisions will be made for us elsewhere.

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Federal officials are expected to announce new climate policies ahead of the COP26 world climate conference in Glasgow, which begins on October 31.

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Environment and Climate Change Minister Jonathan Wilkinson said last week the country will pledge to cut methane emissions from the oil and gas industry by 75% by 2030 and an overall reduction 30% of methane emissions as part of its climate policies for the future.

Ahead of COP26, the United Nations Intergovernmental Panel on Climate Change (IPCC) released a report in August warning that high levels of greenhouse gases in the atmosphere will impact the climate. for decades and will force policy makers to further reduce emissions, especially methane. emissions to avoid a climate crisis.

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