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Executive Director of the International Energy Agency Fatih Birol speaks Nov. 13, 2019, in Paris.Michel Euler/The Associated Press

Current federal government policies set the stage for Canada to meet its ambitious climate goals, but Ottawa must consult with provinces and industry to form a concrete plan to lower the energy sector’s emissions to net zero, according to a new analysis.

The report from the Paris-based International Energy Agency, released Thursday, is the organization’s first deep dive into Canadian policy since 2015. While largely positive about Canada’s “ambitious transformation of its energy system” and implementation of policies such as a carbon tax and a clean fuels standard, the report notes that the federal government needs to strengthen interprovincial power connectivity, increase funding for clean energy technologies and set clear targets for energy efficiency.

That’s likely to put pressure on the federal Liberal government to hasten its plans to implement an emissions cap on Canada’s oil and gas sector – a promise the party made in last year’s election campaign.

Co-operation and co-ordination between federal, provincial and territorial governments will be “essential for a successful energy transition,” IEA executive director Fatih Birol said in the report.

Canada’s energy sector is an important economic engine, but its role in the coming decades is a hot-button issue – particularly in oil-heavy provinces such as Alberta and Saskatchewan, which butt heads with Ottawa on everything from the carbon tax to the impact of federal plans for a transition to a low-carbon future on energy workers and their communities.

But those joint federal-provincial conversations will be a crucial part of modelling tangible pathways to bring Canada’s energy system to net zero by 2050, the report says.

Federal Natural Resources Minister Jonathan Wilkinson said in an e-mail he welcomes the IEA report, noting it echoes Ottawa’s acknowledgment that “more must be done to address the climate crisis, including through the continued commitment to the deployment of zero-emission vehicles, support for clean technology and clean fuels, and the reduction of methane emissions from the oil and gas sector.”

The report urges Canada to use its abundance of clean electricity and “innovative spirit” to help drive a secure and affordable energy transition, and reduce emissions in its oil and gas sector to ensure the country’s continued place as a reliable global energy supplier.

Yet Canada’s role as a large producer and consumer of fossil fuels makes that a challenge. Energy accounts for about 10 per cent of GDP, and is a major source of capital investment, export revenue and jobs.

“But simply having those resources will not be enough to compete in rapidly transforming global energy markets,” the report says.

“Canada’s oil and gas production must become both cost- and carbon-competitive in domestic and international markets, as many countries are implementing net zero targets and will seek the most affordable and least polluting supplies in a carbon constrained economy.”

That will take some work. The report notes that while emissions intensity in Alberta’s oil sands has fallen by 32 per cent since 1990, upstream oil and gas operations – those at extraction and close to it – still comprised nearly 22 per cent of Canada’s total greenhouse gas emissions in 2019.

Mr. Wilkinson and Environment Minister Steven Guilbeault travelled to Alberta soon after they were appointed in October to speak with the province, industry representatives and labour groups about Canada’s path forward on regional energy transformation. Mr. Wilkinson’s spokesperson, Joanna Sivasankaran, said in an e-mail that the ministers also began early engagement on a cap on emissions from the oil and gas sector, talks that will continue over the coming months.

Today, clean fuels such as hydrogen, advanced biofuels, renewable natural gas, sustainable aviation fuel and synthetic fuels make up less than 6 per cent of Canada’s total energy supply, the IEA report says.

But they represent a huge opportunity to transition the existing energy sector to a future low-carbon economy, “thereby supporting innovation, competitiveness and energy security while providing a new revenue stream from forest and agriculture waste, as well as municipal solid waste.”

“In particular, clean fuels can be an effective way to decarbonise hard-to-abate industries such as cement, steel, heavy-duty transport, and oil and gas, which represent nearly two-thirds of Canada’s emissions.”

The report also recommends that the federal government develop national emissions reduction strategies for other key economic sectors, such as transport, buildings and industry.

When it comes to power, the report notes that Canada has one of the cleanest electricity systems in the world, with more than 80 per cent of production coming from non-emitting sources.

“The dominant role that hydroelectricity plays in several Canadian provinces, along with the fact that many hydro projects in Canada are large and have sizeable reservoirs, will also significantly assist with the integration of variable generation as wind and solar generation are poised for growth,” the report says.

Nuclear energy will be fundamental to achieving and sustaining climate change goals as well, the report says. In particular, using small modular reactors to provide a long-term source of baseload electricity supply.

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