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What will make a difference in Canada’s emissions ‘is more aggressive and targeted GHG policy frameworks, which are now emerging in Canada,’ said National Energy Board chairman Peter Watson.

Todd Korol/The Globe and Mail

Canada's fossil fuel consumption will continue to rise over the next 25 years, boosting greenhouse-gas emissions, unless governments follow through with targeted GHG-reduction policies, the National Energy Board says.

Whether oil prices stay low, or not, or whether pipelines are built, or not, fossil-fuel consumption will increase in the period to 2040, the NEB's chairman, Peter Watson, said in a speech in Toronto on Wednesday as the regulator released its long-term forecast called Canada's Energy Future 2016.

That forecast shows the use of fossil fuels increasing by 22 per cent between 2014 and 2040, or 0.8 per cent a year.

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"Scenarios like high or low oil and natural-gas prices, or whether or not we build pipelines or we build LNG terminals – those things are in and of themselves not sufficient to put Canada on the path to declining GHG emissions," Mr. Watson said.

As long as there is demand for energy, markets will supply it and emissions will be generated, he said.

What would make a difference in Canada's emissions "is more consistent and aggressive and targeted GHG policy frameworks, and we are seeing some of these emerging today."

Putting a price on carbon, or setting emission caps on oil-sands production, are significant steps, he said after the speech. "Those are the nature of the things that Canada needs to do to start to bend the emissions curve going forward."

Canada's total GHG emissions dropped about 3 per cent between 2005 and 2013, Mr. Watson said, mainly due to the reduction in coal-fired electricity generation in Canada.

The use of coal will continue to decline and thus reduce the GHG intensity of energy use, but overall growth in fossil-fuel consumption will continue to increase overall emissions in Canada.

The NEB report looks at scenarios with a variety of pricing assumptions over time. Its "reference case" has Brent crude at around $80 (U.S.) a barrel by 2020 and $105 by 2040. Its "low price case" has oil at $55 by 2020 and $80 by 2040.

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A prolonged period of low oil prices will cut into Canadian oil production, but not until 2020, after which time production would be flat for two decades, the NEB projects.

Low prices mean "investment will not be significant enough to grow production beyond what will be reached in the next few years," Mr. Watson said.

But in the reference scenario where oil prices are stronger, oil production will grow significantly, as will Canada's overall level of energy production from all sources, the report says.

In that case, oil production will be up 56 per cent by 2040, natural-gas production up 22 per cent and electricity production will hold steady at current levels. The electricity mix will shift, however, with coal generation declining and natural-gas-fired capacity rising sharply.

"Energy production is going to increase in Canada up to 2040," Mr. Watson said. "For some, it may be a bit of a surprise, because the discussion we see in the country sometimes focuses on the pace of growth of renewable forms of energy and their potential. The reality is that [regulators] project that all types of energy production will continue to grow significantly for a few decades to come."

The NEB projections also looked at the impact on oil production if no new major oil export pipelines are built. In that "constrained pipeline" scenario, it says, producers would ship by rail, which will cost them more but allow many projects to stay profitable.

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If major pipelines aren't built but prices are sufficient, Mr. Watson added, "crude oil production will grow, at a more moderate pace than our reference case, and rail transportation will be able to provide the takeaway capacity."

Indeed, "rail has proven to be amazingly resilient" in providing needed oil transport capacity, he said, noting that the NEB does not regulate rail transportation of energy resources.

Dan Woynillowicz, policy director at think tank Clean Energy Canada, said the NEB's report does not take into account a number of very significant policy developments that took place near the end of 2015. "The climate policy landscape in Canada underwent a transformation in the lead-up to the Paris climate negotiations and subsequent agreement," he said. "As those announcements are translated into policy and then implemented, they will significantly alter the country's emissions trajectory and energy system."

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