Canada’s opportunity for a sustainable development future

Governments, businesses, and consumers are trying to reduce greenhouse gas (GHG) emissions and limit the severe impacts of climate change. This is our chance to move toward a sustainable development future—an economic model that balances environmental protection, wealth creation, and a prosperous society. Canada’s natural resources sector has an important role to play in that future, both at home and abroad. As this goes to press, international delegates are convening at the United Nations Climate Change Conference (COP25) in Madrid. Countries are expected to agree on implementation details of the 2015 Paris Climate Change Agreement. This conference follows the UN Climate Action Summit held earlier this fall in New York, where 65 jurisdictions committed to net-zero GHG emissions by 2050, 70 countries announced a ramp-up in their emissions mitigation efforts, and more than 100 business leaders firmed up their alignment with the Paris Agreement to transition to a green economy. Closer to home, the re-elected federal Liberals campaigned on ambitions beyond the Pan-Canadian Framework, their existing climate policy package. New objectives included a 2050 net-zero emissions target for the country. Clearly, international momentum is building on climate action for the coming decades, including in Canada. So where is change likely to happen? Three-quarters of the world’s GHG emissions are energy-related, making that sector a key target. Meanwhile, fossil fuels—including coal, oil, and natural gas—formed more than 80 per cent of all the energy used worldwide last year. These global shares have hardly budged in the last couple of decades, and Canada’s shares follow a similar pattern. The path to global and domestic emissions reductions is clear: an overhaul of the energy system, including how it is produced, processed, and used. The key question is: how big of an overhaul is needed? To understand the magnitude of it, consider the latest findings in the International Energy Agency’s World Energy Outlook, published in November. Under their Sustainable Development Scenario—one consistent with the Paris Agreement—the global energy system requires the following changes by 2040: Energy demand must plateau around 2020 and decline at a slow and steady pace after. The share of fossil fuels in the energy mix needs to fall to 58 per cent, down from 81 per cent in 2018. The share of clean energy sources (such as bioenergy, nuclear, hydro, and non-hydro renewables like solar and wind) needs to more than double today’s levels. Relative to recent years, energy investment levels will need to increase by close to 60 per cent annually until 2040, totalling more than US$71-trillion cumulatively. Energy supply investment levels must increase moderately, but shift from fossil fuels to clean energy. End-use investment levels (including on energy efficiency) need to increase threefold and account for a much larger share of total energy investments. Changes across all segments of the system are needed in three areas: energy efficiency, renewables, and “others”—such as fuel-switching efforts; behavioural change; and adopting carbon capture, utilization, and storage (CCUS) technologies. There is no silver bullet for reducing energy-related GHG emissions globally. This scenario presents clear opportunities for Canada’s natural resources sector. For example, although demand and investments for fossil fuels are expected to shrink, Canada’s producers can expand their market share—provided they are positioned to compete as low-cost, low-carbon, and reliable suppliers. What’s more, Canada’s natural resources companies are experts on environmental stewardship and disruptive fossil-fuel technologies (including CCUS), and can export these services and intellectual properties. This would help reduce environmental impacts of fossil fuels globally. For industries such as forestry and mining, a sustainable development scenario generally means greater demand for their products—timber, minerals used in batteries and wind turbines, and fuel supplies for nuclear power. Along this line of thought, the opportunities are obvious for Canadian manufacturers and exporters of clean energy technologies, as well as for energy efficiency and other service and construction industries. One thing is clear: The world is moving forward on slicing GHG emissions. This means massive changes to the global energy system, bringing significant future market opportunities with it. Canada’s natural resources sector can play a prominent role in this transition. To capitalize on it, Canada’s policy-makers and sector leaders must act swiftly, work together, and have a long-term strategic vision. This way, the sector can keep contributing to the economy, the environment, and communities across the country for decades to come. Carlos A. Murillo is a senior research associate for energy and environment with the Conference Board of Canada. The Hill Times