How Governments are Reacting to the Canadian Federal Climate Plan

How companies can navigate uncertainty with ever-changing climate policies

01 Aug 2022 - Written by criteriumgroup.com   |    Energy & Mining, Public Sector,

On June 29, 2021, Canada built upon previous emissions reduction frameworks and action plans by committing the country to net-zero emissions by 2050 using the Canadian Net-Zero Emissions Accountability Act. Since then, the federal government has progressed clean fuel regulations, the clean electricity standard, and oil and gas emissions caps among other important steps towards Canada’s 2050 goals. These goals mandate a transformation into a cleaner economy, which will be difficult for the country to do well without overspending and remaining within their given timeframes.

Canadian provinces have been required to map their own path forward within the federal plans, which in turn trickles down to businesses, municipalities, and consumers. Knowing this, a major problem for decision-makers lies within changing government priorities after elections.

So, what are the federal plans, how are the provinces reacting, and how can decision-makers navigate within so much economic uncertainty?

What are Canada’s 2030, 2035 and 2050 plans?

Canada’s net-zero-plan means a shift to technologies which do not produce greenhouse gas emissions, while offsetting any remaining emissions out of the air and into either a useable product or the ground. The four areas of particular interest are buildings, transportation, industry, and negative emissions solutions.

To reach its 2030 goals, the federal government has capped oil and gas emissions and made significant investments in strategies like low-carbon building materials. By 2035, it aims to have a 100% clean electricity grid and is replacing all internal combustion (gas and diesel) sales with electric vehicles. By 2050, the government has put forward a transitional plan towards a hydrogen economy, which focuses on the hard to electrify sectors like heavy machinery and airplanes.

How have provinces reacted to the federal climate plan?

Focusing on protecting their own economies, the provinces have adopted similar laws and begin adapting to the new energy transition “normal”. In Alberta, a province particularly impacted by the new economy, government is working with private industry on carbon sequestration hubs and has released a Hydrogen Roadmap aligned with the federal strategy.

Breakdown of where Canadian emissions come from

Source: Green Energy Futures

How have municipalities reacted to the Federal Climate Plan?

Most municipalities are focused on solving the same key issues. To become net-zero, they are focusing on:

  • Homes and buildings
  • Transportation
  • Waste reduction
  • Carbon removal

Because hydrogen alone is not a solution for heating municipal buildings long term, their plans may become largely reliant on the electrical grid like the Calgary Climate Strategy – Pathways to 2050. Calgary’s plan proposes $87 billion in spending on things like retrofitting all homes away from natural gas heaters, among other things.

What happens if another party comes into power?

With governments, businesses, and private citizens spending so much time and money on climate related goals, what could happen from a transition of power? The Canadian opposition party is drawing crowds while campaigning on carbon tax removal that could significantly impact (if not cancel) major transition projects in development.

In 2019, Alberta’s UCP won a majority from the previous NDP government. The UCP removed the provinces solar energy rebate and instead focused their efforts on large industrial emitters. This stalled and ultimately cancelled many projects in the province.

How can we navigate the uncertainty?

Here are three keys to navigating economic uncertainty during the energy transition:

  1. Have an agile mentality: The ability to move quickly is the first key. New net-zero initiatives are announced almost daily but having an awareness of them being gone the next day is paramount.
  2. Focus on the lowest risk, highest return strategies: Many of the net-zero technologies are still in development. Decision-makers should consider focusing on proven, ready to implement solutions to reduce risk unless being incentivized by the government.
  3. Do not rely on subsidies as a business: The federal government is promoting the transition primarily with carbon taxes, but businesses, cities, and individuals should not rely on this long-term. Decisions-makers should consider relying on the underlying economics of each situation with or without future credits.

About Criterium Group

Criterium Group is a strategy and management consultancy that unlocks the potential of leaders and their teams by bridging the gap between strategy design and execution.

We help leaders in financial servicesenergy & mining, the public sector, and healthcare navigate disruption by providing data-driven insights, sector expertise, and an unwavering focus on value.

Sources: Climate Choices, NRCan, The Government of Canada, The Government of Alberta, The National Post, Global News, Green Energy Futures