With less than 30 years left to meet net-zero targets and the impetus to decarbonize and address climate change looming, Canada must act now on the energy transition if the country expects to tackle its energy trilemma and continue as a world leader in sustainability.
“Canada and the US are the only G7 countries to have experienced an increase in emissions since signing the Paris Agreement.”
As part of the Paris Agreement, signed in 2015, Canada committed to achieving a net-zero economy by 2050. But we are struggling to make significant progress. Canada and the US are the only G7 countries to have experienced an increase in emissions since signing the Paris Agreement. In response, Canada’s 2030 Emissions Reduction Plan announced last February set out significant reductions and new measures, many of which are already underway, to ensure that we reduce emissions 40% to 45% below 2005 levels by 2030.
While the country is on the path to net-zero, progress needs to be accelerated quickly.
What is the Energy Trilemma?
The energy trilemma refers to the growing challenge of finding a balance between energy security, sustainability, and equity in how we access and use energy in our daily lives. The three dimensions are uniquely necessary and complementary, whereby each dimension requires careful consideration to transform and build resilience in future energy systems. This is especially true in Canada, where the oil and gas sectors make up a sizeable portion of GDP, employment, and investment in the country.
“Energy security and equity are just as important to building resilient economies and fair energy markets.”
Thinking about energy transition in these terms will be key to designing a holistic approach to pacing and balancing decarbonization efforts. Climate change action often focuses on environmental sustainability to reduce the carbon intensity of numerous economic sectors. However, energy security and equity are just as important to building resilient economies and fair energy markets.
How is Canada’s Energy Transition Faring Globally?
The stakes are high and rapid change is needed. The good news is that Canada is well-positioned to act. Globally, our energy transition policy puts us at the forefront of climate action over the last few decades, earning us a strong environmental record. With rich natural resources and a diverse electricity generation mix, we benefit from energy security, boasting both a reliable energy supply and a resilient system.
Energy equity – or the ability to provide affordable, fairly priced, and abundant energy domestically and commercially – also remains strong. With a top ten ranking on the global Energy Trilemma Index, Canada is drawing from a position of power.
Canada’s sustainability score remains stable, but affordability is raising concerns. The instability seen with the war in Ukraine and its impact on pricing and inflation is clouding the future, making the future of energy transition difficult to predict. Questions abound on how the energy transition will unfold in Canada. How will local industries support the transition? How will the energy transition balance sustainability, equity, and security? What is our next best move, and perhaps the most troubling question on pundits’ minds: who will pay for it all?
“Canada needs approximately $2 trillion to deploy new technologies needed to reach 2050 net-zero targets.”
It is estimated that Canada needs approximately $2 trillion to deploy new technologies needed to reach 2050 net-zero targets. COVID-19 spending has governments juggling budgets and while the federal government committed $9.1 billion as part of the 2030 Emissions Reduction Plan, it is a drop in the bucket considering the modernization that will be required to decarbonize value chains.
Maintaining economic prosperity will be critical. The environmental and clean technology sector contributed $67.5 billion to the Canadian GDP in 2020, and there is significant room for growth. Doing so will demand national alignment, with consideration of the country’s diverse interregional resources and policy frameworks. In addition, cooperation and funds will have to be shared among both private and public sectors. While solutions will be complex, opportunities will be significant.
Opportunities in Canada’s Energy Transition: Resource-Rich, Sustainably Savvy
There is no doubt that the energy and resources sector is critical to achieving decarbonization goals. Canada had a natural resource wealth of $550 billion in 2020 and ranked first for ESG practices among the world’s top oil reserve holders. Energy, in particular, accounted for approximately 9.7% of the country’s GDP in 2021, with $154.3 billion worth of exports sent to 142 countries.
1. Oil and Gas
Often in the spotlight of energy transition discussions due to its carbon-intensive operations, oil and gas opportunities including the generation of carbon credits or renewable electricity can help reduce cost gaps to international competition. Climate action in the form of sustainable investments to protect land and water could show climate leadership and return environmental value.
2. Power and Utilities
Similarly, the power and utilities sector has a significant opportunity to decarbonize, favouring alternate sources of power, including hydrogen and electrification, and investing in technology innovations and infrastructure updates.
The mining industry is set up to benefit from such innovations, with increased demand for minerals to supply renewable technologies like clean-tech batteries and wind turbines expected to quadruple by 2040. There is also, however, a significant opportunity this uptick in operations will provide – to electrify and automate, for example, or show important goodwill through water, land and resource stewardship and working with Indigenous communities in decision-making.
The industries above will not be alone. There will be varying degrees of disruption across most businesses. An integrated, multi-sector approach, including infrastructure updates, will be needed to ensure national alignment and to help accelerate decarbonization.
A coordinated approach to a cohesive energy system for 2050 has proven elusive. Given Canada’s geographic size and scope, the vastly different political and social perspectives across provinces have prevented a consensus. Siloed action by government and business has been fragmented and often led to new concerns once implemented, and financing has been a stumbling block, with stakeholders scrambling to source funding.
This lack of leadership oversight and accountability has led to underwhelming results. Gaining the traction needed to drive momentum forward and achieve energy transition will demand the collaborative efforts of all players – government, industry, business and consumers. With strong leadership, policies and regulations in place to guide action, clearly defined accountabilities, and communities continuing their energy transition pursuits, Canada can get back on track in the three decades we have left.
What Must Canada Do to Lead in the Energy Transition?
Engaging diverse stakeholders and delivering on decarbonization targets will be near impossible without technology and innovation. Technology and innovation, while not solutions to the energy transition, will be critical tools. Early and proactive investment in new and creative tools and processes will enable efficiencies and expedite an industry’s path to net-zero.
Having humans at the centre of change with transformative leadership and tangible value delivered to stakeholders each step along the way will help sustain progress. Partnering through collaboration and sponsorships like Pathways Alliance – in which Canada’s oil sands producers work together to address climate change – will help build awareness, distribute knowledge, invite participation and perhaps most importantly, ensure resources are available to see change through.
Decarbonizing to avert climate crisis is a massive undertaking. While there are certainly gaps to overcome, Canada’s role in the energy transition holds significant promise. Our work with disclosures and clean technologies has us off to a good start. We will need decisive action and the dedicated attention of government, industry, investors and citizens if we are to realize our decarbonization goals and move forward together for a more sustainable future.
“The transition is not about abandoning the past; it is about innovating and moving forward together for a more sustainable future.”
While the EY Pathway to the 2050 Energy System report admits there is much work to be done, it also identifies tremendous opportunities ahead for Canadian businesses prepared for the disruption that the energy transition can be expected to bring. This is truer still for fossil-fuel-dependant industries like oil and gas, power and utilities, and mining and metals, which will need to prioritize decarbonization to remain competitive and deliver on the promise of a net-zero future. We must remember: the transition is not about abandoning the past; it is about innovating and moving forward together for a more sustainable future.