Energy transitions in the industrialized world are largely shaped by the implementation of new technologies, the shutdown of inefficient infrastructure, and the adoption of environmental regulations (Hafner and Tagliapietra, 2020). However, no country has yet completed a shift from fossil fuels to low-carbon sources of energy. The economic implications of these transitions are often uncertain. While diverging assessments suggest that energy transitions may fuel future prosperity or become an economic burden (Mercure et al., 2019), the emergence of new technologies, changes in energy demand, and conflicting policy evidence call for a continuous reassessment of the costs and benefits of energy transitions.
At the same time, several approaches, which vary in complexity and scope, are available to assess the economic impacts of such transitions. The methodology developed in this study is adapted from the assessment of costs incurred in decarbonizing the electricity sector in the U.S. (Heal, 2020). This approach is used to gain understanding of the magnitude of the costs associated with changes in the Canadian primary energy sector rather than quantifying the budget needed to fund a transition in great detail. Accordingly, the results presented in this chapter aim at providing a gross measure of energy transition costs in Canada. More specifically, this chapter provides an order of magnitude for primary-energy costs associated with a deep electrification of Canada’s primary energy sector by comparing generation, transmission and storage investment costs incurred by electrification relative to fossil fuel expenditures for the scenarios explored in this Outlook.
Section 14.1 presents the main results derived from the calculation of primary energy transition costs in Canada; Section 14.2 discusses recent findings on projected costs to achieve carbon-neutrality globally; and Section 14.3 surveys the limitations and advantages of the different approaches available for analyzing the macroeconomic aspects of energy transitions. Appendix D presents a complete description of the methodology used in this chapter.