15.2 Learnings from modelling Canada’s transformation


By modelling various net-zero scenarios, looking at the order in which sectors decarbonize (Table 15.1), and testing various modifications through sensitivity analyses, we are able to draw a number of important conclusions. 

15.2.1 Net-zero changes everything

  1. Moving towards a net-zero emission society means that targeting partial reductions of GHG emissions is neither sufficient nor in most cases appropriate. For example, moving from diesel to natural gas in trucking is not a transformation compatible with net-zero, further debunking the idea of a transition fuel. Similarly, carbon capture and use still leads to net positive GHG emissions that must be captured and sequestered elsewhere in the economy, adding considerable costs to the transition. Given the short horizon for net-zero, all efforts and investments must be aligned with a carbon-neutral society and maintain a sharp focus on intrinsic zero-emission for the maximum number of activities.
  2. Reaching net-zero means giving priority to preventing emissions rather than compensating them with capture. Given the uncertainties surrounding negative-emission approaches—nature-based and technological—it is at present more cost-beneficial and strategically structuring to limit their use to capturing emissions to compensate those that are almost impossible to prevent, as in agriculture and some industrial processes.
  3. While energy efficiency and productivity are important contributors to the transformation of the energy system, they can in some cases be incompatible with a net-zero objective. Replacing fossil fuels for electricity will provide significant gains in energy productivity, especially for transport and heating. For example, electric cars consume three to four times less primary energy for the same distance traveled, while heat pumps can provide a service equivalent to three times the energy consumed. However, eliminating GHG emissions can also decrease energy productivity, with the use of hydrogen produced by electrolysis or biomass instead of natural gas in heat production, or by relying on storage to reduce electricity peak demand.
  4. The energy system will continue to evolve after reaching net-zero as relative costs and available technologies change. This means that non-optimal solutions that deliver on net-zero will most likely be updated in the future; it is therefore not essential that everything be perfect the first time—as long as compatibility with net-zero is taken into consideration.

15.2.2 A need for more effective approaches

  1. Reaching net-zero by 2050 will be much cheaper than projected. Marginal cost analysis of NZ50 in 2050 (Figure 8.7) and an analysis of the cost of electrifying the primary energy supply (Chapter 14) show that reducing emissions is economically viable and could even deliver considerably savings. A comparison with results from our previous Outlook (Langlois-Bertrand 2018) also shows that decarbonization costs are falling much more rapidly in some sectors than our modelling hypotheses projected, a trend that is likely to persist.
  2. Achieving net-zero requires strong leadership and making immediate difficult choices. A number of structural barriers, including ill-conceived programs, regulatory and innovation barriers, risk aversion, the slow pace of technological adoption, inadequate workforce training, financial incongruities, and regional economic fabrics, are preventing even cost-beneficial investments that would accelerate the transformation of Canada’s energy production and consumption pattern. These barriers cannot be overcome simply with a price on carbon; they must be lowered or eliminated through a strategic, coherent and integrated approach, led at the highest levels of governments, in order to deliver significant results on a horizon of one to four years from now (e.g., see also Meadowcroft 2019 and 2021). 
  3. The most cost optimal way to reach 2030 targets is to significantly reduce emissions from the oil and gas sector. In view of current estimated costs for CCS, our model shows that this must take place through a significant reduction in production. More specifically, the emission reductions through production cuts in this sector are cost optimal. Maintaining current emission levels for this sector would require a much faster decarbonization of the other sectors, including electricity, buildings, industry and transport. However, policies are not in place for some of these sectors, while for others, economically competitive solutions are unlikely to be available on a sufficiently short horizon to enable the transformation needed by 2030.
  4. In addition to oil and gas, the industrial, commercial and electricity sectors must bear the largest efforts early on. Governments should therefore focus a major share of their attention on these sectors. Due to the nature of Canada’s economy, less than 20% of all GHG emissions can be directly assigned to citizens’ direct choices, including residential heating (6%) and personal transport, including individual vehicles (11%) and airplanes (1%). Indirect emissions associated with consumption can be significant, but for the large fraction of imported goods, these emissions are not assigned directly to Canada. As suggested by the numbers in Table 15.2, to meet their GHG reduction commitments, governments should set targets and develop sector-specific programs for each of the aforementioned sectors. 
  5. Transport does not transform as quickly as might be expected. Transport isone of the sectors where governments are most active with regulations, such as the proposed Clean Fuel Standard (CFS) or those respecting the sales of internal combustion engine vehicles, and massive subsidy programs. While some efforts, such as CFS, are not compatible with net-zero ambitions (see item 1 in this list), others can only do so much as vehicle fleets typically take 7-10 years to completely renew. Planned for no sooner than 2035, the net effect comes too late for 2030 targets. Decarbonizing transport also requires early and decisive action at multiple levels to ensure results by 2050. While essential, net-zero compatible urban-planning will take decades to have an impact; similarly, heavy public transportation and infrastructures for decarbonizing freight transport can take a decade to plan and build and will require many years afterward to produce results.

15.2.3 Looking beyond modelling

  1. Current international agreement can lead to exports of emissions. NZ scenarios that follow the Paris Agreement definitions favour a strong decrease in oil and gas production with, in some cases, additional imports of refined fuels for Canada’s needs, as production emissions abroad are not added to Canada’s GHG balance. Modelling also leaves unaccounted emissions associated with goods produced outside of Canada’s borders, while assigning emissions from products that are consumed abroad to Canada. Total carbon pricing for goods, which would assign the environmental costs to the final user, would avoid this issue.
  2. Strong general results do not equate to certainty on all changes, as details will depend on specific developments. Modelling results closely depend on the conservative hypotheses that we have adopted about the evolution of technologies, the barriers to investments and the overall costs of the transformation. This means that the specific evolution in the understanding of agriculture and nature-based solutions, as well as of technologies under intense development such as hydrogen, small nuclear reactors, large scale energy storage, many industrial processes, and heavy transport, is still uncertain and even unknown. Their future is dependent not only on further research and technological progress but also on political orientations and choices that will lock in some of the infrastructure-heavy solutions (such as catenary or hydrogen-powered trucks) early-on and, by doing so, reduce the number of possible futures to consider (Meadowcroft 2019 and 2021).