Before moving on to the next chapters, which provide a comprehensive description of the Canadian energy system and GHG profile, it is worth reviewing recent developments affecting energy issues and GHG reduction efforts. In 2020, the energy sector was affected by the broad-scale economic downturn resulting from the COVID-19 public health crisis. In particular, the Canadian oil industry described in Chapter 2 was impacted both by the spectacular drop in oil prices worldwide and by the price war between oil producing countries early in the year. Although the considerable uncertainty respecting this sector prevents us from making a clear-cut prognostic, the impact of these two crises, combined with ever more ambitious GHG-reduction targets, may prevent this sector from ever returning to pre-crisis levels.
Despite the prominence of this global crisis in 2020, many other developments surrounding Canada’s energy sector occurred since the publication of the first Canadian Energy Outlook less than three years ago. Notably, opposition to large fossil fuel infrastructure projects continued, with varying effects across the country; clashes to carbon pricing between provincial governments and their federal counterpart multiplied and even reached the Supreme Court, and elections altered the prominence of some opponents; and calls for action to slow down humans’ influence on global warming intensified within Canada and around the world. This section provides an overview of these and other major developments that marked the last three years in the Canadian energy sector.
1.4.1 Oil and gas infrastructure
We begin with several developments related to energy infrastructure projects. The first is U.S. President Biden’s fulfilment of a campaign promise to revoke the presidential permit for the Keystone XL pipeline project, effectively shutting it down. While some court challenges had continued for the Keystone XL pipeline in 2020, construction of the project had begun. The previous U.S. federal administration had given it presidential approval in January of 2020, and the Nebraska state Supreme Court had sided with regulators in an earlier challenge over the tracing of the route within the state. In March of 2020, the Alberta government had also announced a $1.5 billion investment in the project to ensure its construction went ahead, and guaranteed loans for a further $6 billion. Construction work went on from March in Alberta and in several U.S. states, as well as at the U.S.-Canada border.
The project, which has been in planning since 2008, has faced a long list of court challenges and political hurdles—including opposition from the Obama administration. It would have delivered 830,000 barrels a day of crude oil from Alberta to Nebraska, connecting with the U.S. pipeline network and ultimately reaching the Gulf Coast hub of refineries and export terminals. In February 2020, Enbridge’s project to replace its existing Line 3 seemed destined for a different fate, clearing its last hurdle when the Minnesota Public Utilities Commission approved a revised environmental impact assessment for the project. While the construction continued after the decisions, opponents to the project reached the Minnesota Court of Appeals, arguing that Enbridge failed to show long-term need for the Line 3 project. A decision is expected in 2021.
In February of 2020 as well, Teck Resources announced its decision to withdraw its Frontier oil sands mine proposal, which was still waiting for federal approval. Evaluated at $20 billion, the project would have been the largest in the Canadian oil sands. The company explained its abandon citing the many uncertainties in the current Canadian context, which included economic factors linked to insufficient oil prices and political opposition.
The Government of Canada purchased the Trans Mountain pipeline in 2018 and approved its expansion project in 2019. Its construction is administered by a crown corporation. In 2019, the Government conducted a second round of consultations with Indigenous populations on the project, which then cleared a potential legal obstacle when the Supreme Court refused to hear a challenge from Indigenous and environmental groups in March 2020. Construction of the pipeline project, now evaluated at $12.6 billion, continued through 2020.
In British Columbia, protests intensified about the Coastal GasLink, a natural gas pipeline intended to transport natural gas to a liquefaction plant for West Coast exports. The pipeline’s route goes through several First Nations peoples’ traditional lands, and disagreements among the Wet’suwet’en people’s hereditary chiefs and elected band councils persisted on whether to support the project. Arrests of protesters by the Royal Canadian Mounted Police in early 2020 led to protests across the country, mainly in the form of rail blockades, causing several weeks of disruption to both passenger and freight transport. After several meetings, government and Wet’suwet’en leaders reached a tentative agreement that requires approval by the nation’s people, but which excluded the pipeline itself. Public consultation was postponed and discussions slowed down due to the COVID-19 outbreak, although talks are now ongoing and construction on the pipeline has begun.
In the midst of these protests, the GNL Québec project lost its main investor. The project aimed to transport natural gas from Western Canada to the Saguenay reion in Quebec for transformation and export to Europe and Asia. Berkshire Hathaway, which intended to provide the larger part of the project’s funding, announced its decision to withdraw its participation, citing uncertainty in the Canadian political context. In March 2021, a report from the Bureau d’audiences publiques sur l’environnement concluded that social acceptance for the project could not be established or confirmed, and that economic and environmental risks outweigh its potential benefits (Bergeron et Pilotto 2021).
Several developments also affected Infrastructure projects in the electricity sector. British Columbia’s site C hydroelectric dam continued and remains on pace to begin operating in 2024 as scheduled. Although Hydro-Quebec had to temporarily halt construction work at the Romaine-4 powerplant in late 2019 due to safety concerns, construction is set to complete this last part of the Romaine hydroelectric complex in 2022. Hydro-Québec also announced an agreement to export 9.45 TWh of electricity to Massachusetts for 20 years. Opposition to the route for the line to supply the transmission capacity for the project remains, however. After New Hampshire rejected the initial project, an alternative route through Maine is also facing obstacles, with a referendum on the project planned for November 2021. 1
In Newfoundland and Labrador, the Commission of Inquiry Respecting the Muskrat Falls Project released its final report in early 2020. The commission was tasked with investigating the reasons behind the major cost overruns and construction delays. The report found that the cost benefits for the project were influenced by questionable optimism and political pressure, as well as strategic misrepresentation. The report concluded that the Government of Newfoundland and Labrador had predetermined that the project would proceed, and as a result “failed in its duty to ensure that the best interest of the province’s residents were safeguarded” (Commission of Inquiry Respecting the Muskrat Falls Project 2020).
Finally, in Ontario, the refurbishment of the Bruce nuclear powerplant formally began in early 2020. The operation is part of a major refurbishment project of ten units at two powerplants between 2016 and 2033. The year 2020 marks the beginning of the phase when the Bruce refurbishment took place in parallel to similar work at the Darlington powerplant. The province announced it will further its commitment to nuclear energy, having signed a memorandum of understanding with Saskatchewan and New Brunswick to develop small modular reactors.
After many false starts, hydrogen seems to be picking up around the world as an essential part of the decarbonization of the economy. It is generally seen as flexible carrier for storing electricity from variable low-carbon sources or as a clean fossil energy source when deriving from natural gas reforming coupled with GHG emissions captured and sequestered at the transformation site. In December 2020, the federal government released its Hydrogen Strategy for Canada (NRCAN 2020), which follows from the international Hydrogen Initiative. The latter had been created a year earlier by the Clean Energy Ministerial, a group of energy ministers from 19 countries, including Canada. 2
Canada’s hydrogen strategy builds on the creation of hubs across the country to support mature and emerging applications, coupled with efforts at revising regulations and policies to facilitate the use of this molecule as part of GHG reduction plans. A first hub3 was created in April 2021 in Edmonton, with the support, among others, of the federal and Alberta governments and of the city of Edmonton. A number of other provinces, including Quebec and Newfoundland and Labrador, are working on their own hydrogen strategy, which should be unveiled in 2021 or early 2022.
1.4.4 Electoral and political developments
In another series of developments, elections modified the political landscape as concerns climate and energy policy. In the spring of 2019, Jason Kenney became Premier of Alberta and vowed to roll back several of the measures taken by the previous provincial government to promote renewable energy and manage the carbon footprint of the province’s oil and gas sector. The new government abandoned a large part of the province’s carbon pricing mechanism and challenged the federal carbon pricing system in court. The challenge was significant because it led to a first victory by a province on the constitutionality of the program, after both Ontario and Saskatchewan lost their respective court cases. The Supreme Court however decided against the provinces on the matter in 2021, while across the country the federal pricing system had taken effect in 2019 (see Chapter 5).
In the fall of 2019, a national election led to a new mandate for the incumbent Prime Minister Justin Trudeau, in a campaign where climate issues were prominent. The federal Liberal government was elected with a minority status but did not see its main climate policies questioned, as all other parties in Parliament but the Conservative generally support the efforts. However, the government’s support for pipeline projects was met with more resistance from opposition parties.
In other Canadian politics, the National Energy Board, the main regulatory agency overseeing interprovincial and international energy infrastructure, became the Canadian Energy Regulator. The change also expanded the board’s jurisdiction over offshore projects and the impact assessment of energy infrastructure projects. The Canadian Centre for Energy Information4 was also created to improve and streamline data available to researchers and policymakers on energy matters across the country.
South of the border, the U.S. administration sued the state of California over its participation in the cap-and-trade system with Quebec, arguing that the state overstepped its constitutional authority and undermines the federal government’s ability to negotiate treaties with foreign nations. California and Quebec have been participating in this system since 2013, which imposes carbon pricing on large industrial emitters as well as fuel distributors. California won the case in July of 2020.
Finally, calls for more serious actions to prevent global warming intensified. The Intergovernmental Panel on Climate Change released a Special Report on Global Warming of 1.5 C in October 2018, detailing how deep emission reductions were needed to meet the target, well beyond the Paris Agreement pledges. A series of school strikes were also held around the globe throughout the first half of 2019, the largest being in March and May and each gathering more than a million strikers. Broader climate protests were then held in September, with several million people marching worldwide to ask for more action on reducing GHG emissions, eliminating fossil fuels, and expanding the use of renewable energy. Lastly, in November 2019 more than 11,000 researchers from around the world signed a widely publicized letter in BioScience, warning of the “untold suffering” that will result from insufficient mitigation of global warming (Ripple et al. 2020).
The last year has also seen a considerable strengthening of Canada’s climate goals. In November 2020, the Liberal government tabled a C-12 Bill that established a net-zero target for 2050, as well as a new governance model to increase transparency and accountability on the climate change file.5 The bill was adopted at the end of June 2021.
At a meeting led by U.S. President Joseph Biden for Earth Day 2021, the Prime minister also announced that GHG reduction targets for 2030 will be increased from 30%, with respect to 2005 to 40%-45%, although these objectives have no legal standing as of this writing. The probability of these targets to survive a change in government has been considerably increased with the Conservative Party of Canada’s publication of a new climate platform that supports carbon pricing and the decarbonization of Canada’s economy. 6
These developments affect different parts of the Canadian energy system. Part 1 of this Outlook provides a more detailed look at the various dimensions of this system, helping to further understand the impact—and in some cases, the causes—of these events.
1 A previous referendum initiative, scheduled for November 2020, was deemed unconstitutional by the Maine Supreme Court due to its wording. A new initiative was later tabled to correct this issue.
6 Secure the environment. The Conservative Plan to Combat Climate Change, 16 pages. Online,