Canadian Energy Outlook 2021

Key facts

The starting point: Canada’s energy system

The unique characteristics of Canada’s economy and energy system:

  • One of the world’s largest energy producers and exporters; oil and gas alone contributes to 10.2% to the country’s GDP

  • Among the leading countries in the share of low-carbon sources in its electricity production (80%)

  • Overall per capita energy use for the country is almost double the OECD average, and GDP energy intensity is well above OECD average as well

  • Significant variation across provinces in both energy production and in the energy mix used by sectors

  • GHG emissions come overwhelmingly from energy-related activities

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World Rank

Energy Resource Proved Reserve/Capacity Production Exports
Crude Oil
3
4
4
Uranium
3
2
4
Hydroelectricity
3
3
-
Electricity
8
6
3
Coal
16
13
7
Natural Gas
17
4
6

GHG Emissions in Canada

GHG emissions are still increasing in many sectors:

  • Transport and oil and gas production are the two leading sources of emissions, and show the two most rapid increases since 1990 as well

  • Residential and commercial buildings emissions have also grown by 10% between 2016 and 2019

Those increases offset reductions in other sectors:

  • GHG emissions come overwhelmingly from energy-related activities

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Aiming for net-zero changes everything

Contrary to deep reduction, aiming for net-zero imposes that:

  • So-called transition fuels – or technologies – be avoided if they are not compatible with net-zero on the longer term

  • All sectors aim for zero emissions, whenever possible

Also, negative emissions activities will be needed to compensate unavoidable or hard-to-avoid emissions in some sectors, notably:

  • Transport, because of the very high cost of completely decarbonizing some specific sub-sectors

  • Agriculture, where emissions are more intractable and difficult to reduce or capture

  • Industry, where new processes must be developed to replace existing ones

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Total GHG emissions by sector across scenarios

GHG emissions by sector

Due to the specific structure of Canada’s economy:

  • Less than 20% of all GHG emissions can be directly assigned to citizens’ direct choices,

  • By contrast, around 80% of emissions come from sectors beyond the everyday choices of citizens: energy and electricity production, industry, commercial transport and buildings, waste, and agriculture.

  • Therefore, net-zero pathways will first and foremost require transformations on the industrial and commercial fronts: these sectors must bear the largest efforts early on (from a system cost perspective).

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The costs of GHG abating technologies continue to decrease sharply

Reaching net-zero by 2050 will be cheaper than projected a few years back, as the cost of technologies is declining at a staggering pace:

  • In 2018 estimations, for 200$ per tonne or less, 200 million tonnes of CO2 could be avoided; that number is now 400 million tonnes

  • In 2018 estimations, avoiding the 400th million tonne cost 550$; avoiding that same tonne would only cost 200$ now

  • The marginal cost for the most difficult reductions has decreased by more than half in our projections since our first assessment three years ago

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Marginal cost of reductions, NZ50 compared with REF

Net annual costs of electrification infrastructure

Considerable investments in infrastructure to make the transition possible produce massive savings later on:

  • Because of avoided fuel costs, widespread electrification of the economy will result in considerable annual savings from 2050 onward compared with business-as-usual

  • In net-zero scenarios, even doubling the projected cost of electricity transmission infrastructure while halving the cost of combustibles still leaves annual savings of CAD $37 billion

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Emission capture is important, but should be reserved as a last resort solution

To reach net-zero, a significant quantity of carbon capture is necessary, with crucial caveats:

  • Capture occurs mainly in industry and in bioenergy with CCS (BECCS) hydrogen and electricity production, to take advantage of negative emission activities

  • CCU is almost non-existent, as the utilization often results in emissions down to road so must be avoided to reach net-zero

  • Capture (outside of BECCS) as a whole is only a small portion of the total in net-zero pathways: this is largely because any emissions not captured when CCS is applied has to be compensated by negative emissions elsewhere

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Annual captured emissions by source

Total CO2 stored (cumulative)

These projections are likely to be very optimistic as to the role of CCS:

  • Both costs and technological uncertainties mean that an even greater quantity of DAC and negative emissions energy production may be required (constrained by biomass availability)

  • Moreover, the required quantities of GHGs to store in order to achieve neutral emissions in 2050 are massive and must be captured every year, but there are considerable unknowns about the risks of such large-scale storage of CO2

  • For all those reasons, reaching neutral emissions means giving priority to preventing emissions rather than compensating them

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