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Canada’s Path to Net Zero

David Knight Legg

Guest Content by David Knight Legg, Chairman of the ESG Working Group of the Province of Alberta and CEO of Invest Alberta Corporation

 

Canada is unique in the world: a free democracy of 38 million citizens, home to vast water supplies and forests, and seemingly endless mineral deposits and hydrocarbon reserves that hold more oil than Russia, China and the U.S. combined and make us the fourth largest gas supplier in the world. We share a border with the world’s largest consumer economy and our critical shipping and logistics trade routes connect us directly to the vast emerging growth markets in Asia.

This extraordinary strategic position and natural wealth bring tremendous opportunity and responsibility: developing our resources to provide the energy needed to lift 3 billion people out of poverty—while also leading the world in developing cleaner and greener fuels, renewables and innovative technology to ensure a better world for our children.

This balance isn’t easy and commitments to net zero need to be reconciled with results. According to data from the Government of Canada, we have removed less than 2% of emissions from our 2005 baseline, well below our 30% by 2030 target. And it’s taken us 16 years to get this far, partly due to population growth and a grid that is already 80% non-emitting.

The recent Earth Day announcement to increase that 2030 target to a 40-45% reduction means that Canada, which has reduced less than 1 megatonne (mT) a year for 16 years, will now find a way to remove over 300 mT—over 30 mT a year—in the remaining nine years.

The foreign press has quickly pointed out how unlikely this is.

There is however a path to achieve and even exceed this goal if Canada thinks globally, applies what has already worked around the world, and invests in scaling home-grown innovation.

 

The Net-Zero Challenge

Electricity and heating account for one quarter of all global emissions, and the world’s consumption of electricity has doubled since 2000. The growing use of coal in electricity has driven global emissions higher every year. Because coal burns at 100% higher carbon intensity per unit of energy than natural gas, the conversion of grids from coal to gas has been the largest single contributor to global decarbonization. The U.S. has led with a reduction of over 900 mT since 2000, and Europe and the U.K. are a close second, using gas imports from Russia, Algeria and Norway to drive the lion’s share of their reduction of over 700 mT.

Asia, on the other hand, accounts for the vast majority of all emissions growth globally thanks in large part to coal. Just four nations: China, India, Japan and South Korea account for two thirds of all coal-fired CO2 emissions globally. And this is increasing. In 2018, China was solely responsible for 47% of all global emissions from coal-fired power, and in 2020 the country built three times the total new coal capacity of the rest of the world combined, with planned production at five times the planned coal-fired capacity of the rest of the world.

It is critical to note that this is happening not because nations are intentionally careless about the environment but because they are relentlessly focused on supporting the long transition of over 3 billion people globally emerging from grinding poverty into the middle class. Asia is the epicentre of this historic moment. This requires critical infrastructure—including reliable electrical grid capacity—to support hundreds of millions of people every year that require new homes, hospitals, schools, transport, roads, heat, and light in thousands of rapidly expanding cities.

Energy—and our ability to harness it for light, heat, and cooling—has supported the greatest expansions of prosperity in human history. It has also driven up emissions. And Asian nations are desperate to find affordable lower-carbon solutions to meet this demand more responsibly.

 

Canada’s Place in a Global Opportunity

Canada has a massive abundance of the low-cost, high-quality natural gas Asia desperately needs to replace coal and reduce emissions while supporting their core anti-poverty growth agenda. By providing Asia with natural gas, Canada can remove well over our entire carbon footprint of 739 mT a year. This is an emissions reduction tactic with specific production, supply, trade and carbon reduction math applied to every country, and can happen as quickly as we can build the essential infrastructure and strategic trade to meet gas demand that has grown 12.5% to 359 million tonnes in 2019 alone, with China emerging as the third largest buyer in the world, and India and Indonesia looking to clean the air in their urban centres and reduce carbon overall.

The numbers are exceptional: when fully online in three years, Canada’s $40 billion Shell LNG project alone is estimated to remove 70-80 mT of Asian emissions. This project—the largest infrastructure investment in Canada—is sponsored by Korea and Japan, the largest buyers of LNG in the world. Our Invest Alberta seven national Asian offices are having conversations every week with dozens of investors, firms and governments intent on securing our LNG—and looking to invest heavily in Canada’s ultra low-carbon hydrogen capacity that will retrofit into LNG infrastructure in the future.

 

The Canadian Opportunity

Today, successfully ensuring net zero while growing the Canadian economy requires major capital investments into our LNG and hydrogen future as well as critical decarbonization infrastructure. In Alberta alone, investments of $30 billion into the large-scale deployment of carbon capture, utilization, and storage (CCUS) will help offset another 60 mT of production-related emissions. To quote the Hon. Seamus O’Regan, Minister of Natural Resources: “Carbon capture technology creates jobs, lowers emissions and increases our competitiveness. It’s how we get to net zero.”

The International Energy Agency (IEA) forecasts that the world will need approximately 1,000 CCUS facilities by 2050 to achieve net-zero ambitions. Currently only 21 are in operation, with the largest now in Alberta. Without CCUS investment, the IEA predicts that the cost of climate mitigation will increase by 138% putting many communities and countries on the brink of poverty. We can’t let that happen. Canada’s net-zero pathway demands CCUS capacity to decarbonize energy and industrial systems and set the stage for growth in the global demand for cleaner natural gas and net-zero hydrogen production.

The Paris  Accord explicitly recognizes the global nature of emissions. Solving for net zero is, by its very nature a global problem requiring transnational and trade solutions because most of the world is fighting poverty and energy shortages without Canada’s advantages of low population, clean grids and a 300-year supply of natural gas. For Canada, our role can be so much greater than our current targets, or our record in hitting them suggests.

The Paris Accord Article 6 establishes a basis to negotiate credit for global trade as a principal tool of emissions reduction, and Article 9 credits the importance of technological transfer and CCUS. Canada holds a position of strategic proximity, cost and supply advantages of natural gas and hydrogen as well as global leadership on decarbonization technologies and sophisticated regulatory and incentive frameworks that are all tradeable and transferable in helping developing nations.

The global scope of the challenges we face—poverty and climate—will be solved by collaboration between nations. When I took part in the GLOBE Capital session, Destination Net Zero: Governments’ Role in Achieving Carbon Neutrality, there was a consensus on the panel that collaboration is the key to unlock a net-zero future. It will take our best entrepreneurs, scientists, investors, diplomats and dealmakers to realize Canada’s global leadership in a low carbon future. In this, as with so much else, Canada has the advantage of abundant human talent and natural resources to do something extraordinary in the world.

 

David Knight Legg is chairman of the ESG Working Group of the Province of Alberta and CEO of Invest Alberta Corporation. He was also a speaker at the GLOBE Capital session: Destination Net Zero: Government’s Role in Achieving Carbon Neutrality. GLOBE Capital registrants can watch the session recording here and non-registrants can purchase access here.

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