Canada: After The Pandemic: Canada Releases Climate Change Plan To Build Back Sustainably And Exceed Its 2030 Target

Under the Paris Agreement, Canada has committed to reducing its greenhouse gas (GHG) emissions by 30% below 2005 levels by 2030. The first policy steps taken to meet our Paris Agreement commitment were guided by the Pan-Canadian Framework on Clean Growth and Climate Change (the Pan-Canadian Framework), which was adopted in December 2016. On December 11, 2020, the federal government released its Healthy Environment and a Healthy Economy Plan (the Plan), which builds on the Pan-Canadian Framework and provides a road map forward to meet our 2030 emissions reduction target.

The Plan is the cornerstone of the federal government's commitment in the 2020 Speech from the Throne to create over one million jobs, and includes 64 new measures and $15 billion in investments. This is in addition to the Canada Infrastructure Bank's (CIB) $6 billion for clean infrastructure announced in October 2020 as part of the CIB's Growth Plan, which targets investments in clean power ($2.5 billion), the digital economy ($2 billion), energy efficiency ($2 billion), agricultural irrigation projects ($1.5 billion), and zero-emissions transportation ($1.5 billion).

Together with the Pan-Canadian Framework, the federal government expects to achieve reductions within the range of 32 to 40% below 2005 levels in 2030, thereby exceeding Canada's emissions reduction target under the Paris Agreement. The Plan is also intended to establish the building blocks to reach Canada's goal of net-zero emissions by 2050, which was announced by the federal government in 2019. With the introduction of Bill C-12 (An Act respecting transparency and accountability in Canada's efforts to achieve net-zero greenhouse gas emissions by the year 2050) on November 19, 2020, Canada joins over 120 countries in committing to net-zero emissions by 2050, including the UK, Germany, France, and Japan. For more information on Bill C-12, please see our earlier blog.

The Plan outlines actions in five main areas, including: (i) energy efficiency in homes and buildings; (ii) lower emission transportation options; (iii) increasing the price on carbon pollution; (iv) supporting the decarbonization of Canadian industry; and (v) building more resilient communities. In addition, the Plan commits to developing Canada's first-ever national adaptation strategy and contains new measures to support Indigenous climate leadership. Two of the more notable policy proposals under the Plan include (i) continued annual increases to the carbon price through to 2030, which will rise at $15 per tonne after 2022 until it reaches $170 in 2030 (under the Pan-Canadian Framework, the carbon price will reach $50 per tonne by 2022), and (ii) the exclusion of solid and gaseous fuels from the scope of the Clean Fuel Standard, which will now cover only liquid fossil fuels. As it relates to the carbon price, the federal government will continue to return the proceeds back to households, such that the majority receive more money back than they pay in provinces where the federal system applies.     

The specific initiatives announced by Environment and Climate Change Canada under each focus area are described below.

Energy Efficiency in Homes and Buildings

• Invest $1.5 billion over three years for green and inclusive community buildings, and require that at least 10% of this funding be allocated to projects serving First Nations, Inuit and Métis communities.
• Provide $2.6 billion over seven years to help homeowners make their homes more energy efficient. This funding will provide grants of up to $5,000, up to one million free EnerGuide assessments, and support to recruit and train EnerGuide auditors.
• Work with the building materials sector and other stakeholders to develop a robust, low-emission building materials supply chain to ensure Canadian, locally-sourced products are available, including low-carbon cement, energy-efficient windows and insulation.
• Continue working with and building on successful provincial and territorial low-income retrofit programs to increase the number of low-income households that benefit from energy retrofits.
• Continue to work with provincial and territorial governments to develop a new model 'retrofit' code for existing buildings, by 2022, with the goal of collaborating with provinces and territories to have this code in place by 2025.
• Conduct Canada's first-ever national infrastructure assessment, starting in 2021, to help identify needs and priorities in the built environment, and undertake long-term planning toward a net-zero emissions future.
• Invest $2 billion in financing commercial and large-scale building retrofits, which will be repaid by energy savings costs. This commitment is part of the CIB's $10 billion Growth Plan.
• Develop a simple, low-cost loan program that integrates and builds on energy audits and grants to finance deeper home energy retrofits for homeowners.

Lower Emission Transportation Options

• Invest an additional $287 million over two years to continue the Incentives for Zero-Emission Vehiclesprogram until March 2022. The program provides a rebate of up to $5,000 on a light-duty zero-emission vehicle.
• Invest an additional $150 million over three years in charging and refueling stations across Canada, as announced in the 2020 Fall Economic Statement.
• Work with partners in the year ahead on supply-side policy options to achieve additional reductions from Canada's light-duty vehicle fleet, including regulations and investments to accelerate and expand the consumer availability of ZEVs in Canada as demand grows.
• Build on previous investments in public transit in the Investing in Canada Infrastructure Program to develop next steps on public transit, including the government's plan to help electrify public transit systems, and provide permanent public transit funding.
• Engage the incoming US Administration on approaches to increase the consumer availability of zero-emission vehicles in both countries, given the integrated nature of the North American auto sector.
• Work to align Canada's Light-Duty Vehicle regulations with the most stringent performance standards in North America post-2025, whether at the US federal or state level.
• Develop a national active transportation strategy, and explore ways to deliver more active transportation options, such as walking trails, cycling paths and other forms of active mobility, which are a complementary tool that can reduce reliance on cars and provide healthy transportation alternatives.
• Include the 100% tax write off for commercial light-duty, medium- and heavy-duty ZEVs.
• Implement Canada's Off-road Compression-Ignition (Mobile and Stationary) and Large Spark-Ignition Engine Emission Regulations to make new equipment and machines used by Canadians less polluting and more fuel-efficient.
• Further improve the efficiency of heavy-duty vehicles standards for post-2025 by aligning with the most stringent standards in North America - whether at the US federal or state level.

In connection with clean electricity, the federal government will:

• Invest an additional $964 million over four years to advance smart renewable energy and grid modernization projects.
• Invest an additional $300 million over five years to advance the government's commitment to ensure rural, remote and Indigenous communities that currently rely on diesel have the opportunity to be powered by clean, reliable energy by 2030.
• Work with provinces and territories to connect parts of Canada that have abundant clean hydroelectricity with parts that are currently more dependent on fossil fuels for electricity generation - including by advancing strategic intertie projects, such as the Atlantic Loop and other regional initiatives. CIB has earmarked $2.5 billion as part of its $10 billion Growth Plan. The government will invest an additional $25 million to support pre-development work.
• Working with provinces, utilities and other partners to ensure that Canada's electricity generation achieves net-zero emissions before 2050.

Increasing the Price on Carbon Pollution

• Continue to put a price on pollution through to 2030, rising at $15 per tonne after 2022, while returning the proceeds back to households such that the majority receive more money back than they pay in provinces where the federal system applies.
• Move from carbon pollution pricing rebate payments being distributed on an annual basis to quarterly, starting as early as 2022.

• Explore the potential of border carbon adjustments, and work with like-minded economies to consider how this approach could fit into Canada's broader strategy to meet climate targets while ensuring a fair environment for businesses.
• Review the standards used to assess provincial systems, also known as the federal "benchmark criteria", and engage with provinces and territories as well as with Indigenous Peoples on these proposals over the coming months.

In the context of the continued increase to the carbon price, the scope of the Clean Fuel Standard has been narrowed to cover only liquid fossil fuels. When the CFS was originally proposed in 2016, it was envisioned that the new measure would cover liquid, gaseous and solid fuels.

Decarbonizing Canadian Industry

• Launch a Net-Zero Challenge for large emitters to support Canadian industries in developing and implementing plans to transition their facilities to net-zero emissions by 2050.
• Make investments to support decarbonization and drive the immediate creation of well-paying, resilient jobs, in complement to the Challenge. This would involve the Strategic Innovation Fund's Net-Zero Accelerator Fund, through an investment of $3 billion over five years. The fund will rapidly expedite decarbonization projects with large emitters, scale-up clean technology and accelerate Canada's industrial transformation across all sectors.
• Use proceeds collected from the Output-Based Pricing System (OBPS) for industry to further support industrial projects to cut emissions and use cleaner technologies and processes.
• Invest $1.5 billion in a Low-carbon and Zero-emissions Fuels Fund to increase the production and use of low-carbon fuels (e.g., hydrogen, biocrude, renewable natural gas and diesel, cellulosic ethanol) in a manner that complements federal carbon pollution pricing, regulatory efforts and other federal programming.
• Introduce Canada's Hydrogen Strategy, which sets out a path for integrating low emitting hydrogen across the Canadian economy, before the end of the year.
• Propose to strengthen Canada's approach to reducing methane emissions from the oil and gas sector by establishing new targets and associated regulations for 2030 and 2035, based on international best practices. The design of the amended federal regulations to achieve additional reductions in 2030 and 2035 will be determined through consultations with provinces, territories, the oil and gas industry, and civil society.
• Invest $165.7 million over seven years to support the agriculture sector in developing transformative clean technologies and help farmers adopt commercially available clean technology.
• Set a national emission reduction target of 30% below 2020 levels from fertilizers and work with fertilizer manufacturers, farmers, provinces and territories, to develop an approach to meet it.
• Continue to support Sustainable Development Technology Canada with an additional $750 million over five years. This would support start-ups and scale-up companies to enable pre-commercial clean technologies to successfully demonstrate feasibility as well as support early commercialization efforts.
• Leverage the Government of Canada's purchasing power to support emerging clean technologies across Canada's economic sectors, such as technologies to reduce emissions in federal buildings and reduce embodied carbon in construction materials. This would be part of the updated greening government strategy. 
• Work with small businesses to get their feedback on all potential ways to further support them in taking action to reduce emissions, including through rebates, targeted investments, and other supports.
• Continue helping Canadian businesses navigate available federal resources and measures, understand their environmental outcomes, while exploring opportunities to integrate into supply chains of larger private and public purchasers, and expand their reach in Canadian and global markets.
• Develop new federal regulations to increase the number of landfills that collect and treat methane, and ensure that landfills already operating these systems make improvements to collect all they can.

Building More Resilient Communities

• Invest up to $3.16 billion over 10 years, to partner with provinces, territories, non government organizations, Indigenous communities, municipalities, private landowners, and others to plant two billion trees.
• Invest up to $631 million over 10 years to work with provinces, territories, conservation organizations, Indigenous communities, private landowners, and others to restore and enhance wetlands, peatlands, grasslands and agricultural lands to boost carbon sequestration.
• Provide $98.4 million over 10 years to establish a new Natural Climate Solutions for Agriculture Fund.
• Continue to support partnerships with Indigenous communities across the country through the establishment of new Indigenous Protected and Conserved Areas and Indigenous Guardians programs.

As outlined in the Fall Economic Statement, every dollar spent in the post-pandemic stimulus plan - which amounts to 3 to 4% of GDP - will be assessed for its effectiveness in furthering the goals of the Plan. The Plan also commits to applying a climate lens to integrate climate considerations throughout government decision-making.

Looking Ahead

As the federal government continues to navigate the COVID-19 pandemic landscape, the Plan is intended to be forward-looking. Specifically, the federal government sees the need for accelerated climate action as integral to incorporating sustainability into a diverse range of socio-economic sectors, and sparking innovation as we transition to a lower-carbon economy. Moving forward, the Plan provides the basis for consultations by the federal government with provinces and territories, Indigenous partners, and industry to articulate the activities needed to implement the Plan. As Minister Wilkinson notes in the Plan: "This plan is not an end point. Reaching the goal will require a sustained effort for years and decades to come."

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