Canada's energy transition – a shift toward cleaner, more sustainable energy sources – continues to accelerate through significant policy and regulatory actions. Several key initiatives were introduced or developed in 2024, including emissions caps for the oil and gas sector, advancements in nuclear and hydrogen strategies and updated clean electricity regulations. This article highlights the most important developments from the past year, offering insight into their implications for Canada's journey to net-zero emissions.
1. PROPOSED OIL AND GAS SECTOR GREENHOUSE GAS EMISSIONS CAP REGULATIONS
On November 4, 2024, the Government of Canada released its proposed Oil and Gas Sector Greenhouse Gas Emission Cap Regulations (the "Regulations"), establishing a cap-and-trade system that will apply to a wide range of industrial activities within the oil and gas sector, including onshore and offshore oil and gas production, oil sands production and upgrading, natural gas production and processing and liquefied natural gas production. The Federal government's cap-and-trade system will set a maximum annual emissions threshold and issue free allowances equal to the cap, with regulations coming into force on January 1, 2025. The initial cap, based on 2026 emissions, is expected to reduce emissions by 27% for 2030–2032, representing a 35% decrease from 2019 emission levels. For more information on the Regulations, please refer to our in-depth analysis here. In light of recent federal political developments, we note that the approval process for regulations can continue despite the proroguing of Parliament until March 24, 2025. However, it is uncertain at this time whether the Regulations will ultimately be enacted into law.
2. SMALL MODULAR REACTORS: THE FUTURE OF NUCLEAR ENERGY INNOVATION
Nuclear energy reached another pivotal milestone at 29th Conference of the Parties ("COP 29") to the United Nations Framework Convention on Climate Change in 2024, where six more countries endorsed nuclear power as essential for achieving net-zero emissions and committed to tripling nuclear capacity by 2050, bringing the total number of nations endorsing this initiative to 31. Advanced technologies like small modular reactors ("SMRs") are central to this expansion, and Canada is leading with the GE Hitachi BWRX-300 SMR project at the Darlington Nuclear Generating Station in Ontario, set to be the first commercial SMR construction in North America by 2025 and operational by 2028. The Darlington Nuclear Generating Station, already a major facility, is being expanded by Ontario Power Generation, which plans to add three more BWRX-300 reactors, further cementing its role in Canada's clean energy strategy.
3. KEY UPDATES TO CANADA'S HYDROGEN STRATEGY
In May 2024, the Government of Canada published a progress report highlighting numerous developments related to the Hydrogen Strategy for Canada, including the introduction of investment tax credits for hydrogen production, clean technology and manufacturing methods and carbon capture, utilization and storage ("CCUS"). Canada has also implemented various policies and programs to promote low-carbon hydrogen production and use, focusing on tax credits like the Clean Hydrogen Investment Tax Credit and broader initiatives such as the Clean Fuels Fund and Strategic Innovation Fund. These measures provide significant financial incentives, including up to 40% credit for eligible projects, and support infrastructure development through investments in hydrogen refuelling, electrolysis and zero-emission transportation. Regulatory frameworks like the Clean Fuel Regulations, and carbon pollution pricing further incentivize the adoption of lowcarbon hydrogen across industries. For more information on the Clean Hydrogen Investment Tax Credit, please refer to our in-depth analysis here.
4. ALBERTA ANNOUNCES CARBON CAPTURE INCENTIVE PROGRAM
On April 3, 2024, the Government of Alberta announced the Alberta Carbon Capture Incentive Program, which aims to accelerate the development of CCUS infrastructure in Alberta, providing $3.2 to $5.3 billion in support from 2024 to 2035 (the "Program"). The Program also complements Federal government programs like the CCUS Investment Tax Credit and offers a 12% grant for new CCUS capital costs, paid in installments over three years. Eligibility is limited to Alberta-based projects involved in carbon capture, utilization or storage, excluding those already funded under other Alberta programs, with retroactive cost coverage starting January 1, 2022. Funding covers capital costs for approved equipment and modifications, but excludes expenses like pilot projects, engineering studies or dualpurpose equipment unless further supports are developed. For more information on the Program, please refer to our indepth analysis here.
5. FEDERAL GOVERNMENT ENACTS FINALIZED CLEAN ELECTRICITY REGULATIONS
On December 18, 2024, the Government of Canada enacted the finalized Clean Electricity Regulations ("CERs"). The CERs are the culmination of nearly three years of feedback from provinces, territories, Indigenous communities and industry. Initially released in August 2023, the draft CERs received significant pushback, particularly regarding the prohibition against electricity generation units emitting more than an annual average of 30 tonnes of carbon emissions per GWh (t/GWh) of electricity generated. In response, the Federal government updated the proposed CERs in February 2024, introducing key changes such as unit-specific annual emission limits and the possibility of exceeding these limits through the remittance of offset credits.
Notably, the now-finalized CERs push back the date to decarbonize electricity grids from 2035 to 2050. The CERs aim to achieve net-zero emissions by 2050, with interim emission intensity limits set for the period from 2035 to 2049. The CERs also permit the exclusion of emissions associated with the combustion of biomass and renewable natural gas, as well as emissions captured by carbon capture and storage projects and emissions generated during an emergency circumstance. For more information on the CERs, please refer to our in-depth analysis here.
6. FEDERAL GOVERNMENT INTRODUCES 100% TARIFF ON CHINESE ELECTRIC VEHICLES
On October 1, 2024, the Government of Canada implemented a 100% tariff (the "Tariff") on Chinese-made electric vehicles ("EVs"). This measure applies to electric and certain hybrid passenger automobiles, trucks, buses and delivery vans. and aims to bolster Canada's domestic EV industry and support the country's energy transition.
Acknowledging the potential challenges for businesses reliant on Chinese EVs and components, the Federal government has also introduced a tariff remission framework. This process allows Canadian businesses to apply for exemptions if they can demonstrate that the Tariff adversely affects their operations or that alternative suppliers are not readily available.
This push for domestic production aligns with broader regulatory changes in Canada, including the Regulations Amending the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations, which mandate that a specified percentage of manufacturers' and importers' fleets of new vehicles sold in Canada must be zero-emission vehicles ("ZEV"). The ZEV sales targets will take effect with the 2026 model year and progressively increase until achieving full compliance by 2035, when all new vehicles sold in Canada must be zero-emission.
This article appeared in ESG and Sustainability: Key Trends in Canada
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