Insights & Analysis

April 13, 2021

Seizing Alberta’s outsized opportunity to reduce emissions

In the early 20th century, Henry Ford revolutionized the mass production of automobiles by creating the world’s first moving assembly line for vehicle manufacturing. Ford wasn’t the first person to envision a future with mass uptake in consumer automobile use, but his invention of the moving assembly line was the first legitimate pathway towards realizing that vision.

Much like Ford prior to his invention of the moving assembly line, Canada envisions achieving a low-carbon future while creating economic growth. This vision is anchored by Canada’s emissions reduction commitments in alignment with the Paris Agreement. However, Canada is still in the process of charting a pathway to achieve this vision. In a sense, the federal government is figuring out how to mobilize the private sector to develop its own “moving assembly line” to achieve meaningful GHG reductions. But achieving these goals will require addressing the most significant sources of emissions at speed and scale.

It may come as a surprise to many, but Alberta is the natural fit for outsized federal supports to reduce emissions, especially if Canada’s 2030 Paris Agreement commitments are to be met.

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Canada’s Paris Agreement commitments

Canada has set ambitious GHG reduction targets for both 2030 and 2050, as part of its Paris Climate Agreement commitments:

  • By 2030, Canada will decrease its emissions by 30% below its 2005 emissions levels; and
  • By 2050, Canada will achieve net-zero emissions.

Achieving 2050 net-zero ambitions will require a long-term policy vision that creates the right market signals and spurs investments in research and development, clean tech, and alternative fuels in a technology-agnostic manner.

Reaching 2030, however, is an entirely different challenge. The federal government has signaled its goal is not just to meet but to exceed its target, but there is very little time between now and then. Without decisive and rapid action, those nine years will disappear in the blink of an eye and Canada will have once again over-promised and under-delivered.

The federal government’s recently released climate plan—A Healthy Environment and Healthy Economy (HEHE)—projects that, in order to exceed 2030 emission reduction targets, significant industrial GHG reductions are necessary. According to projections in that plan, of all the national emissions reductions needed between 2018 and 2030, 28% are expected to come from the oil and gas sector, 27% from electricity generation, and another 9% from heavy industry—that’s a total of 63% of Canada’s 2030 emissions cuts expected to come from these three sectors alone. (Source: own calculations based on HEHE, numbers may not sum to the total due to rounding)

The scope and scale of Alberta’s emissions

What, then, makes Alberta an attractive place to invest in reducing emissions? For starters, Alberta immediately jumps out as a disproportionate contributor to Canada’s total GHG emissions. In 2018, Alberta produced 37% of Canada’s total emissions despite the province only having 11.6% of the population. Albertans contribute approximately 63.4 tonnes of emissions per capita, whereas Canadians on average emit 19.7 tonnes per capita.

On the surface, these are alarming numbers, but they are not the result of Albertans having a particular disregard for the environment. Individual Albertans are not more rampant polluters than other Canadians. Rather, our higher emissions are the direct result of Alberta’s industrial economic base. By the fate of geography, Alberta is a workshop for Canada and the world; the province produces emissions that are really on behalf of others.

Alberta is Canada’s natural home to many energy-intensive and heavily emitting industries, most predominantly oil and gas. Because Canada’s oil and gas production is heavily concentrated in this province, so too are the associated emissions. Approximately 72% of oil and gas emissions occur in this province, and Alberta’s oil and gas industry contributes approximately 19% of Canada’s total emissions. As stated above, this does not signal Albertans’ disregard for the environment. It is a direct function of resource concentration. Were those fossil fuel resources more evenly spread across the country, emissions would be as well.

Alberta’s geography also contributes to higher emissions in electricity generation. Unlike in provinces such as British Columbia, Manitoba, and Quebec, Alberta does not have the geography or the geology conducive to developing enough hydroelectric capacity to provide low carbon baseload power. Instead, the province has had to rely on coal and natural gas to play that role.

As a result of this industrial economic base, Alberta’s emissions profile looks a lot worse than Canada’s other provinces. Industrial emissions—those created by the oil and gas industry, electricity generation, and heavy industry—make up 70.1% of Alberta’s total emissions, compared to just 32% across the rest of the country.

In other words, Alberta’s industrial emissions as a percentage of their own total provincial emissions is almost 2.2 times greater than the average in the other provinces. On top of that, Alberta produces more industrial emissions than all the other provinces combined.

How is the situation improving?

However, Alberta’s businesses are making notable steps to reduce their emissions. Coal-fired electricity generation will be phased out by 2023, representing a deep emissions cut to what once provided Alberta with 55% of its power generation. Add to that the potential to upgrade remaining natural gas power facilities with carbon capture and the recent reductions in the cost of renewable power technology, these changes could all result in very significant emissions reductions that contribute to a net-zero grid. Nevertheless, Alberta’s legacy power generation infrastructure is reliant on fossil fuel combustion, and the tremendous demand for electricity from heavy industry, the oil and gas sector, and residential and commercial buildings produces large volumes of emissions where in other provinces it would not.

Furthermore, Alberta’s oil and gas sector has made significant investments in improving the emissions intensity of their operations in recent decades. For example, since 2011 the GHG intensity of oil sands crude production has decreased by approximately 20%. Alberta energy companies are also collaborating to address clean tech investment, innovation, commercialization, and knowledge gap challenges through world-leading organizations such as COSIA and CRIN.

But despite this ongoing commitment to reducing emissions, more work needs to be done if the federal government is to meet its climate objectives without causing significant economic fallout.

So…what now?

The federal government’s climate plan projects that the oil and gas, electricity, and heavy industry sectors will each require deep absolute emissions cuts if Canada is to exceed its 2030 climate targets. If the federal government’s projected emissions cuts for these three sectors come to fruition, and if those reductions are distributed in proportion to where the emissions actually take place, it implies the following emissions reductions in Alberta between 2018 and 2030:

  • Oil and Gas sector – 28% of absolute emissions, or 39.5 Mt
  • Electricity sector – 82% of absolute emissions, or 27.1 Mt
  • Heavy Industry sector – 22% of absolute emissions, or 4.2 Mt

Source: BCA own calculations, based on ECCC’s climate plan, 2020, and National Inventory Report, 2018.

In other words, 57% of Canada’s industrial emissions reductions will need to come from Alberta if the federal government is to exceed its 2030 goal.

This scale of emissions abatement is massive. For it to succeed without massive devastation to the Alberta economy will require recognizing that the policies needed to reduce Alberta’s emissions will not be the same as those that work best in other provinces. It will require an unprecedented influx of federal financial and tax supports for the kind of emissions reduction projects that make sense in this province—projects like carbon capture (CCUS), electrification, biofuels, small modular nuclear reactors (SMR), and hydrogen. These will build on the progress made to date and create the opportunity to make Canada, and the whole world, cleaner.

Imagining the “moving assembly line” for Canada’s Paris Commitments

Henry Ford could have attempted to achieve his vision for the mass adoption of automobiles by making small investments here and there, but that wouldn’t have led to the speed and scale of Model T production necessary to secure his vision. A moving assembly line was necessary.

Canada has become adept at casting a vision for bold emissions reduction targets but has yet to commit the resources necessary to kickstart the process that will realize those targets. To reach its 2030 goal, Canada’s industrial emissions need to be reduced with speed and scale. Given its present contribution both to those emissions and to the Canadian economy, Alberta is the obvious target for immediate climate policy and fiscal supports.

With the proper regulatory structures in place, adequate incentives to support strategic investments in industrial clean tech, and a willingness to place big bets, the federal government can help empower the private sector to mobilize a “moving assembly line” that can quickly scale up emissions reductions in industrial sectors and meet their Paris climate commitments.

If Canada is serious about reaching climate targets in 2030 and beyond while positioning the nation for economic growth in a low-carbon economy, Alberta’s industry provides an outsized opportunity for deep emissions reductions and economic growth.

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