The Liberals Release their Highly Anticipated Plan for Canada to Reach its Climate Targets

Environment and Climate Change Minister Steven Guilbeault tabled the government’s 2030 Emissions Reduction Plan. A mix of new and previously made announcements, the Plan includes $9.1 billion in new spending. It outlines specific actions, policies, and programs intended to put Canada on path to reach its emissions reduction target of 40-45% below 2005 levels by 2030, and net-zero emissions by 2050. This is the government’s first Emissions Reduction Plan under the Canadian Net Zero Emissions Accountability Act, which was passed just prior to the 2021 election.

The government estimates that in the pathway to 2030, emissions from electricity can be cut by 77%, heavy industry by 32%, waste (including landfills) can be cut by 43%, and emissions from buildings by 42%. Progress reports for the Plan will be released in 2023, 2025, and 2027 and additional targets and plans will be developed for 2035 through to 2050, with the next report expected in December 2022.

Overview

The government’s much-anticipated Plan is the blueprint for turning Liberal climate ambition into results, and it is ambitious. Targeted at sectors across the economy that are by now familiar facets of the government’s climate strategy, it includes a significant new GHG emissions-reduction target for the oil and gas of 42% below 2019 levels by 2030 as well as increased Zero Emission Vehicles (ZEVs) sales targets.

The Plan also introduces substantial new spending on building retrofits with over $450 million in additional funds allocated to the Canada Greener Homes Loan program. It also includes $780 million for nature-based solutions to conserve and restore Canada’s wetlands and grasslands, with the intent of storing carbon. The government’s momentum on electrification in this mandate will be a key part of meeting its climate targets, particularly as work on another major pillar, cleaner fuels, is already well underway with a final Clean Fuel Standard regulation set to be released soon. The Plan allocates $850 million for action on electrification, including grid modernization, renewable energy projects, and clean electricity projects.

While the release of the first comprehensive roadmap to meeting its climate targets is a momentous occasion for this climate-focused government, today’s announcement took place against the fraught backdrop of rising inflation, high gas prices, supply chain challenges, a significant carbon tax increase on April 1^st, and the government’s heightened focus on global energy security. As we recently noted, the Russian invasion of Ukraine prompted a sea change in the Government of Canada’s level of concern about securing energy export and development opportunities.

The shift to a more active government interest in energy exports played out in a recent announcement by Natural Resources Minister Jonathan Wilkinson that Canada will export an additional 300,000 barrels of oil and natural gas daily to Europe to offset the drop in Russian supply due to international sanctions. Wilkinson further stated that Canada is “very open to the discussion” about what else it can do to help.

While the Plan sets an ambitious target for the O&G sector – with a cap on industry emissions still to come – some producers in Western Canada are likely taking some comfort in the government’s acknowledgement of the International Energy Agency’s recent statement that “continued oil and gas use globally… means not only diversifying our energy mix, but also offering lower carbon oil and gas to the world.”

In a speech today highlighting the Plan, Prime Minister Trudeau called it the “boldest and most specific step yet. It’s ambitious and it’s achievable.” In the same remarks, Trudeau put direct pressure on the O&G sector, stating “big oil lobbyists have had their time on the field… it’s now up to workers and engineers to bring emissions down.”

However, the Liberals will need to continue to work to find the right balance between the hard work ahead to meet ambitious climate targets and the economic pressures on the minds of Canadian consumers. For example, the Official Opposition Conservative Party and three provincial governments (Alberta, Saskatchewan, and Manitoba) are requesting the government delay its decision to increase the carbon tax by $50 per ton, which is due to be implemented on April 1^st, due to inflationary pressures already impacting Canadians.

Opposition Reaction

While a Supply and Confidence Agreement was announced last week between the Liberals and New Democrats, the NDP criticized the government’s Emission Reduction Plan. In a news release, the NDP stated that the Plan “clearly doesn’t meet the urgency of the crisis” and “for the past 6 years, the Liberals have been headed in the wrong direction.” Environment and Climate Change Critic Laurel Collins highlighted that reducing emissions by only 40% is inadequate and that far more is needed to address the climate crisis, including phasing out fossil fuel subsidies.

Notably, climate policy is not a core part of the Supply and Confidence Agreement. In an interview, Party Leader Jagmeet Singh said he intended to use the Agreement to pressure the Liberals to include measures like ending “fossil fuel subsidies” and a plan for energy retrofits for low-income families. By criticizing the Liberal plan, the NDP continues to position itself as a climate champion and ensure its continued role as an opposition party is clearly communicated.

The Bloc Québécois took an even harder line than the NDP, predicting the Plan would cause the government to fail to meet its own climate targets and accusing the Liberals of “supporting the oil and gas sector” instead of the energy transition.

As for the Conservatives, reaction has been fairly muted. As of writing, interim Conservative Party leader Candice Bergen, nor Shadow Minister Kyle Seeback had issued a formal statement. Seeback did suggest in a scrum that the Conservatives are “highly skeptical” and “deeply concerned” about the Plan, arguing that the government has not done enough analysis on what impact it may have on the economy and on taxpayers. He also tied back recent public reports by the Parliamentary Budget Officer and others on the impact of carbon taxes and other regulatory measures, especially on farmers around fertilizer use, suggesting the plan could lead to higher food prices.

Conservative leadership candidate Pierre Poilievre issued a tweet suggesting that the Plan “increase(s) dirty overseas oil production, by shutting down Canada’s responsible resource development” and that his “plan is the opposite: end oil imports from polluting dictatorships.”

Full List of Commitments by Sector:

Oil & Gas

• The Plan sets a 42% reduction in GHG emissions from 2019 levels by 2030. This figure is intended to serve as a guide as the federal government engages with industry, Indigenous groups, the public, and provinces to define and set a cap on O&G emissions
• Also highlighted is a 75% reduction in methane emissions by 2030

Transportation

• $400 million for ZEV charging stations and $500 million from the Canada Infrastructure Bank (CIB) for ZEV charging and refueling infrastructure
• $1.7 billion to extend the Incentives for ZEVs (iZEV) program, intended to make new electric light-duty vehicles more affordable and easier to purchase

ZEV Sales Mandates

• 20% of new light-duty vehicle sales to be ZEVs by 2026, and a goal of reaching 60% ZEV sales by 2030 and 100% by 2035
• 35% of medium- and heavy-duty vehicles (MHDV) sales of ZEVs by 2030 and 100% of certain subsets of MHDV sales by 2040, based on a feasibility study.
  • Exploring interim targets for the mid-2020s

Homes & Buildings

• Developing the $150-million Canada Green Buildings Strategy
• An additional $458.5 million for the Canada Greener Homes Loan program
• New policy, programs, incentives, and standards to drive retrofits of the existing building stock and new construction to stricter zero-carbon standards

Communities

• $2.2-billion renewal of the Low Carbon Economy Fund
• A new $180-million Indigenous Leadership Fund
• $25 million for Regional Strategic Initiatives

Electricity Infrastructure

• Establish a Pan-Canadian Grid Council representing provinces and provincial utilities to promote investments in new renewable electricity generation and retrofitting and fuel-switching existing power plants and buildings
• An additional $600 million for the Smart Renewables and Electrification Pathways Program for grid modernization and renewable energy projects
• $250 million to support predevelopment work for large clean electricity projects, in collaboration with provinces

Industry

• Developing a carbon capture, utilization, and storage (CCUS) strategy and introducing a tax credit to incentivize the development and adoption of the technology
• Allocating $194 million to expand the Industrial Energy Management System to support ISO 50001 certification, energy managers, cohort-based training, audits, and energy efficient-focused retrofits for small-to-moderate projects

Agriculture & Nature-Based Climate Solutions

• An additional $780 million for the Nature Smart Climate Solutions Fund, which conserves and restores Canada’s wetlands and grasslands with the intent of storing carbon
• Developing protocols under the federal GHG Offset System to stimulate demand for other projects that reduce GHG emissions, sequester carbon, and generate economic opportunities, including for projects that focus on nature-based climate solutions
• $470 million in the Agricultural Climate Solutions: On-Farm Climate Action Fund to help farmers adopt sustainable practices
• $330 million for the Agricultural Clean Technology Program, which helps farmers purchase energy-efficient equipment
• $100 million for research, knowledge transfer, and developing metrics to support the agriculture sector’s role in the net-zero transition

Emissions Pricing

• The Liberal government reaffirmed its commitment to exploring measures that guarantee a price on carbon emissions, including:
  • Investment approaches like carbon contracts to de-risk against emission price changes
  • Legislative approaches to support firm prices on emissions