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Appendix A: Domestic Climate Policy Assumption Overview


 

The “Scenarios and Assumptions” chapter discusses the domestic climate policy assumptions included in the Evolving Energy System Scenario (Evolving Scenario) and the Reference Energy System Scenario (Reference Scenario). The Reference Scenario includes only policies currently in place. The Evolving Scenario assumes greater policy action over time, at roughly the same pace as historical policy implementation. It does this by assuming a hypothetical suite of policy initiatives that build upon current policies. Table 1 describes the criteria for inclusion of current policies, and assumed future policies. Table 2 provides a brief67 overview of several key current policies. Table 3 provides an overview of future policies assumed in the Evolving Scenario.

Table 1: Policy Inclusion Overview
Criteria for Inclusion of Current Policies Included in Reference and Evolving Scenarios Considerations for Future Policy Assumption Included in the Evolving Scenario Only

The Reference Scenario includes only current policies. In the Evolving Scenario, current policies provide a baseline that is built upon over the projection. In order to determine whether a policy was included in the analysis, the following criteria were applied:

  • The policy was publically announced prior to 1 August 2020.
  • Sufficient details exist to model the policy.
  • Goals and targets, including Canada’s international climate targets, are not explicitly modelled. Rather, policies that are announced, and in place, to address those targets are included in the modelling and analysis.

The Evolving Scenario includes a hypothetical suite of future policy developments. These policy assumptions take into account several considerations:

  • Announced policies that are currently in the development stage (such as those included in Environment and Climate Change Canada’s (ECCC) “With Additional Measures” GHG scenarios) are included to the extent possible. Generally their inclusion requires simplifying assumptions, as final regulations are not available and there is a lack of details sufficient to model the policies. The Evolving Scenario should not be taken as analysis of any individual policy or program.
  • The types of future policies assumed have historical precedence in previous climate policies implemented at various levels of government.
  • Evolving Scenario policy assumptions gradually strengthen over time, rather than assuming large clusters of policy development at a given time.
Table 2: Key Current Policies Included in the Reference and Evolving Scenarios
POLICY DESCRIPTION
Pan-Canadian Framework on Clean Growth and Climate Change

In December 2016, Canada’s First Ministers released the Pan-Canadian Framework on Clean Growth and Climate Change (Pan-Canadian Framework), which outlined the actions that will contribute to meeting, or exceeding, Canada’s 2030 climate change target of a 30% reduction below 2005 GHG emission levels. Pillars of the Pan-Canadian Framework include:

  1. pricing carbon pollution
  2. complementary actions to reduce emissions
  3. adaptation and climate resilience
  4. and clean technology, innovation, and jobs.

The framework describes many new actions associated with the four pillars. Several elements of the framework are in place and qualify as a current policy, as described in this table.

Vehicle Emission Standards

Light Duty Vehicles

In 2014, the federal government adopted phase 2 of the light-duty vehicle GHG regulations which progressively increased GHG standards. Given these standards are harmonized with the U.S., the recent U.S. rollback of standards starting with model year 2021 is included.

Heavy Duty Vehicles

Phase 2 heavy duty vehicle standards, which increase stringency to model year 2027, are included. The regulation reduces GHG emissions from on-road heavy-duty vehicles through emission standards applicable to manufacturers and importers of new heavy-duty vehicles, engines and trailers.

Pricing Carbon Pollution

EF2020 includes provincial and territorial carbon pricing systems, as well as the Federal Carbon Pricing Backstop (Backstop). Implementation of carbon pricing systems currently varies across the country, and details on each region’s approach are available from Environment and Climate Change Canada. Most provinces have an end-user carbon price at similar levels to the Backstop, which is C$30 per tonne in 2020, increasing to $40/tonne in 2021 and $50/tonne in 2022, where it remains for the remainder of the projection.

For provinces such as Quebec and Nova Scotia that have adopted a cap-and-trade program, the price of carbon is market-based, determined by the supply and demand of emission permits. Like crude oil and natural gas prices, EF2020 makes simplifying assumptions for the future outlook of carbon pricing. EF2020 assumes the carbon price in these provinces remains below the Federal Backstop in the early 2020s, before converging to $50 per tonne in 2025 and remaining at that level for the remainder of the outlook.

Many provinces, as well as the Federal Backstop, include specific programs for large industrial emitters. For provinces where these systems are fully detailed and implemented, they are included in EF2020 as current policies. Examples include:

  • British Columbia’s CleanBC Program for Industry, which includes both the CleanBC Industrial Incentive Program and the CleanBC Industry Fund.
  • Alberta announced plans to replace its existing carbon pricing program for large industrial emitters, with the Technology Innovation and Emissions Reduction (TIER) program. Large emitters must improve their emissions intensity relative to their historical levels. Emitters pay a carbon price if they fail to meet the required emissions intensity reductions, and can earn credits if they surpass their required reductions.
  • In 2018, Saskatchewan enacted its own regulation for large industrial emitters: Management and Reduction of Greenhouse Gases Act - Large Emitters Intensity Standards. Like Alberta, sector benchmarks are set from historical emission intensity levels. Saskatchewan is also developing its own emissions offset system, which is expected to come into force in 2020.
  • The Federal government recently approved New Brunswick’s industrial output based pricing system.
  • The Newfoundland and Labrador government passed legislation in June 2016 that enables the regulation of GHG emissions from industrial facilities in the province: Management of Greenhouse Gas Act. The plan will include a form of carbon pricing for industrial emitters, the revenues of which will support funding of emission-reducing technology. Large industrial emitters can choose between a historical facility-specific benchmark or a larger industry-wide established benchmark.
  • Created under Ontario’s Emission Performance Standards Regulation, the province’s Emission Performance\Standards program applies to large emitters, with the option for smaller emitters to opt in.
Canada-U.S. joint action to reduce methane emissions from the oil and gas sector

In March 2016, Canada and the U.S. announced joint action to reduce methane emissions from the oil and gas sector by 40 to 45% below 2012 levels by 2025.

In May 2017, the federal government released a technical backgrounder detailing the proposed regulations to deliver on this commitment. The regulations will apply to oil and gas facilities responsible for the extraction, production and processing, and transportation of crude oil and natural gas, including pipelines. The first federal requirements come into force in 2020, with the rest of the requirements coming into force in 2023.

Federal phase-out of traditional coal-fired generation by 2030

In November 2016, the federal government announced it is amending the regulations applicable to coal-fired electricity generation to ensure that all traditional coal-fired units are phased out by no later than 2030. Alberta, Saskatchewan, New Brunswick, and Nova Scotia have coal-fired power plants that are impacted by these regulations. Prior to this announcement, Alberta had already committed to phasing out pollution from coal-fired plants by 2030.

Renewable Fuel Regulations

There are various renewable fuel blending requirements in place across Canada.

Gasoline and Diesel

On average, federal regulations require 5% ethanol blending in gasoline and 2% biodiesel blending in diesel. Various provinces have their own renewable fuel regulations that go beyond these limits. Recent provincial regulations include:

  • Manitoba Biofuel Standard: In late 2019, Manitoba announced they would increase their minimum ethanol content to 10% and biodiesel to 5% in 2020.
  • Ontario Greener Gasoline Regulation: In 2020, gasoline suppliers will be required to maintain an average of 10% ethanol in gasoline.
  • British Columbia’s CleanBC plan includes extending its low carbon fuel standard to reduce the carbon intensity of transportation fuels by 20% by 2030.

Natural Gas

In recent years, Quebec and British Columbia have established regulations for consumed natural gas to contain a minimum content of renewable natural gas.

  • Quebec Renewable Gas Mandate: Quebec recently mandated that all consumed natural gas contain a minimum of 5% renewable natural gas by 2025.
  • British Columbia’s CleanBC plan includes a renewable natural gas standard of 15% by 2030.

Clean Fuel Standard

A federal Clean Fuel Standard is currently under development, which aims to reduce the emission intensity of liquid, gaseous, and solid fuels through increased use of low carbon fuels, energy sources, and technologies. In June 2019, ECCC released the Proposed Regulatory Approach for the Clean Fuel Standard. Proposed regulations for the liquid fuel class of the Clean Fuel Standard are expected to be published for consultation in fall 2020. Regulations for gaseous and solid fuel classes will follow.

The Clean Fuel Standard is not included in the EF2020 scenarios, as regulations are still in development for all fuel streams. The Evolving Scenario includes a hypothetical emission intensity standard that reflects preliminary details of the Clean Fuel Standard where available.

Energy Efficiency Programs and Regulations

Federal

  • In June 2019, Amendment 16 to the Energy Efficiency Regulations was published.
  • Initiative to green the federal government: The federal government announced in November 2016 that it would act to reduce its own GHG emissions. This includes initiatives to reduce energy consumption in government buildings through repairs and retrofits, and investments to shift the government vehicle fleet to electric and hybrid vehicles.
  • Other various energy efficiency, innovation, or emissions reduction programs. Some examples include Natural Resource Canada’s Energy Innovation Program, Energy Manager Program, and the Low Carbon Economy Fund.

Various Provincial

  • Saskatchewan - Energy Efficiency Standards for Buildings: In 2019, Saskatchewan adopted the National Building Code of Canada (for residential and small commercial), and the National Energy Code of Canada (for large buildings).
  • Efficiency Manitoba Act: Manitoba recently established Efficiency Manitoba, a new crown corporation whose sole purpose is to ensure Manitoba reaches its goal of saving 22.5% of domestic electricity demand, and 11.25% of domestic natural gas demand over the next 15 years. When fully established, Efficiency Manitoba will take over the role of providing consumers with rebates, other incentives, and education, which is currently provided by Manitoba Hydro. Current rebates and incentives provided by Manitoba Hydro and/or Efficiency Manitoba are included in the EF2020 Scenarios.
  • In 2019, Ontario amended its building codes to align with the 2015 National Building Codes.
  • Ontario’s current Demand Side Management Framework is set to expire at the end of 2020. The Evolving Scenario assumes a new framework will come into effect.
  • Quebec currently offers various rebates and incentives through its Chauffez Vert Program intended to increase the adoption of energy efficient appliances. New Brunswick - Provincial Energy Retrofit and Renewable Energy Program: This program provides various rebates for purchasing more energy efficient appliances.
  • Nova Scotia: EfficiencyNS offers various rebates for energy efficient appliances, such as heat pumps, biomass heating, solar systems, and water heating.
  • Newfoundland and Labrador – Energy Efficiency Programs: These programs include a Home Energy Savings Program, a Heat Pump Rebate Program, and Commercial sector rebates.
  • Prince Edward Island – EfficiencyPEI Rebates: EfficiencyPEI offers various rebates on energy efficient appliances, such as heat pumps, solar systems, biomass heating, and fuel efficient furnaces.
  • Yukon, Nunavut, and Northwest Territories – Incentives and Rebates: All three territories offer incentives and rebates for improving energy efficiency.
Northern REACHE Program

In 2016, the Federal Government implemented the Northern Responsible Energy Approach. This program intends to reduce diesel use for electricity and heat.

Support for Electric Vehicles

Many provinces have policies and initiatives to support low and zero emission vehicles (ZEV). This includes Quebec’s ZEV mandate, as well as British Columbia’s Zero-Emission Vehicles Act.

Federal action includes subsidies for electric vehicles, as well as support for charging infrastructure through the zero emission vehicle infrastructure program. These initiatives are included as current policies.

Renewable Electricity Generation

Many utilities, and provincial and territorial governments, provide support for increasing levels of renewable generation. EF2020 electricity capacity expansion outlooks generally align to province and territory utility, government, and system operator expansion plans and expectations in the near-to-medium term.

Table 3: Overview of Future Policies Assumed in the Evolving Scenario
POLICY DESCRIPTION
Rising Carbon Price

The Evolving Scenario assumes carbon prices continue to rise beyond 2022. The price rises to 2019 CDN $60 in 2030, $75 in 2040, and $125 by 2050. Currently, carbon price systems across Canada are diverse. The increasing price in the Evolving Scenario should be taken as a hypothetical increase. It should not be taken as analysis of any particular carbon pricing scheme.

Carbon pricing revenue is redistributed through the economy. Credits for large emitters are reduced over the projection period. On average, emitters from large energy-intensive trade-exposed sectors pay 50% of carbon costs in 2040 and 75% in 2050.

Low Carbon Fuel Standard/Clean Fuel Standard

The Evolving Scenario includes a country-wide low carbon or clean fuel standard aimed at reducing the lifecycle emission intensity of fuels. Targets and structure are generally consistent with the approach outlined in the proposed Clean Fuel Standard’s Proposed Regulatory Approach for Liquids. It is important to note that the Clean Fuel Standards are not final, and additional information would be necessary to model the policy. As such, EF2020 projections should not be taken as analysis of the Clean Fuel Standard, or any other single policy initiative. Further, the Clean Fuel Standard is only proposed to 2030. In the Evolving Scenario we extrapolate reductions beyond 2030, which again should be taken as hypothetical.

Liquid Fuel Class

  • Target: Average emission intensity is reduced 10% by 2030, 20% by 2040, and 30% by 2050 compared to fossil fuel baseline.
  • Per the Clean Fuel Standard proposed regulatory approach, lifecycle emission intensity from oil products (gasoline, diesel, jet fuel, etc.) will be reduced approximately 13% by 2030. The Evolving Scenario targets an average 10% incremental reduction to 2030 and extrapolates this reduction linearly over the next two decades. Emission intensity is reduced in a variety of ways, including use of alternative technologies (such as EVs), blending renewable fuels, and reducing upstream emissions intensity.

Gaseous and Solid Fuel Classes

  • At the time of analysis, there was no target for emission intensity reductions in the Clean Fuel Standard for these classes, other than the general targeted GHG reductions of 30 MT by 2030 across all streams.
  • The Evolving Scenario assumes a reduction of gaseous emission intensity of 2.5% in 2030, increasing to 6% in 2040, and 10% in 2050. This is met by blending renewable natural gas into the gas stream.
  • For solid fuels, we do not assume a specific intensity reduction target. Rather, the emphasis is on phasing out coal use in power generation to 2030, and reducing coal use for industrial applications in the latter decades of the projection period.
Energy Efficiency Regulations

Canada has a long history of improving energy efficiency through standards, regulations and policies. The Evolving Scenario continues this trend. Specifically:

  • Federal Efficiency Regulations Amendment 17 is currently in the pre-consultation phase, and is reflected in the Evolving Scenario.
  • Post 2030, the fuel economy of light duty vehicles continues to improve, at approximately 1% per year.
  • Net zero ready building codes are currently under development. The Evolving Scenario assumes these are gradually adopted by provinces and territories, leading to efficiency improvements in building shell, as well as heating and cooling technologies.
Zero Emission Vehicle Standards

The adoption of low and ZEVs in the Evolving Scenario is driven by technology, consumer choice, and policy. A minimum ZEV requirement is assumed in the Evolving Scenario, requiring a national minimum of 5% sales by 2030, 25% by 2040, and 50% by 2050.

Given the other factors that influence ZEV adoption, individual provinces vary in their adoption of ZEVs, with some having greater or less than the national minimum. The provincial levels are based on economics and/or provincial policies that exceed these minimums. See “Towards Net Zero” for discussion of higher penetration of ZEVs.

Support for Clean Energy Technology and Infrastructure

The continuing energy transition shown in the Evolving Scenario requires significant levels of technology and infrastructure development. Historically, governments have played key roles, in collaboration with specific industries, regulators, and other participants in these areas.

This trend continues in the Evolving Scenario. It assumes government infrastructure and technology development are key contributors to the deployment of new energy technologies, including:

  • Deployment of EV charging infrastructure to accommodate the rising levels of ZEVs in the Evolving Scenario.
  • Increased electric transmission.
  • Increased support for CCUS development and deployment.
  • Support for technologies currently with limited commercial application to achieve greater adoption in the 2035-2050 period. Examples include: high efficiency natural gas heat pumps for buildings, hydrogen fuel cells for heavy trucking and industry, utility scale battery storage, electrification and efficiency improvements in the industrial sector, and reduced emission intensity of oil and gas production.
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  • [67] For an exhaustive review of climate measures in Canada, see Environment and Climate Change Canada’s Fourth Biennial Report on Climate Change.

Notice: On 2 December 2020, a note for additional clarity was added to Figures ES.8 and R.12 in this PDF.

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