The following was written by ICBA Chief Economist Jock Finlayson.
The federal government’s recent decision to exempt home heating fuels widely used in Atlantic Canada from the national minimum carbon tax is once again shining a light on the linked issues of energy costs and energy security. Despite this carbon tax carve-out, the Trudeau government remains committed to a dramatic reduction in Canada’s greenhouse gas (GHG) emissions by the end of the decade. Specifically, Ottawa has pledged to slash emissions by 40-45% from 2005 levels by 2030 – fewer than seven years away.
So far, Canada is far from being on track to meet the aggressive GHG targets adopted by the federal government. In 2020, amid the COVID crisis, GHG emissions reached 659 megatonnes of carbon dioxide, 13% higher than in 1990 and 9% lower than in 2005. It must be noted that emissions in 2020 were artificially depressed owing to the effects of the pandemic. As the country’s economy slowly re-opened in 2021, GHG emissions increased. When the final data are reported for 2022, they may show a further increase.
Reaching the Canadian government’s 2030 GHG reduction target will require an unprecedented restructuring of the Canadian energy system, including a major shift in energy consumption patterns away from fossil fuel sources. How likely is this to occur – especially within a few short years?
A review of recent trends in Canadian energy consumption can help to answer the question. Fortuitously, Statistics Canada just released a comprehensive set of statistics on energy production and consumption through 2022. Digging through that data and related reports from the Canadian Energy Regulator provides grounds for skepticism about the promises, claims and forecasts made by the federal government concerning the ongoing “energy transition.”
Energy Consumption in 2022
Last year, Canada was still recovering from the 2020-21 COVID “shock” and its attendant impact on economic activity and energy demand. Overall Canadian energy consumption rose by 4.2% from 2021 levels, reaching 8,585 petajoules (a common way to measure energy production and consumption). Energy use increased in all six sectors covered by Statistics Canada’s analysis: transportation (up 7.8% from 2021), commercial/institutional (+4.2%), residential (+3.1%), government (+2.5%), industrial (+2.1%), and agriculture (+1.0%). Regionally, Ontario, Alberta and Quebec where the top three energy-consuming provinces, together accounting for almost three-quarters of all energy used in Canada.
Types of Energy Consumed
What sources of energy meet the diverse and growing needs of Canadian households, businesses and industries? This is where things get difficult for those who hope to see a quick and radical transformation of the entire energy system toward low- and no-carbon sources.
The hard reality is that refined petroleum products still make up almost two-fifths of total end-use energy demand in Canada, followed by natural gas and then electricity. By sector, industrial demand represents about half of all of the primary energy used in Canada, followed by transportation, residential and commercial (see Table 1).
Table 1
While Canada has made great strides in de-carbonizing the power generation sector – with more than four-fifths of all electricity produced across the country now coming from carbon-free sources – electricity itself accounts for less than one-fifth of all primary energy consumed in the country. Today, electricity plays little role in providing energy for transportation, industrial processes, agricultural operations, or the heating of commercial, industrial and institutional buildings. The picture will change over time, as energy-related technologies advance, market penetration increases for electric vehicles, and electricity becomes a more prominent and reliable source of energy for other sources of demand and other segments of the economy that are now overwhelmingly served by fossil fuels.
The lesson one can draw from the data collected by Statistics Canada, the Canada Energy Regulator, and other agencies is that the vaunted energy transition is going to take a lot longer than suggested by the politically chosen timelines for reducing emissions touted by the Trudeau government and some of its provincial counterparts.
