That’s what representatives from the cement, aluminum, hydrogen and power sectors told a conference in Ottawa last week, warning that failure to make those investments will erode the country’s competitiveness over time as the world accelerates joint action to limit the destructive impacts of climate warming.

The session on the challenges for Canada’s competitiveness under net-zero scenarios was hosted by the Canadian Climate Institute and the Net-Zero Advisory Body. The two federally supported bodies provide analysis and advice to Ottawa on climate economics and policy issues.

Last month, the Net-Zero Advisory Body recommended that the federal government ratchet up its ambitions and set a 2035 target for Canada to reduce emissions by 50% to 55% below 2005 levels on the way to a net-zero goal by 2050. The federal government has committed Canada to reduce greenhouse gas emissions by 40% to 45% by 2030 and must set a 2035 target by December 1.

The Canadian Climate Institute, together with Clean Prosperity and the International Institute for Sustainable Development, will soon launch a Commission on Carbon Competitiveness that will provide analysis on how Canada can attract the investment needed to reduce emissions most efficiently while protecting our existing industries and building the new clean energy sectors.

The institute gathered industry players at the conference to kick off the conversation. Asked about the biggest risk to carbon competitiveness, industry spokespeople pointed to political and policy questions. “It’s the uncertainty,” said Ivette Vera-Perez, president of the Canadian Hydrogen Association. “To make investment decisions, you want that long-term view and an understanding of what the future is going to look like.”

Adam Auer, president of the Cement Association of Canada, agreed: “Uncertainty is the biggest thing that we worry about. We’re obviously very aware of some of the uncertainty that is being generated by the political narrative around the robustness of some of the climate policies that exist today,” he said. “But there is also a larger uncertainty about where the market is going.”

At the federal level, Prime Minister Justin Trudeau is facing an election that could come any time between now and fall 2025 after the New Democratic Party pulled its support for an agreement that propped up the Liberal minority government. Conservative Party Leader Pierre Poilievre is eager to topple the government, particularly given the large lead his party enjoys in the polls.

We’re obviously very aware of some of the uncertainty that is being generated by the political narrative around the robustness of some of the climate policies that exist today.

–Adam Auer, president of the Cement Association of Canada

Poilievre has vowed to kill the carbon tax, but it is unclear whether he will target only the consumer levy or also eliminate the federal backstop on industrial carbon pricing and leave it to provinces to manage their own systems. The Liberal government plans to increase the tax from $80 per tonne of carbon dioxide this year to $170 in 2030.

The Conservative leader hasn’t specified the fate of other Liberal climate policies, including investment tax credits, clean fuel standards and clean electricity regulations, though he has consistently opposed Liberal actions on those fronts.

Industry warns that costly government policies shouldn’t get ahead of markets. Auer noted that customers for commodities like cement, aluminum and hydrogen are currently unwilling to pay a premium to suppliers with lower carbon intensity. As a result, it remains unclear whether investments in emissions reduction will pay off. Some jurisdictions such as the European Union are moving forward with border measures that would penalize higher-carbon sources and provide some return for decarbonization efforts.

Auer said that investors with his member firms are increasingly worried about their carbon intensity. The ability to attract capital depends to some extent on the companies’ ability to show they have a “robust, credible path to decarbonization.” Companies need to balance those competing pressures, he said.

Quebec advantage

The race to net-zero can be accomplished only if governments, corporations and energy utilities can manage it without dramatically driving up costs to consumers, Michael Sabia, chief executive officer at Hydro-Québec, told the conference. Indeed, it is that affordability issue – which became more acute with post-COVID inflation pressures – that Poilievre is exploiting with his “Axe the tax” approach.

Hydro-Québec is a key player in the province’s drive to its 2050 net-zero goal. In order to reduce fossil fuel use and attract new manufacturing in Quebec, the provincial utility plans to increase its clean-electricity capacity by a third, even as it subsidizes its customers’ investments in energy efficiency.

Globally, investment in the clean energy transition must average $4 trillion annually – up from $1.5 trillion in 2023 – to meet the 2050 goals. That investment is required “both to address the challenge of decarbonization but also to seize the opportunities of building new industries that can ensure prosperity in a low-carbon world,” Sabia said.

The only real question is not whether it’s going to happen but whether it happens in a relatively smooth way or not.

–Michael Sabia, CEO, Hydro-Québec

The challenges faced by Hydro-Québec are illustrative of the global hurdles on the road to transition. The utility needs to invest between $150 billion and $180 billion to meet its 2035 goals, Sabia noted. On a yearly basis, that’s three times its current investment. Its workforce of 10,000 people would grow to an average of 35,000, and a peak of 55,000 workers through the investment cycle. Hydro-Québec is attempting to recruit skilled francophones from countries like Morocco and Algeria to meet those labour needs.

For all the pieces to fall into place, the permitting of projects must speed up, Sabia said. Canada has the second-worst record in the OECD (Organisation for Economic Co-operation and Development) for length of project permitting. At the same time, the province and Hydro-Québec itself will need to pursue new partnerships with Indigenous people in whose traditional territories much of the work will be done, he said.

The world has seen tremendous progress in clean energy development, but 80% of the world’s energy is still supplied by fossil fuels, Sabia noted. “Clearly, decarbonization is going to happen; it has to happen. The only real question is not whether it’s going to happen but whether it happens in a relatively smooth way or not.”

The post Uncertainty hobbles industry in race to net-zero appeared first on Corporate Knights.

That was one of the takeaways from a panel Wednesday that was part of a series on the Corporate Knights Earth Index. The initiative tracks Canada’s progress on decarbonizing its economy in a variety of carbon-intensive sectors, from buildings and transportation to agriculture and power. Heavy industry – the manufacturing of cement, steel, chemicals, pulp and paper, and non-ferrous metal smelting and refining – has seen only a slight reduction in its greenhouse gas emissions since 2005, according to Corporate Knights analysis, something that will need to change for the country to reach its climate ambition.

Heavy industry’s contribution to Canada’s GDP is 2%, but it is responsible for 9% of the country’s emissions. And to meet Canada’s commitment to cut emissions from 2005 levels by 45% by 2030, these industries would have to decline at an average rate of just over 4% a year. Lowering these emissions will not be easy without a complete rethink of these industries’ processes, said Ralph Torrie, head of research at Corporate Knights. “Incrementalism is not going to be an effective strategy in this case,” he told the panel. 

This is because roughly half of these industries’ greenhouse gas emissions come from the chemical processes they use to manufacture products. So it isn’t simply a matter of electrifying their energy consumption. A larger, more complex transformation has to happen. Recycling and disruptive technologies will be key in that transition, said Torrie, but most important will be speed.

By taking bitumen and converting it to carbon fibre alone, it will add so much value to our economy. And it will transform our economy, not transition it.

—Laura Kilcrease, CEO of Alberta Innovates

When it comes to cement, Chris Bataille, an energy economist with the Paris-based think tank Institute for Sustainable Development and International Relations and a professor at Simon Fraser University, said a big chunk of emissions can be eliminated through better design that minimizes the amount of cement used in buildings. But carbon capture technology will also be necessary to reduce emissions, he said.

In Edmonton, a pilot project is under development at a Lehigh Cement plant that hopes to capture more than 90% of the carbon dioxide that comes from the facility’s flue gas. The project is a first for the North American cement industry and follows a Norwegian carbon-capture cement project being built in Brevik, Norway, by HeidelbergCement.

Panellists also exalted the potential of research exploring “bitumen beyond combustion,” which entails tapping Canada’s bitumen deposits to make useful materials beyond oil and gas, such as carbon fibre (a strong, lightweight material used in some electric cars). Laura Kilcrease, the CEO of Alberta Innovates (which funded a $15-million competition to further develop this technology), says that this is not only an alternative way to use an abundant Canadian resource, but an important avenue for increasing its value. “By taking bitumen and converting it to carbon fibre alone, it will add so much value to our economy. And it will transform our economy, not transition it,” she said. 

Panellists agreed we’ll need a national conversation about how these critical industries make the necessary changes to arrive in a net-zero future. And a large part of that conversation will need to involve Indigenous communities, said Jean Paul Gladu, a founder and principal at Mokwateh Group who serves on Suncor’s board of directors. Gladu said that we won’t be able to achieve our goals without Indigenous consent.

And just as there is little time for incrementalism when it comes to the climate crisis, Gladu said that the same applies to Canada’s relationships with its Indigenous Peoples. “We’ve got to start thinking bigger in this country,” he said. 

The post How to transform Canada’s heavy industry into a net-zero powerhouse appeared first on Corporate Knights.

The exploitation of this disproportionate abundance of natural resources was a defining feature of Canada’s modern economic development; a relatively small share of the world market for any of these resources resulted in relatively large per capita export earnings for Canadians. The Canadian Prairies became known to some as “the bread basket of the world,” and in 1930, University of Toronto professor Harold Innis used the biblical phrase “hewers of wood and drawers of water” to describe Canadians’ dependence on resource production. The perennial struggle to “move up the value-added curve” has plagued Canadian economic progress, and the export of primary resources rather than higher-value products remains an ongoing challenge (eg. bitumen rather than refined petroleum, pulp rather than paper, hydropower rather than electricity-intensive products, wood pellets rather than high-value forest-based fibres and chemicals).

Heavy industry – the manufacturing of cement, steel, chemicals, pulp and paper, and non-ferrous metal smelting and refining (including aluminum) –  is deeply rooted in Canada’s economic history. While the contribution of these industries to the national economy has been declining, they remain economic and employment mainstays for many communities, and for the most part they have been holding their own in competitive global markets where innovation is driving rapid change. 

The direct contribution of these energy-intensive heavy industries to Canada’s GDP is only 2%; however, as a result of their high energy use and emission-intensive processes, their greenhouse gas emissions comprise 9% of Canada’s total GHG inventory. As such, heavy industries are a focus area for Corporate Knights’s recently launched Earth Index initiative, which tracks progress toward meeting national 2030 targets on the road to a net-zero future. 

Earth Index target

In 2019 (the most recent year for which we have complete data), emissions from heavy industry were 65 megatonnes of CO2 equivalent (Mt CO2e), 15% lower than they were in 2005. To meet Canada’s prorated share of emission reduction commitment (45% by 2030, relative to 2005), emissions from these industries would have to decline at an average rate of 4.2% per year, more than four times faster than the rate of decline over the past 15 years. While there is much that can and should be done to improve the efficiency and reduce the carbon intensity of the status quo, incrementalism will not suffice. The low-carbon transition is a fundamental game changer for heavy industry. 

Heavy Industry in Canada – By the Numbers

Canada’s greenhouse gas emissions neither grew nor declined much in the past 15 years, and heavy industry emissions (represented by the shaded red area above) are no exception, having declined less than 1% annually since 2005.

Some indicators of the level and pattern of greenhouse gas emissions from these industries are in the table below, and there are a number of attributes of these industries that pose unique challenges with regard to deep emissions reductions.

Sources: Environment and Climate Change Canada and Statistics Canada

The high energy intensity combined with the reliance on combustion-based production technologies makes the heavy industries among the most greenhouse gas intensive, as measured by tonnes of greenhouse gas per dollar of GDP. The relatively large contribution of fuel and electricity to the total cost of production in these industries provides a strong incentive to improve technological energy efficiency, to look for process innovations that require less energy, and to pursue production strategies that increase the economic value created for every unit of fuel burned. Notwithstanding the slow growth in the heavy industry sector, greenhouse gas intensities have been stable or declining in the cement, chemicals and non-ferrous metals industries. Carbon pricing adds further impetus to find low-carbon pathways, but at the moment these industries are mostly exempt from paying carbon tax as per the federal government’s Output-Based Pricing System. Trade concerns and the complexities of implementing a border carbon adjustment tax suggest that a system of carrots (guaranteed top-ups for relevant heavy industry materials that meet net-zero criteria) rather than sticks may be a more fruitful path to decarbonization.

While we have grouped these industries together for the Earth Index to consider the possibilities for greenhouse gas mitigation, they are quite different from each other, and there can be large variations in energy and emission intensities within an industry. For example, in the pulp and paper sector, while value added is down by 40% throughout the industry, the energy intensity, emissions intensity and electrification of the newsprint mills have all improved since 2005, while those same indicators have deteriorated in the pulp and other paper product mills.

Greenhouse gas emissions from heavy industry have declined only slightly since 2005. Declining value added has been offset by stable or growing emissions intensities (emissions per dollar of value added). And high energy intensity is a defining characteristic of these industries, with energy consumption per dollar of GDP up to 20 times higher than for general manufacturing and even higher relative to the service industries that now make up two-thirds of Canada’s economic output. Fuel and electricity costs are a much higher factor cost for these industries than for the rest of the business economy, reaching 20% of value added and more. A qualitative attribute related to their energy intensity is that the level and pattern of energy consumption for these primary manufacturers is integral to their production technologies, which have historically included high-temperature operations in capital-intensive plants (kilns, furnaces, smelters, pulpers) that have relatively long capital turnover rates. Capital renewal presents opportunities for deep reductions in GHG intensity.

Half the greenhouse gas emissions from heavy industry are non-combustion related and result from chemical reactions that are integral to the material transformations taking place in the industry processes. Process emissions account for more than half the greenhouse gas emissions for cement, steel, non-ferrous smelting and refining (including aluminum), and more than 40% for the chemical industry. 

Electricity’s share of total energy use varies among the heavy industries but has not changed much over time. The non-ferrous metals industry (including aluminum) is particularly electricity-intensive and concentrated in provinces with relatively inexpensive hydropower resources. The substitution of GHG-intensive combustion process technologies with electrified technologies (for example in primary steelmaking) is expected to be an important contributor to the decarbonization of heavy industry.

Recycling is particularly important for the heavy industries. There is often a several-fold difference in the energy and emission intensities of producing steel, paper, aluminum and other metals from recycled inputs as compared with virgin inputs. Recycling has long since been mainstreamed in these industries, and recycling of cement and plastics promises similar benefits. 

The heavy industries have a unique and challenging risk profile that results from the confluence of long capital investment cycles, uncertain and volatile markets in trade-intensive and globally competitive industries, uncertainty about future costs for fuel and electricity, and the ever present risk of stranded production capacity resulting from product and service innovations that reduce the need for steel, cement, plastic, paper and other heavy industry products. 

For the heavy industries to pull their weight in the low-carbon transition will require bold and disruptive innovation in technology, policy and business strategies. To be effective, policy and business strategies will need to be tailored to the market dynamics and technological possibilities of the individual industries and responsive to the global contexts in which they operate.

Canadian industry and the global carbon transition

As the transition to a sustainable economy that runs on renewable energy and the circular flow of materials gains momentum, Canada will continue to be challenged to move up the value-added curve. There will be many opportunities for Canada to “punch above its weight” in supporting the global sustainability transition by combining its natural resources advantage with its hard-earned know-how to earn export revenue while contributing to greenhouse gas mitigation on a scale that dwarfs the emissions of its own heavy industries. Consider two examples: bitumen and strategic minerals.

Beyond bitumen

We are the fourth-largest oil producer in the world, and we have the largest natural deposit of bitumen, which has uniquely high concentrations of asphaltene, a potentially lucrative feedstock for lightweight materials. Instead of extracting oil from the bitumen to burn in tailpipes, we could harvest materials that are more valuable than oil, including carbon fibres, which would be the material of choice in construction and for making electric cars and trains if we can crack the cost nut.

Strategic minerals

Electrification is a central element of decarbonization strategies everywhere, and Canada has large reserves of the minerals that will be needed for rapidly expanding battery markets, including nickel, cobalt, graphite and lithium (from oilfield brines). Canada is one of the few countries that has all the elements to produce a lithium-ion battery for electric vehicles and is also the global hub for mining finance, with the Toronto Stock Exchange being the world’s number-one mining and exploration listing venue.

We have become accustomed to thinking of the primary processors and materials industries as being energy- and carbon-intensive, but this will have to change in a low-carbon future. Innovation and electrification are delivering lower-emission technologies for the production of steel, cement and industrial chemicals, and there is a growing demand for the minerals, fibre and natural chemicals that are needed for the realization of advanced, circular economies. Central to this transition will be a shift to higher value-added production, and Canada has both the ecosystems and the know-how to lead the world in the development of the global post-carbon economy.

The post Ramping up the green industrial wave appeared first on Corporate Knights.

The surprising developments happened in July as Algoma Steel and ArcelorMittal Dofasco (AMD) committed to reduce their annual greenhouse gas (GHG) emissions by three million tonnes each within the coming decade.

The magnitude of the $1.765-billion investment by AMD is unprecedented and will secure the company’s future for “yet another generation,” said AMD CEO Ron Bedard at the company’s announcement July 30.

Algoma’s $703-million investment will help to secure “high-paying sustainable jobs for the next 50 years,” said CEO Michael McQuade on July 8, a few days after Prime Minister Justin Trudeau announced the project.

The six-million-tonne reduction by these two companies is equivalent to taking 1.8 million passenger vehicles off the road or wiping out emissions from 1.4 million homes, according to the federal GHG calculator. The promised cuts represent almost 1% of Canada’s annual CO2 emissions – 730 million tonnes in 2019.

What makes these announcements stand out is not only their size but their clearly stated CO2 reduction targets and detailed investment and implementation plans, unusual compared with most decarbonization announcements by Canadian companies.

At three million tonnes, the pledge by Sault Ste. Marie–based Algoma would amount to a 70% cut to its annual CO2 emissions by 2030, which according to the last available report in 2019 were 4.3 million tonnes. The reduction by Hamilton-based AMD would equate to a 60% cut to its yearly GHG releases, reported to be 4.8 million tonnes in 2019.

Ottawa provided major support to these companies to help them make these cuts, driven no doubt by the need to claim progress ahead of the international UN climate change conference in November and an expected federal election this fall.

Included in Algoma’s total investment is a $200-million federal grant and a $220-million loan from the government’s Canada Infrastructure Bank. The AMD investment includes a $400-million federal grant. The AMD grant is contingent on additional funding from the province, but company officials said they expect Ontario to support the project.

Both companies have a history of high CO2 emissions as well as local air pollution problems from smoke, soot and more serious pollutants such as benzene and benzo[a]pyrene – two recognized carcinogens. The CO2 cleanup will also address these pollution issues.

The source of these contaminants is the coke ovens and blast furnaces used to make steel, which will be phased out over the next decade.

Like most large integrated steel manufacturers, AMD and Algoma manufacture steel using large quantities of metallurgical coal, which is heated in ovens to produce carbon-intensive coke. The coke is mixed with iron ore in blast furnaces, where the carbon in the coke binds with oxide impurities, resulting in pure liquid iron – and massive CO2 releases into the atmosphere. The iron is further processed in basic oxygen furnaces or electric arc furnaces (EAFs) to create steel.

AMD’s plan to address this problem involves construction of a new direct reduced iron (DRI) furnace and an EAF, which will replace the company’s coke ovens, blast furnaces and basic oxygen furnace. An existing EAF will remain. The two electric arc furnaces will use low-carbon Ontario electricity to further process the liquid iron into steel using scrap steel. The new furnaces are scheduled to be operational by 2028.

To begin, the DRI furnace will use natural gas to convert iron ore to liquid iron, replacing the current blast-furnace process. The natural gas furnace will reduce measured GHG emissions significantly, though the latest science suggests natural gas’s climate benefits over coal may be reduced by methane leaks from gas sites.

Importantly, however, Bedard said the DRI furnace will be built to enable it to be 100% “hydrogen ready” when hydrogen becomes available sometime after startup. Unlike natural gas, hydrogen can remove oxides from ore with zero CO2 emissions if it is produced with carbon-free electricity. This part of the announcement is still speculative, though, because Ontario has no plans for large-scale hydrogen production.

For its part, Algoma announced construction of two electric arc furnaces that will rely on scrap steel as a feedstock, phasing out its coke ovens and blast furnaces. As with AMD, the company can dramatically reduce carbon emissions using low-carbon Ontario electricity. Construction is expected to take 30 months, and operation is scheduled to begin sometime after that.

While the Algoma and AMD announcements were surprising, they weren’t totally unexpected. Both companies have aging primary plants requiring costly coke-oven and blast-furnace retrofits. At the same time, the federal government’s carbon tax ($170/tonne of CO2 by 2030) promises to make GHG emissions very expensive.

The companies have also made significant investments in their secondary operations recently. AMD has invested $800 million since 2013 in a number of projects, including finishing lines suited to lightweight car steel that will be in demand as automakers switch to electric vehicles.

AMD is a subsidiary of ArcelorMittal, the largest steel company in the world. It has other aggressive climate reduction projects underway in Europe and has recently sold its aging ArcelorMittal USA assets, leaving its operations in Canada and Mexico as its key North American properties.

Algoma has been planning a major restructuring as well, with a $1.1-billion deal with Legato Merger Corp., a New York–based special purpose acquisition company. The plan will provide a significant capital injection into Algoma and facilitate an initial public offering on the Toronto Stock Exchange.

It’s unlikely Algoma and AMD would have approved these major investments without some expectation of government support to address the rising costs and public-image problems of their carbon emissions.

Eugene Ellmen writes about sustainable business and finance. He lives in Hamilton, Ontario.

The post Steel giants sign up for carbon-cutting transformation appeared first on Corporate Knights.

It’s a similar science that Bataille, an energy economist and economic modeller, has been using for more than 20 years to show the impact of rising greenhouse gas emissions on people and the planet.

While his and other climate models haven’t received near the widespread global attention as pandemic-tracking charts used to urge citizens to help “flatten the curve” of the virus, Bataille is hopeful that information will help people take this type of science more seriously.

“Suddenly modelling is relevant to them, numbers are relevant to them, and the credibility of the experts is relevant,” says Bataille, a Vancouver-based energy policy consultant and researcher at the Institute for Sustainable Development and International Relations, a non-profit research centre headquartered in Paris.

And while it’s an inexact science, Bataille says modelling can provide much-needed direction in times of uncertainty, especially when well communicated to the public.

“People know they need to do something different, so they are looking for direction,” says Bataille, who is also an adjunct professor at Vancouver’s Simon Fraser University (SFU). “What I am seeing is that, if experts communicate what they know and don’t know and provide clear direction given this uncertainty, and are willing to correct themselves, people will listen.”

It’s not just wishful thinking for Bataille, a key figure in the movement to decarbonize heavy industry, in particular steel – a sector whose emissions, together with concrete, are responsible for 14.7% of global CO2 emissions.

Bataille’s work is slowly but steadily helping the steel sector build a path toward a net-zero carbon future.

Bataille, a 47-year-old married father of two young daughters, first became interested in modelling as an economics and political science student at the University of British Columbia in Vancouver. One of his UBC professors was renowned economist John Helliwell, whose letter of recommendation landed Bataille a spot in the master’s program in resource and environmental management at SFU.

Bataille worked and studied with Mark Jaccard, a professor with a specialty in developing energy-economy models that assess the effectiveness of sustainable energy and climate policies. Jaccard ran (and still runs) an energy material modelling group at SFU, which also houses the Canadian Energy and Emissions Data Centre.

Bataille says the team built models of the Canadian economy, showing the potential for reducing emissions. “It was a hotbed of energy and economy modelling, and still is,” he says. “A lot of the people who do this in Canada now all came from this group and this school.”

Bataille became the executive director of MK Jaccard & Associates, a spin-off of his work with the professor at SFU from 2006 to 2011, before co-founding Navius Research Inc., where he worked for four years before going out on his own, with a focus on modelling for heavy industry, in particular steel and cement.

Jaccard describes Bataille as “very talented as a modeller” and a “quick study” who has become “a high international roller” when it comes to energy modelling for policy analysis. “He’s a very good, hard-nosed critical thinker,” says Jaccard, adding that Bataille is also skilled at bridging the nexus between academia, government and non-governmental organizations.

Shahrzad Rahbar, president of the Ottawa-based Industrial Gas Users Association, tasked Bataille with four different projects in different roles she’s held over the past couple of decades. She describes him as an “honest researcher” with a “fiercely analytical” mind.

Rahbar hopes Bataille’s work will inspire industry and policy-makers in Canada to put a greater emphasis on decarbonization moving forward.

“I think Canada’s missed opportunity is an international leadership role in the industrial piece of the puzzle when it comes to carbon reduction,” she says.

“As Chris’s work gets more international recognition, I hope that there will be more of a Canadian appetite for looking at the industrial piece in the same manner [as they do internationally] and attempts to craft a viable transition plan.”

If Bataille could set Canada’s strategy for decarbonizing steel during this time of once-in-a-generation public investment, he would get the federal government (and high-carbon manufacturers) to commit to using greener steel and build supply through accelerated research and development, piloting, commercialization and guaranteed lead markets at higher prices for set amounts of greener steel. For a few billion dollars spread over a decade or so, he says, we could make hydrogen-reduced ore in northern Quebec and ship the reduced iron to electric-arc furnaces in Ontario, where it could be made into steel.

Bataille says it was the initial work with Rahbar that enabled him to go out on his own to pursue his “obsession” with industrial decarbonization. That led to his various research papers, talks, policy influence work and work with the Intergovernmental Panel on Climate Change (IPCC).

Some of his work includes being lead editor of a special issue of Climate Policy on the Deep Decarbonization Pathways Project (DDPP) in 2015/16 and a two-year project to review technology and policy options for net-zero emission decarbonization of heavy industry, including detailed physical and policy transition plans for the Canadian steel, chemicals, mining and forest products sectors. Bataille says the policy package written for the 2014/15 DDPP helped inform Alberta’s climate plan under then-Premier Rachel Notley, which helped them form the template of the federal climate plan.

He’s also a lead author for the industry chapter of the sixth cycle of the IPCC Assessment Report (2019 to 2021).

Bataille sees his mission as normalizing conversations about industrial decarbonization, making it part of forecasts such as the one announced in March by the Canadian Steel Producers Association to achieve net-zero emissions by 2050.

“The net-zero commitment from the federal government on down is a necessary beginning. It [requires] a huge jump in technology, and we aren’t going to incrementally bumble our way there,” he says.

It’s his ability to work on different sides of the debate, including industry and academics, that Bataille believes enables him to break through barriers.

“I’m a hybrid academic and corporate person,” he says. “On one hand, I get what it means to run a business, to have things go really well, then south when you’ve got people on payroll . . . Then, on a deep level, I’m a researcher. I’m a person always trying to look forward and explore the world ahead of us . . . [Having experience with both] allows me to realize what policies are likely to have traction and not have traction because of the stickiness of reality.”

Despite pilot projects like the Swedish HYBRIT (Hydrogen Breakthrough Ironmaking Technology), described as “the world’s first fossil-free steelmaking technology,” overall progress on decarbonization has been slow. Nonetheless, Bataille believes his work is helping drive change long-term.

“I would like to see HYBRIT’s hydrogen DRI iron ore reduction technology, or something like it, become the new standard for making steel in my lifetime.”

It’s that hope that inspires him to press on.

“People need a purpose in their lives, and for me it’s an endless font of purpose. It’s not going to be solved when I’m done working, but it’s work worth doing.”

Brenda Bouw is a freelance writer  and editor based in Vancouver.

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In an online roundtable Wednesday, policy experts said that even “smokestack industries” in Canada can become low-carbon sectors using existing technology. To make the transition, however, they’ll require government subsidies.

Manufacturers generate more than 10% of the country’s gross domestic product, export more than $354 billion in goods annually, and employ 1.7 million Canadians. Energy-intensive heavy industry – including steel, cement, pulp and paper, and chemicals – accounts for 85% of the sector’s emissions.

Many manufacturers have responded to the COVID-19 crisis by retooling their operations to produce much-needed personal protective equipment – an indication of their ability to adapt to national imperatives, said Ralph Torrie, who co-authored an analysis on the manufacturing sector’s climate change challenges.

“We see the extent to which industry in general can quickly pivot when there is an urgent need or high motivation,” Torrie said at a session hosted by Corporate Knights as part of its seven-part Building Back Better event series.

“We tend to forget about that in the business-as-usual environment – how capable we are of change when we need to.”

In the analysis, the authors propose $5 billion in federal spending over the next decade to purchase emission reductions from the steel and cement industries. Such a program would unlock $37 billion in private-sector spending, generate the equivalent of 24,000 full-time jobs annually and reduce emissions by eight million tonnes per year by 2030, according to analysis by Torrie and Chris Bataille, a researcher at the Paris-based Institute for Sustainable Development and International Relations (IDDRI).

It would also put the steel and cement sectors on track to achieve net-zero emissions in their operations by 2050 if they employ carbon capture technology. The Canadian Steel Producers Association recently committed to a “net-zero by 2050” target.

Bataille said cement and steel are among the most commonly used commodities in the global economy. They’re also among the most greenhouse-gas (GHG) intensive, since both rely heavily on fossil fuels such as coking coal in their manufacture.

To achieve deep decarbonization, government will have to subsidize the cement sector’s emission reductions since current carbon prices are not high enough to encourage the required investment, said Kent Stuehmer, vice president for cement operations at Lehigh Hanson Canada. He said governments at all levels should incorporate climate strategies into their procurement policies to provide a market for low-carbon cement and other industrial commodities.

Lehigh Hanson is currently in the planning stages to build the world’s first carbon-neutral cement plant in Canada but will need government support to do so, Stuehmer said.

Canada’s steelmakers already have among the world’s lowest emissions per tonne of steel produced and are aiming to do more, said Mark Rowlinson, of the United Steelworkers union and president of Blue Green Canada. But the market currently provides no reward to low-emission producers, he said. At the same time, there is a global glut of steelmaking capacity, driven in part by Chinese plants that have high emissions per tonne.

It’s a similar story for aluminum; Canada has the lowest-GHG aluminum in the world but gains no market advantage as a result of those green credentials. Rowlinson said governments should ensure that low-carbon steel and aluminum are used for public projects like bridges, buildings and public transit vehicles.

Nick Xenos, who leads the Greening Government program at the federal Treasury Board, said Ottawa is working on its procurement policies and has targets for green buildings, zero- or low-emission vehicles and the use of renewable electricity in its operations. However, he said there is a “big data gap” when it comes to assessing the carbon footprint of various construction materials, and the government has asked the National Research Council to create a database through which the performance of prospective suppliers can be accurately assessed.

Smaller manufacturers, meanwhile, are facing increasing efforts to improve material recycling, a move that would reduce waste and lower the GHG intensity of their supply chains. The effort is hampered by the fact that waste disposal remains inexpensive in Canada, especially when compared to enhanced recycling systems, said Jo-Anne St. Godard, executive director of the Recycling Council of Ontario.

She argued that governments – and municipalities in particular – need to set clear and ambitious requirements for recycled content in their procurement policies. That includes proper scoring and verification.

The roundtable’s moderator, Diana Fox Carney, noted that there are important gender aspects to the call for government support in the male-dominated manufacturing sector. To date, women have been hit hardest by pandemic-related job losses due to the closure of restaurants, retail outlets and education and daycare services.

Rowlinson suggested there might be a second round of employment cuts that would hit manufacturers if the economic shutdown continues and noted that his sector is seeing more and more women enter its workforce.

Shawn McCarthy writes on sustainable finance and climate for Corporate Knights. He is also senior counsel for Sussex Strategy Group.

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The world is at a turning point. Will we address the climate crisis in a timely and adequate manner and create a low-carbon economy, or will we fail to see the benefits of the transition and instead face the catastrophic impacts of global heating ill-prepared? With Canada’s energy-intensive economy, there are market opportunities in climate adaptation and mitigation. Now is the perfect time to recalibrate Canada’s economy to thrive in a low-carbon world. The prize includes stronger GDP growth, hundreds of thousands of new jobs and billions of dollars of savings. What’s missing to get us there is an aggressive clean stimulus package to turbocharge the transition, one that would require an investment of slightly under 2% of the national GDP over six years.

To illustrate the economic prospects of various sector-specific climate policies, Corporate Knights worked with industry, government and academic experts to develop The Capital Plan for Clean Prosperity. The Plan has been divided into five sectors that have the biggest carbon and economic footprints in Canada: buildings, transportation, electricity, oil and gas, and heavy industry. In 2017, heavy industry was responsible for approximately 10% of Canada’s total emissions.^[1]

What are the federal party positions on heavy industry?

With the federal election intensifying, parties are making an effort to highlight their policies around reducing emissions while simultaneously supporting Canadian industry and Canadian jobs.

• The Conservative Party promises to fight carbon leakage^[2] by ensuring the competitiveness of Canadian industry when designing environmental policies. Emissions standards would be set for major emitters. Those that would emit more than allowed would be required to adopt emissions-reducing technology and invest in R&D by a set amount for every tonne of greenhouse gas (GHG) they emit above the limit. The party strongly opposes carbon pricing.^[3]
• The Liberals have committed to establishing a $5 billion Clean Power Fund which would support the electrification of Canadian industry, including resource and manufacturing sectors. They will also maintain carbon pricing as part of their environmental plan, albeit with some carve outs for trade-exposed heavy industries.^[4]
• The NDP plans to develop a national industrial strategy to ‘build an advanced low-carbon manufacturing economy in Canada,’ but offers no further details. The party supports carbon pricing, and will implement more stringent pricing regulations for big industry. ^[5]
• The Green Party has committed to setting a decreasing emissions cap for industry, with penalties for companies that exceed said limits. The party would also maintain a revenue-neutral carbon price. ^[6]

While clearly intent on engaging industry in decision-making, all of these commitments fall short of providing the required financial firepower to ignite energy efficiency and decarbonization investments on a scale commensurate with the challenge and opportunity of climate action. Under the logic of “what gets funded gets done,” we propose a six-year time-bound clean stimulus program to cover the cost of improving energy efficiency and reducing emissions in the Canadian heavy industry sector.

We conducted extensive calculations based on data from sources such as Statistics Canada and Natural Resources Canada. By implementing an active clean stimulus program in the heavy industry sector, Canada could:

• raise GDP by $13 billion
• add 19,500 full-time jobs
• drive savings of $16 billion
• increase tax revenues by $4.3 billion from 2020 to 2025
• reduce the sector’s emissions from 75 megatonnes (mt) of CO₂ equivalent (CO₂e)^[7] in 2016 to 53 mt of greenhouse gases (GHG) by 2025 (equivalent to taking 4.6 million cars off the road for a year)

The policy that would bring us these numbers: A $16.8 billion clean public stimulus fund for investments that can reduce either heavy industry’s energy use or greenhouse gas (GHG) emissions by 50% by 2025.

Public investment needs

Implementing the heavy industry clean stimulus program would require public financing of $16.8 billion over the next six years (2020 to 2025, inclusive). The goal is to ‘green’ 50% of Canadian heavy industry by halving either a company’s emissions or energy usage. The choice between emissions or energy reductions would be under the company’s discretion. The companies would be provided with grants from the federal government to achieve these reductions. If the companies fail to reach these goals, the grants would need to be repaid. The grants would be financed through the creation of a federal fund, the Low-Carbon Industry Fund, which would be financed through governmental green bond issuances to raise the required $16.8 billion.

It’s imperative for heavy industry to implement and develop energy and emission-saving technologies as soon as possible. To stay on track for a global temperature increase of 1.5 to 2C, low-carbon technologies should become standard by the early 2030s. There are many off-the-shelf technologies to do this as well a number of game changers in the realm of low-carbon cement, steel and aluminum. For example, in 2018, Alcoa and Rio Tinto unveiled a technology in Quebec that they described as “the world’s first carbon-free aluminum smelting process.” The pilot is supported by various companies as well as federal and provincial governments. The technology could reduce emissions in aluminum smelters and decrease operating costs by around 15%.^[8] The Russian aluminum company Rusal is also working on its own line of carbon-free aluminum, showing that the global race is on. Another company from Quebec, Carbicrete, is developing a carbon-negative concrete alternative which sequesters carbon dioxide from the atmosphere and uses it to produce the sturdy material. In the steel industry, a partnership of Swedish firms is developing a fossil-free steelmaking technology with 20–30% lower production costs compared to traditional technology.

From 1990 to 2015, Canada’s industrial sector’s energy use increased 31%; it would have increased by 42% without energy efficiency improvements. Consequently, the sector saved $3.2 billion in energy costs in 2015.^[9] The business case for investing in technology and reducing emissions or energy use is not hard to spot.

Despite all of these exciting technological developments, it will still be several years before some of these technologies are ready for commercial use. Before zero-carbon or even carbon negative manufacturing technologies are ready to be implemented in heavy industry, cutting emissions and energy use in the short term is vital. This can be both done by incremental changes and/or developing completely new, groundbreaking technologies. Grants such as the one proposed in our Capital Plan can push the needle for both small, cumulative improvements and more impactful technological breakthroughs.

Economic and environmental benefits

Job creation: 19,500 jobs

The new jobs that would be created with the energy efficiency stimulus would amount, based on our calculations, to 19,500 new, full-time jobs. This includes direct, indirect and induced jobs.

Increase in GDP: $13 billion

The GDP increase between 2020 and 2025 could reach $13.2 billion with this stimulus project. With stronger economic growth through increased GDP, average income levels would go up and unemployment numbers would drop for mostly blue-collar workers in the construction and trades industry.

Increased tax revenues: $4 billion

the realization of these energy efficiency projects, federal and provincial Canadian governments could benefit from additional tax revenues of $4.3 billion dollars. These tax revenues could offset approximately one-third of the cost of the program.

Direct savings: $16 billion

Companies could generate savings of close to $16 billion from 2020 to 2025 (inclusive) through reduced energy costs.

Emissions: 30% reduction in heavy industry

In 2017, heavy industry was responsible for approximately 10% of Canada’s GHG emissions. The absolute amount of GHGs emitted in heavy industry has gone down by 29% after peaking in 1996–1997. It’s notable that the federal government predicts that emissions from heavy industry will increase by 19% in the next six years over 2016 levels. This underlines the necessity of a clean stimulus program for the sector as soon as possible. The recommended clean stimulus program could reduce the sector’s emissions by 22 mt CO₂e by 2025, or a nearly 30% reduction from 2016 levels. This would be the equivalent of taking 4.6 million cars off the road for a year.^[10] The recommended stimulus program would achieve approximately 12% of the emissions reductions required to fulfill Canada’s commitments to the 2015 Paris Agreement.

These numbers show that engaging and supporting heavy industry to reduce emissions and/or its energy use is mutually beneficial both for industry and Canadians. With the importance of heavy industry to the Canadian economy and the unavoidable emergence of the low-carbon economy, this mechanism would undoubtedly bring Canada further down the path to a cleaner manufacturing sector and a cleaner environment.

We are, indeed, at a turning point. How we act in the next decade will determine the climate conditions of dozens of future generations. Transitioning into a low-carbon economy is not an alternative course of action, but a necessity to ensure a stable future for Canada. Due to the fact that governments set the framework for how corporations and individuals operate in the economy, the onus on climate action largely lies with federal and provincial governments. Regardless which party is elected October 21, the Capital Plan for Clean Prosperity offers Canada the opportunity to pivot towards a low-carbon economy at this critical time. Adopting the Plan would bring economic prosperity to Canadians through new jobs, higher GDP, and savings for individuals, corporations and governments. The window of opportunity for economic, social and environmental prosperity for generations to come is still open. The question remains, will Canada’s incoming government seize it?

Corporate Knights is committed to providing the public and decision makers with information about the intersection of business, environment and society. Learn more about the rest of our Capital Plan for Clean Prosperity addressing buildings, transport, electricity, and oil and gas  on our website. You can find an overview of the plan here.

^[1] https://www.canada.ca/en/environment-climate-change/services/environmental-indicators/greenhouse-gas-emissions.html

^[2] Carbon leakage refers to a situation that may occur if, for reasons of costs related to climate policies, businesses were to transfer production to other countries with laxer emission constraints, leading to an increase in total emissions. (European Commission)

^[3]

^[4] https://2019.liberal.ca/wp-content/uploads/sites/292/2019/09/Forward-A-real-plan-for-the-middle-class.pdf

^[5] https://action.ndp.ca/page/-/2019/Q2/2019-06-19_Commitments-Doc_EN.pdf

^[6] https://www.greenparty.ca/sites/default/files/platform_2019_web_update_oct_6.pdf

^[7] “Carbon dioxide equivalent” or “CO2e” is a term for describing different greenhouse gases in a common unit.  For any quantity and type of greenhouse gas, CO2e signifies the amount of CO2 which would have the equivalent global warming impact.

^[8] https://corporateknights.com/voices/brenda-bouw/greening-concrete-jungle-15604200/

^[9] https://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/energy/pdf/energy-factbook-oct2-2018%20(1).pdf

^[10] https://www.epa.gov/energy/greenhouse-gas-equivalencies-calculator

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