Between 1990 and 2021, GHGs from the transport sector in Canada soared 27%. And yet, Canadian delegates at COP28 in Dubai this week have arrived without final regulations for transitioning cars and other light-duty vehicles from fossil fuel power to clean energy. Draft regulations applicable to heavy-duty trucks and buses – where emission levels have climbed rapidly, threatening to surpass those of cars – have not been released.

Should Canada fall short of transitioning to zero-emission vehicles at the pace needed, we will fail to reduce national emissions by 40% to 45% below 2005 levels by 2030. Worse, it will be impossible to accomplish Canada’s global commitment to carbon neutrality by 2050. It cannot be overstated how much is at stake.

Last December, the federal government issued draft regulations intended to increase sales of EVs across the country. The regulations follow the pledge in the government’s 2030 Emissions Reduction Plan that by 2035 all sales of new light-duty vehicles in Canada should be electric models that do not emit carbon pollution.

The draft regulations stipulate that increases in sales of emission-free cars be phased in. By 2026, for instance, 20% of total vehicle sales by a manufacturer or importer should be electric. By 2030, zero-emission vehicles must make up 60% of total sales. Five years later, the consumer will be able to choose from a range of model options, all of which will be fuelled by clean energy. Air pollution levels will plummet.

As demonstrated in both British Columbia and Quebec, sales mandates – which both provinces have implemented – are an effective means of switching from gas to electric cars.

A province-wide sales requirement for EVs was introduced in B.C. in 2019; the goal was that, by 2040, 100% of vehicles sold would be zero-emission. In 2022, EVs accounted for 18.1% of all new light-duty vehicle sales in B.C. Just prior to the legislation, EVs made up 4.1% of all new passenger car sales. Because the original sales targets will likely be exceeded, the provincial government has moved the goal posts: with the new target, 100% of cars sold will be electric models by 2035, five years ahead of schedule.

Like B.C., Quebec also passed regulated targets for the number of new-car sales that are zero emission. From 8.9% of new cars sold in 2021, EVs now constitute 13.9% of the light-duty vehicle market in Quebec.

We’ve seen a significant rise in EV sales across the country despite insufficient inventory on most dealer lots. According to data released by S&P Global Mobility, registrations for zero-emission vehicles reached 13.3% in Canada in the third quarter of 2023 – one in eight new vehicles registered were electric, an increase of 2.7% from the second quarter of 2023, with a market share of 10.5%.

A new report from RBC Capital Markets predicts that the EV market is on the verge of substantial growth, as prices stabilize and charging infrastructure expands. These numbers tell us that the growth in the EV market, which has surpassed expectations again and again, is not an instance of early adopters testing a new gadget. It’s a smart consumer choice when you consider that in almost every instance an EV is cheaper than a gas car over the lifetime of the vehicle.

But the transition to clean transportation must move much more quickly if there’s any hope of meeting, or coming close to meeting, Canada’s climate commitments. To suggest, as some stakeholders have, that Canada not stick with a sales mandate, so clearly a winning formula, makes no sense.

Undoubtedly, there is much else that the federal and provincial governments need to do, starting with more rapid deployment of adequate and reliable charging infrastructure, more provincial consumer incentives, and an upskilled labour force. Still, if Canada succeeds in replacing gas-fuelled cars with electric ones at the scale called for in the government’s Emissions Reduction Plan, GHGs from transportation would drop by 42% to 46% below 2005 levels, in line with Canada’s climate commitment. While this may be a hopeful outcome, it certainly isn’t an empty one.

Adam Thorn is director of transportation at the Pembina Institute.

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The gunshot that started the race to reach net-zero by 2050 was really a 2018 Intergovernmental Panel on Climate Change (IPCC) special report. The report sent a powerful message: 1.5 degrees Celsius is the maximum warming we can accept. The IPCC was clear that this target for a “safer” world (compared with even more warming) is within reach but requires global carbon (CO2) emissions to decline by 45% from 2010 levels by 2030 and hit net-zero by mid-century. When nations convened a year later for COP25, the annual UN climate conference, the target was cemented: 73 countries, 398 cities, 768 businesses and 16 investors announced that they were working to achieve this goal.

Canada is one nation on the growing list of countries that promised to achieve net-zero emissions by 2050. While the federal government is critical in setting the pace, we cannot get to net-zero without leadership from industry and corporations.

The “what” is fairly straightforward: we’ll get to net-zero when we achieve a global balance between emissions produced by humans and emissions taken out of the atmosphere. How we get there is, perhaps surprisingly, more important than the final destination. We need a flattening of the carbon curve, which will be particularly difficult for such carbon-heavy sectors as cement, steel, freight, aviation, chemical manufacturing, and oil and gas. Encouragingly, Canada’s Economic Strategy Table on clean energy indicates that by 2030, a $26 trillion low-carbon economy will create 65 million jobs worldwide.

As the corporate world plans for net-zero, a few principles should guide our collective thinking.

Delayed action on reaching net-zero increases our risk of carbon overshoot
and necessitates costlier action later.

The power of carbon budgets

Limiting global temperature rise to 1.5C isn’t possible without public policy and corporate strategy informed by a carbon budget. As with any other budget, it helps measure progress and lets you know exactly where you stand relative to your goal. That’s why the federal government’s commitment to set legally binding, sectoral milestones that fairly and equitably achieve net-zero by 2050 is absolutely essential.

The concept of shrinking carbon budgets should guide corporations across all sectors. Energy companies producing only fossil fuels face a particular challenge: how do you offer a cost-competitive, low-carbon product while demand decreases as industrialized economies strive to decarbonize? Governments, corporations and civil society together need to plan pathways to reach these targets in such a way that we all can innovate and diversify to ensure Canadians have steady, in-demand employment as we transition to this decarbonized economy.

Not every pathway to net-zero is equal. One approach might be to stick to “business-as-usual” without reducing emissions and instead rely on CO2 removal measures to get to net-zero by mid-century. A second, safer approach is more transformative. It sees a company immediately creating and implementing an emissions-reduction plan that achieves substantial and sustained greenhouse gas (GHG) decreases to reach net-zero earlier.

Both approaches hit net-zero in 2050, but if every company adopts the first approach, we will blow through our carbon budget and fail at limiting warming to 1.5C. Why? It’s all about steadily decreasing annual emissions between now and 2050 so cumulative emissions stay below the global carbon budget to maintain that safer world. Delayed action not only spends our limited budget earlier (increasing the risk of overshoot), but also necessitates more stringent and costlier actions later to rapidly make up the difference.

Prioritize early mitigation

Carbon emissions are still growing in Canada, according to the latest national inventory report. Those emissions need to peak as soon as possible and decline rapidly before they reach net-zero. For businesses, that means now is the time to seize opportunities to reduce emissions across their supply chains. That might mean embracing new products, services and business models.

A key indicator for success will be early and deep mitigation, an approach that tackles carbon in all areas of the supply chain, with strict timelines and public reporting.
High-end outdoor gear company Arc’teryx is one example of a Canadian company that recently pledged to go net-zero by 2050. It has publicly committed to reduce emissions associated with its headquarters, Canadian production facility, and retail stores by 65% by 2030 (compared to 2018), which includes curbing the footprint of its fabrics, products, factories, mills, shipping and distribution centres.

For fossil fuel companies, the route to decarbonization is far more challenging, given that the bulk of emissions come from the end use of the products they create. Shell is planning to reach net-zero on scope 1 and 2 emissions involved in the creation of its products. It’s also committed to a 65% reduction on scope 3 emissions (those GHGs associated with the use of their products, namely burning Shell products in cars or furnaces). To achieve all these reductions, Shell has announced it plans to diversify beyond oil and gas, with a fresh business model that includes selling low- or zero-carbon energy products, including hydrogen, low-carbon biofuels, solar and wind power.

Critically, Shell has set annual targets to reduce its net-carbon footprint, covering a three- or five-year period, and it has wisely linked executive pay to reaching these targets. It also plans to use carbon removal measures, including carbon capture and storage and nature-based solutions like reforestation.

Though it’s too early to know if these company approaches to reaching net-zero will deliver, as they try to manage the material risks of climate change these businesses are positioning themselves as leaders in a low-carbon economy.

Improved building design could reduce overall demand for cement by 34%.
—Energy Transitions Commission’s Mission Possible report

Use every tool at hand

Mitigation (efforts to reduce or prevent emissions) should be the first and most important step for all companies in tackling this global crisis. That means such measures as adopting low- and zero-emission vehicles to replace combustion-engine fleets, switching to zero- or low-carbon fuels like green or blue hydrogen for high-temperature processes, dramatically improving energy efficiency in buildings, exploring alternative delivery logistics, and committing to renewable energy use.

The IPCC pathways to a 1.5C world all use carbon removal measures to some extent (both natural and technological). Shifting toward a circular economy model will also be important. This means using materials more sustainably, by recycling, reusing and designing less resource-intensive products. Design also plays a role: improved building design, for one, could reduce overall demand for cement by 34%, according to the Energy Transitions Commission’s Mission Possible report.

Turn up the heat on climate policy

Net-zero is only as credible a target as the set of policies that will be introduced to get us there. Corporate leaders have a unique place at the table to inform the development of these policies and champion implementation that results in stable, good-paying jobs, strong communities and sustainable development that delivers on decarbonization and climate resilience. They’re already doing so through initiatives like the Catalyst Business Coalition, an alliance of dozens of Canadian companies ranging from a craft brewery to the Insurance Bureau of Canada, together calling for increased climate action. Among other things, the coalition calls on the federal government to prioritize stimulus funding for employment opportunities resilient to future economic shocks as the world limits warming to 1.5C.

On the transportation front, the Urban Delivery Solutions initiative – a national network of businesses including Canada Post and UPS – is asking government for policies to support low-carbon urban freight operations in Canada.

To safely achieve our goal of limiting warming to 1.5 degrees Celsius, Canada’s approach to carbon removal needs to move beyond business as usual. It’s time we embrace a transformative scenario. Working with companies to rebuild our economy and society to be carbon neutral by mid-century won’t be easy, but it is within reach.

Isabelle Turcotte is the federal policy director at the Pembina Institute and is based in Ottawa.

Related:

Report: Building Back Better with a Bold Green Recovery

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After spending six years as vice-president for sustainability at pipeline giant Enbridge Inc., Coady took up the reins at the Pembina Institute environmental think tank at the end of March.

Environmental advocates have long regarded Enbridge as a public enemy because of its proposed Northern Gateway pipeline, the current expansion of its mainline oil pipeline in the U.S., and its fight over refurbishing a pipeline in Michigan where it had a major spill into the Kalamazoo River a decade ago.

For its part, Calgary-based Pembina has been in the crosshairs of oil industry defenders, including Alberta Premier Jason Kenney, who allege Pembina has used funding from American foundations to undermine the province’s leading industry. (Last July, Kenney launched a $2.5 million official inquiry into “foreign funded defamation” of the oil industry.)

Coady is well positioned to navigate in the acrimonious arena, having spent her career working to find common ground between corporate interests and environmental organizations.

Early in her career, she was vice-president of environmental affairs at a B.C. forestry company (later bought by Weyerhaeuser). In 1993, she played a central role in ending the so-called war in the woods when environmentalists clashed with forestry companies over clear-cutting in Clayoquot Sound on Vancouver Island. A stroller run-in between Coady and another new mother – her “arch nemesis,” then-Greenpeace activist Karen Mahon – led to breakthrough talks between the two sides. As Clayoquot blockade organizer Tzeporah Berman wrote in her autobiographical account of that era, “I think [Coady] was the first person I met from a logging company who really talked to us, and about the issues instead of trying to spin them.”

That experience led Coady to accept a position with WWF-Canada as the wildlife organization’s western vice-president. She went on to lead sustainability efforts with the 2010 Vancouver Olympics before joining Enbridge. She also co-chaired the federal Liberal government’s Generation Energy council that, in 2018, provided a roadmap for Canada to pursue the decarbonization of the economy.

The B.C. native will need all her diplomatic skills to bridge the current divide, which has escalated from an environmental issue to a fight that is deeply cultural, political and economic, in which both sides perceive existential threats.

Pembina’s board chair, David Runnalls, acknowledged in an interview that some of the institute’s young, idealistic staff members were apprehensive about the appointment of a former pipeline executive.

He said Pembina has always been focused on finding common ground and solutions to environmental problems rather than simply opposing industrial development. It has, however, taken stands on the need for robust environmental protection with strong regulations that are strictly enforced.

“Pembina has never been particularly popular with the Alberta government,” he said. “And some of the other NGOs don’t like us because they consider us vendus and too close to industry.”

Former Pembina executive director Ed Whittingham applauded Coady’s appointment. “She is one of those people who can flit seamlessly between the private sector and the NGO sector,” he said. He knows well that such dexterity can become uncomfortable given the politically fraught battle between oil industry supporters and environmental activists in Alberta.

After leaving Pembina, Whittingham was appointed by the former NDP government as a board member for the Alberta Energy Regulator. He became a whipping boy in the 2019 provincial election when Kenney accused him – and Pembina generally – of taking foreign funding to engage in “economic sabotage” against the industry.

Whittingham called the attack “an unprecedented smear campaign,” noting that contributions from U.S. foundations represented a small fraction of Pembina’s revenues. Runnalls said the organization has, over the years, received more revenue working with Calgary’s oil companies than it ever did from American foundations.

Coady believes the polarization may still yield opportunity to work on solutions to the industry’s environmental challenges.

In an interview from her Vancouver home, the new Pembina executive director said she has already been in contact with Alberta government officials, including Energy Minister Sonya Savage. The two worked together at Enbridge before Savage joined the Canadian Energy Pipeline Association as vice-president for government relations. “I’ve reached out to people in the Alberta government, including Minister Savage, and have had a very warm reception,” Coady said. “So, so far, so good.”

“Oil and gas is part of the problem on emissions, and there is a real opportunity for Canadian oil and gas companies to be part of the solution.”
—Linda Coady

 

Coady maintained that the fossil fuel industry will continue to produce energy for the world for a period of time, and therefore companies must work to reduce emissions. She sees a role for Pembina in assisting in that process.
“Oil and gas is part of the problem on emissions, and there is a real opportunity for Canadian oil and gas companies to be part of the solution,” she said.

She pointed to federal support to clean up abandoned oil wells and assist industry in reducing methane emissions as examples of efforts in which government, industry and NGOs can cooperate.

Coady endorses Canada’s goal of “net zero” greenhouse gas emissions by 2050, a target that requires deep decarbonization but also expanding technological and natural means to remove carbon dioxide from waste streams and the atmosphere.

The oil industry can contribute to that effort by driving down its emissions for each barrel of crude produced and by developing technologies like carbon capture and storage and the use of hydrogen as an alternative fuel, she said.
Critics argue, however, that those approaches fail to take into account the GHG emissions associated with the use of the oil and gas produced. The industry essentially needs to be wound down over the coming decades, said Berman, now international program director for Stand.Earth.

Coady “may be looking for a technological fix or just emissions-intensity reductions coming from industry, and that won’t be enough to protect Canada’s economy or ensure a stable climate,” Berman said.

While the fate of Canada’s oil and gas sector remains the most fraught area of debate, Pembina is active in other sectors where governments and industry are pursuing the low-carbon transition.

In B.C., for example, the institute is working with the provincial government and the City of Vancouver to develop standards for commercial wood buildings. In Ontario, it’s engaged in efforts to promote low-carbon transportation options and environmentally friendly urban planning.

Coady said she is also looking for Pembina to take a prominent role in the push for more sustainable financing practices.

With leadership from Mark Carney, former governor of the Bank of England, the United Nations is encouraging financial market regulators to require companies to report to investors on their carbon risks and opportunities, including how well they would fare if the world succeeds in making the transition to a low-carbon economy. Such practices would drive investment capital away from activities with high climate-related risks and toward those activities that can benefit from opportunities created by the transition.

Coady noted the federal government is gearing up for a major stimulus program that will finance low-carbon projects and technologies. But she said that must be matched with incentives for the private sector to complement that government spending.

“I see an opportunity for groups like Pembina to try to connect those dots between the public investment and the private investment and to help make the case for return on investment in projects that can further drive decarbonization.”

She said Pembina’s “got an important role to play in the transition of energy systems to a lower-carbon economy.”
“So when they asked me about joining the organization, I pretty well leapt at the opportunity.”

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

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