Climate change: Appearance before the Standing Committee – March 24, 2022

Canadian Net-Zero Emissions Accountability Act

Q1. How can the federal government tangibly demonstrate accountability and transparency in its results?

• The Government is committed to delivering real and meaningful results for Canadians.
• Adopted in 2021, the Canadian Net-Zero Emissions Accountability Act enshrined in legislation the Government of Canada’s commitment to achieve net-zero greenhouse gas emissions by 2050, and provides a framework of accountability and transparency to deliver on it including regular reporting to Parliament and Canadians.
• To ensure transparency, all required plans and reports will be tabled in Parliament and made available to the public. These processes ensure transparency and ongoing discussion with Canadians on the Government’s actions to combat climate change and demonstrate accountability.
• The Act requires preparation of an emissions reduction plan, a progress report, and an assessment report for each target. It also requires publication of an annual report respecting key measures that the federal public administration has taken to manage its financial risks and opportunities related to climate change.
• The Act also provides that the Minister of Environment and Climate Change must publicly respond to advice included in the annual report of the Net-Zero Advisory Body.

Q2. How will Parliament ensure that the federal government is held to account for action on climate change?

• The Canadian Net-Zero Emissions Accountability Act is designed to make the federal government accountable to Parliament and Canadians for setting targets to achieve net-zero emissions by 2050 and for the policy choices it makes to achieve those targets.
• The Act creates legal accountability around the climate policy planning process and political accountability overall by setting out an open and transparent process to support continued government action to get us to net-zero.
• The Act requires independent review of the federal government’s implementation of climate change mitigation measures at least once every five years by the Commissioner of the Environment and Sustainable Development.

If pressed:

• If a target is not met, the Minister of Environment and Climate Change is required to provide the reasons why Canada failed to meet the target and must describe the actions the federal government is taking or will take to address the missed target.

Q3. What steps will the federal government take to ensure that Canada’s climate plan, policies, and actions align with its new targets?

• The Government of Canada has taken significant efforts and investments to address climate change and drive clean growth since 2016.
• With full implementation of the Pan-Canadian Framework on Clean Growth and Climate Change (Pan-Canadian Framework) and the Strengthened Climate Plan, Canada’s 2030 emissions are projected to be 31% below 2005 levels.
• The Government of Canada is working to establish the 2030 Emissions Reduction Plan by March 29, 2022, as required under the Canadian Net-Zero Emissions Accountability Act.
• Pursuant to the Act, the 2030 Emissions Reduction Plan will outline Canada’s approach to meeting its enhanced 2030 target of 40-45% below 2005 levels, and reflects input from submissions received from provinces, territories, National Indigenous Organizations and Representatives, Net-Zero Advisory Body and interested Canadians.
• The Act also requires that the Government publish progress reports outlining progress achieved as well as course corrections needed.

Q4. How can the federal government (advised by the Net-Zero Advisory Body) advance the implementation of the Canadian Net-Zero Emissions Accountability Act and its incremental 5-year milestones?

• The Government of Canada is committed to working with all Canadians and the Net-Zero Advisory Body to identify ways to further accelerate climate action to achieve net-zero emissions as soon as possible and no later than 2050.
• The Government is committed to fully implement the Canadian Net-Zero Emissions Accountability Act.
• The Government is working towards the establishment of the 2030 emissions reduction plan by the end of March.
• A progress report will be prepared before the end of 2023.

Q5. How can coordination across all levels of government be strengthened?

• Provinces and territories are critical partners in climate action. The achievement of Canada’s targets will depend on the ongoing collaboration with provinces, territories, and Indigenous peoples of Canada, which is built into the Canadian Net-Zero Emissions Accountability Act through process requirements in the development of emissions targets and emission reduction plans.
• The Government of Canada will work constructively with Parliamentarians and maintain our strong partnerships with provincial, territorial, and municipal governments and Indigenous partners.
• Longstanding mechanisms to support inter-jurisdictional coordination on environmental policies continue to play a key role in the implementation of the Pan-Canadian Framework, including federal, provincial, and territorial ministerial councils and tables such as the Canadian Council of Ministers of the Environment.
• In addition to supporting implementation of the Pan-Canadian Framework on Clean Growth and Climate Change (Pan-Canadian Framework), the Canadian Council of Ministers of the Environment (CCME) promotes collaborative actions by governments to advance shared climate change objectives, and undertakes studies and analysis to develop best practices and recommendations to enhance governments’ climate action.

Q6. Is there a legal risk of not meeting the emissions targets?

• The focus of the Canadian Net-Zero Emissions Accountability Act is on political and public accountability: there is a legal obligation on the minister to set a target, to develop a plan, to report on progress towards the target, and to account for whether the target has been met.
• While the Act does not include enforcement provisions typically found in regulatory regimes, it requires the Government to answer to Parliament and the public at large as to whether its targets and plans are sufficient to reach net-zero emissions by 2050.
• As such, the primary mechanism or means by which the achievement of Canada’s emissions targets will be enforced will be through public, political, and parliamentary accountability.

If pressed

• There would be an opportunity for judicial review if the Minister of the day does not comply with one of the very specific obligations imposed on the Minister.

Q7. What has Canada done to date to achieve its 2030 target and its 2050 target?

• Since 2016, an intensive national effort has been made by the Government of Canada to undertake historic climate action – including putting in place one of the most stringent carbon-pricing regimes in the world, and committing more than $100 billion to reduce emissions, drive the emergence of clean technologies, and help Canadians adapt to the impacts of climate change.
• The Government recognizes that more needs to be done to address climate change. Canada recently announced a commitment to reducing emissions from the oil and gas sector by placing caps on oil and gas emissions and reducing methane from oil and gas by at least 75% by 2030, as well as ending the exports of thermal coal by 2030. Canada also recently committed to achieving a net-zero electricity grid by 2035.
• Last year, the Government announced an enhanced Nationally Determined Contribution target under the Paris Agreement to reduce greenhouse gas emissions by 40 to 45% below 2005 levels by 2030 – and passed the Canadian Net-Zero Emissions Accountability Act. The Act turns Canada’s national climate goals into law and puts in place a transparent and accountable process to ensure progress towards those targets, including our goal of net-zero emissions by 2050.
• Canada’s Emissions Reduction Plan for 2030 will be established by the end of March this year, as required under the Act, and regular reporting on progress towards the 2030 target will be required, with the first progress report due by December 2023.

Carbon pollution pricing

Q1. What is carbon pricing and why is it important?

• Pricing carbon pollution is widely recognized as the most efficient way to reduce GHG emissions while driving innovation to provide consumers and businesses with low-carbon options.
• The federal government is committed to ensuring that carbon pricing is in place across Canada at a similar level of stringency while ensuring provinces and territories have the flexibility to implement their own carbon pricing systems.
• Pricing carbon pollution is a pillar of Canada’s strengthened climate plan and is critical to delivering on Canada’s targets of reducing GHG emissions to 40-45% below 2005 levels by 2030 and reaching net-zero emissions by 2050.

Q2. What is the federal benchmark and what does it do? Why not let provinces and territories decide for themselves how to price carbon pollution?

• The Government’s approach to pricing carbon pollution gives provinces and territories the flexibility to implement the type of system that makes sense for their circumstances as long as they align with minimum national stringency standards, or benchmark criteria.
• The federal benchmark has been updated to ensure that carbon pricing systems are at a similar level of stringency across Canada (2023-3020) and that they continue to drive low cost emissions reductions required for Canada to build a cleaner, more prosperous economy.
• The federal carbon pollution pricing system applies in provinces and territories that request it or that choose not to adequately price carbon pollution.

Q3. How does carbon pricing impact competitiveness, and what is the impact on Canadian industries?

• Carbon pollution pricing is designed to address competitiveness impacts.
• Under the federal approach, the Output-Based Pricing System (OBPS) is designed to put a price on the carbon pollution of large industrial facilities, while limiting the impacts of carbon pricing on their ability to compete in the Canadian market and abroad. Carbon costs can affect businesses that conduct activities that are emissions-intensive and highly internationally traded if they compete with similar businesses in countries that do not have carbon pricing in place. This approach minimizes the risk that businesses will move from Canada to jurisdictions that do not price carbon.
• Instead of paying the fuel charge, an industrial facility in the federal OBPS faces a compliance obligation on the portion of emissions that exceed an annual limit. Covered facilities are required to provide compensation for GHG emissions that exceed an emissions limit and are issued surplus credits if their emissions are lower than the applicable emissions limit. Facilities can sell surplus credits or bank them for use in future years.
• The Government engaged with industries and other stakeholders on the design of this system for more than two years, and consultations are still on going.

Q4. Has the federal government considered implementing border carbon adjustments to help mitigate carbon leakage?

• Avoiding carbon leakage is key to good climate policy. Carbon leakage occurs when companies move to countries with lower climate ambition to avoid carbon costs. The result is that emissions shift from one place to another rather than decline. Canada’s carbon pricing systems are designed to address this risk. The federal Output-Based Pricing System and similar provincial systems send a strong price signal while lowering costs compared to a full carbon price.
• Another way to address the risk of carbon leakage is with a border carbon adjustment. This policy applies a price on imports based on their embedded emissions. It helps level the playing field between domestic and foreign producers.
• Canada has also started exploring whether a BCA makes sense in the Canadian context. We will be working with like-minded economies, including the European Union and our North American partners, to consider whether and how this approach could fit into a broader strategy to meet ambitious climate targets while avoiding carbon leakage, ensuring a fair and predictable environment for businesses, fostering green innovation, and promoting global ambition on climate action.

Cap and cut emissions from oil and gas

Q1. What is the approach to cap and cut oil and gas sector emissions?

• Canada is taking action across all sectors in order to meet its commitment to reduce GHG emissions by 40% to 45% below 2005 levels by 2030 and to reach net-zero emissions by 2050.
• The oil and gas sector is the largest source of emissions in Canada producing 26% of national emissions in 2019. It is also a major employer and contributor to Canada’s GDP.
• The government has committed to cap emissions from the oil and gas sector and ensure they decline in line with our economy wide net-zero objective.
• New and existing policies will contribute to oil and gas sector reductions, including the new 75% methane reduction target for oil and gas; the CCUS investment tax credit; and R&D for CCUS. However, more action will be needed.
• We have not designed the emissions cap yet. We have begun relatively informal discussions, and plan to launch formal engagement.
• We are also asking the Net-Zero Advisory Body for advice.

Q2. How would an emissions cap affect oil and gas production, exports, and energy security?

• To be clear, the purpose of the cap is to reduce GHG emissions not to cap oil and gas production in Canada.
• Canadian exports of oil and gas are important to energy security in North America and at global levels.
• In designing the cap, we will consider how best to mitigate carbon leakage risks to avoid exacerbating energy security concerns in the current global context.
• 90% of Canada’s O&G exports go into or through the US for processing, with much of the Canadian production also used in the US.

Q3. Is the oil and gas sector target achievable? If it costs too much, won’t it just scare investment away from Canada?

• The target is ambitious, but there are significant opportunities to reduce emissions in the oil and gas sector.
• The oil and gas sector has cut back in recent years in response to low oil prices, but as demand and prices rebound, now is a good time to help direct the sector’s considerable capital toward low-carbon innovation.

Q4. What are the most promising decarbonisation pathways for the oil and gas sector?

• Large-scale deployment of multiple technologies are required for oil sands and other oil and gas producers to reduce GHG emissions.
• Some key mitigation pathways include steam displacement (which includes solvent injections), CCUS, co-generation, electrification, fuel switching and energy efficiency applications.

Clean Electricity Standard

Q1. How will the Government of Canada support jurisdictions that face significant challenges in reaching Canada’s clean electricity goals by 2035?

• The Government of Canada understands the transition to net-zero will require major investments in clean electricity generation, storage, and grid modernization to meet increasing demand from electrification in other parts of our economy as grid operators simultaneously decarbonize generation. To support and encourage the transition, the Government of Canada will explore the role of a Clean Electricity Standard (CES) to meet the commitment of creating a net zero electricity grid by 2035. The CES will complement existing policies on the power sector and provide a strong signal to decarbonize and trigger investment in clean generation and energy storage technologies. Engagement on the design of a CES with provinces and territories and other interested parties will begin shortly.
• As part of Canada’s climate plan, the federal government is already providing support for investments in renewable energy and next-generation clean energy and technology solutions.
  • The Government has since expanded on these investments and committed an additional $17.6 billion in new, green recovery measures included in Budget 2021.
  • In addition, as part of its $10-billion Growth Plan, the Canada Infrastructure Bank has identified a long-term target of $5 billion for clean power projects to support renewable generation and storage and to transmit clean electricity between provinces, territories, and regions, including to northern and Indigenous communities.
  • The return of Output-Based Pricing System (OBPS) proceeds in some provinces (approx. $80 million) through the Future Electricity Fund will support provincially managed clean electricity grid options (interties, grid modernizations, etc.). The Government of Canada launched a callout for projects in February 2022.
  • Through Budget 2021, the Government of Canada announced the creation of an Investment Tax Credit to encourage the creation of carbon capture and storage projects and increase their feasibility.
• The Government of Canada has committed to engaging with provinces and territories through the creation of a Pan-Canadian Grid Council to promote infrastructure investments, smart grids, grid integration and electricity sector innovation.
• The Government of Canada will also work closely with provinces and territories, utilities and potential investors to attract new investments in non-emitting generation and grid upgrades. For example, the Government of Canada and the Canada Infrastructure Bank are currently collaborating with provinces and regional utilities to advance the Atlantic Loop intertie project, which could greatly reduce emissions and maintain electricity affordability in the Atlantic region.
• Supporting interprovincial interties will provide fossil fuel-reliant regions with reliable and affordable clean electricity from neighbouring jurisdictions. This will help protect Canada’s environment while laying the groundwork for clean economic growth. This was also a recommendation from the International Energy Agency during their review of Canada’s energy policy (January 2022).

Q2. Will workers and their communities be affected by the transition to net-zero electricity?

• The Government of Canada remains committed to helping workers, communities, and businesses prepare for the challenges and opportunities that the low-carbon energy transition will present. Creating good, well-paying jobs in the low-carbon economy and ensuring that workers have the right tools and skill sets is essential to building a sustainable and prosperous future for Canada.
• Skills and training measures announced in Budget 2021 will deliver almost 500,000 new training and work opportunities for Canadians, which will help workers transition and take advantage of new opportunities, including in clean energy.
• The Government of Canada has a strong track record in ensuring a people-centered approach to clean energy transition. It is currently delivering $185 million to assist coal workers and their communities to develop new skills and diversify local economies.
  • The Government of Canada has invested a total of over $29 million in 46 projects across Saskatchewan, Alberta, New Brunswick, and Nova Scotia.
• The Government of Canada has emphasized the importance of continued G7 leadership on climate and energy in order to reach net zero by 2050, while also equipping our workers with the skills to take full advantage of the growing economic opportunities associated with clean technology.
• The Government is consulting Canadians to inform legislation on a Just Transition, including by convening a Just Transition Advisory Body to ensure a people-centered Net Zero transition.
• The clean energy sector has the potential to grow significantly, resulting in even more careers and opportunities for Canadians.
• Clean technology will be a vital driver of the economic engine in Canada and the world. Investing in clean technology positions Canada as a leader in an expanding market as investors and businesses seek sustainable growth. This will support the work of Canadian innovators and create new jobs for Canadians.
• The Government of Canada will work with provinces/territories and labour organizations to ensure workers affected by the transition are involved in the design and implementation of a successful transition to clean power.

Q3. Will a Clean Electricity Standard increase electricity costs for Canadians?

• The Government of Canada will work with each province and territory to develop a win-win solution for ratepayers, workers, utilities, and the environment. Together, we will design a standard that minimizes impacts to ratepayers, maintains reliability and reduces emissions.
• Through investments in energy efficiency, smart grids, and affordable renewable energy, the Government will ensure that Canadians will have reliable, affordable, and clean electricity.
• The Clean Electricity Standard discussion paper builds on past early actions by the federal government on electricity. This includes implementing a 2030 phase-out of unabated coal and natural gas electricity performance standards to provide the right market signals that together allow sufficient transition time for utilities to efficiently transition to clean electricity sources with minimal impacts on ratepayers.
• Fossil fuel-free electricity can also protect consumers from market volatility and exposure to global events that affect the price of natural gas and oil that utilities use to generate electricity.

Supplemental

• The Government of Canada and the Canada Infrastructure Bank are currently collaborating with provinces and regional partners to advance the “Atlantic Loop” intertie project, which could greatly reduce emissions and maintain electricity affordability in the Atlantic region, as well as other regional initiatives.

Q4. Canada’s oil and gas industry has recently recovered from an extended downturn following the start of COVID-19. How does this new climate plan help the electricity sector?

• Transforming Canada’s economy to ensure that it is resilient in the context of a global low carbon future will create jobs that will last for decades and ensure Canada’s success in the longer-term.
• Economic growth requires regulatory certainty, especially as the country continues to be impacted by COVID-19. Canada’s commitment to net-zero electricity by 2035 is not only an ambitious target but also the start of providing all electricity producers with the clarity of where the electricity sector is headed in the coming decades. This sends an important market signal that will support their future investments in grid infrastructure.
• Investments in clean tech and related infrastructure such as interties and renewable energy can create new jobs.
• The Government will also continue to partner with industry to ensure new technologies to reduce emissions are being deployed – such as CCUS, development of clean hydrogen and fuel-switching to clean electricity.

Q5. How will the Clean Electricity Standard (“CES”) impact electricity affordability in 2035?

• Affordability will be a key consideration in the design of the CES. ECCC will work closely with provinces/territories, utilities and electricity regulators to ensure that costs are taken into account and minimized. A cost-benefit analysis will be developed and published alongside the regulation.
• The energy transition will be transformative, but it is urgently needed to address the mounting risks and impacts of climate change in Canada. Accelerating the transition to a net-zero economy today will reduce the higher costs from inaction later on. Unless we make transformational changes across many parts of the economy, we will soon have to grapple with even higher human and financial costs like those Canada experienced in 2021 from extreme storms, floods, heat waves, droughts and forest fires.
• The earlier we move away from investments in fossil fuel infrastructure that will persist beyond 2035, the more we’ll minimize the economic burden of infrastructure no longer consistent with our net-zero goals that would likely be passed on to electricity ratepayers.
• A Clean Electricity Standard will ensure that investments in fossil fuel fired electricity generation are consistent with the goal of net-zero emissions by 2035. This regulation will minimize the cost of this transition to ratepayers by preventing new investment in assets that cannot generate low- or non-emitting power to meet Canada’s net zero goals.
• As part of broader engagement regarding the Clean Electricity Standard, the Government of Canada will consult with stakeholders to understand if more complementary measures would need to be developed to help ensure that the electricity sector receives the support it needs to provide reliable and affordable service to all Canadians while achieving net-zero emissions by 2035. Complementary measures could include tax measures, funding, and playing a convening function to support interprovincial electricity system planning.
• A 2035 target year provides a clear market signal to the developers of emerging clean technology, and the investors who finance them, that their technology has a market role in Canada’s grids. This market signal will drive the deployment of technology that allows the integration of variable renewables into the grid. It will also provide the necessary lead time to utilities to begin effectively planning for a clean future.
• The cost of solar and wind power have declined significantly in the last ten years and continue to fall, making them increasingly competitive compared to new natural gas-fired electricity. Canada’s increased carbon price trajectory towards 2030 will increase the competiveness of these non-emitting sources of generation compared to fossil fuels. Battery storage technology is also experiencing cost reductions as more systems are deployed commercially.
• Given the decreasing costs of renewables, an electricity sector that relies on renewable generation helps to cushion households and businesses from the price volatility of fossil fuels. Furthermore, the Government of Canada continues to safeguard the affordability of this transition for households by investing in energy efficiency and electrification so that households and businesses can meet their needs using less energy.

Q6. How will the Government of Canada reduce economic impacts on emissions-intensive-trade-exposed industries (EITEI)?

• As a key input to industry, the Government of Canada recognizes that electricity is a foundational component of economic growth in Canada.
• As the electricity sector transitions to net-zero emissions, the Government of Canada is committed to ensuring that electricity remains reliable and affordable so that industries do not face pressure to relocate operations to other jurisdictions without climate policies in place (also known as carbon leakage).
• The Government of Canada will work to ensure that other climate policies, such as the Output-Based Pricing System Regulations (OBPSR) for large industries, works in harmony with a new Clean Electricity Standard regulation for the electricity sector, while developing a suite of complementary policies to ease the transition to low- and non-emitting generation.
• Canada’s electricity is already among the cleanest in the world. In the future, if Canada’s trading partners, including the U.S. and the EU, levy import fees based on the carbon-intensity of products (known as Border Carbon Adjustments, or BCAs), Canadian industries will already have a head start in producing less carbon intensive products, thereby reducing their exposure to these fees.
• By ensuring the transition to a net-zero emitting electricity sector by 2035, the Government of Canada is helping to reduce industries’ exposure as Canada’s trading partners implement BCAs.

Q7. What role will nuclear generation technologies play in allowing provinces to decarbonize their electricity systems?

• Nuclear energy is already an important part of Canada’s current non-emitting energy mix, and we remain committed to providing responsible stewardship to support a strong and safe nuclear sector.
• Nuclear energy is internationally-recognized by countries and organizations alike as playing an important role in meeting Paris Agreement climate targets and achieving net zero emissions economy-wide by 2050.
• Canada will need non-emitting power to ensure a reliable and stable grid when wind and solar are not available. This non-emitting power could come from existing sources such as hydroelectricity or emerging sources such as geothermal, hydrogen, or small modular reactors. Provinces and territories will make these choices depending on the technology availability, costs, and local circumstances (e.g. geography, available resources, existing infrastructure, economic benefits, etc.).
• Renewable resources vary by region, and decisions on the generation mix ultimately rest with the provinces and territories. Various provinces have expressed a clear interest in utilizing small modular reactor technologies to reduce emissions, decarbonize heavy industry and spur economic development.
• The Government of Canada launched a Small Modular Reactor (SMR) Action Plan in December 2020, building on the SMR Roadmap released in 2018, to lay out the next steps to develop and deploy this technology.

Q8. How might a Clean Electricity Standard fit into the current regulatory environment for reducing the use of fossil fuels in energy (e.g. Clean Fuel Standard; Output-Based Pricing System Regulations; coal and natural gas electricity regulations)?

• A Clean Electricity Standard, in the context of the full set of measures put in place and proposed by the Government, can set us on the path to ensure Canada’s electricity generation achieves net-zero emissions.
• The Clean Electricity Standard will be designed to work in harmony with existing regulations, including the phase-out of conventional coal generation, natural gas regulations, the clean fuel regulation, and carbon pricing, in particular the Output-Based Pricing System Regulations (OBPSR).

Q9. With recent calls from Quebec and Alberta to conserve electricity usage (during Dec/Jan 2022’s cold snap), is this the right time to make big changes to the country’s electricity grid? How will the Government ensure the reliability of the grid under a future CES?

• Canada’s electricity grid sometimes faces challenges when the demand for power is high due to extreme cold or heat. With climate change, we can expect this to happen more frequently, so it is important we use the transition to net-zero electricity to build a better electricity grid.
• Extreme weather can affect both emitting and non-emitting electricity generation. A net-zero grid will depend on a greater diversity of generation and storage technologies, as well as more sophisticated operations, than traditional fossil fuel dependent grids. For example, interties between provinces, increased battery storage, and grid modernization will help grid operators continue to reliably deliver electricity even in the face of challenges caused by extreme weather.
• Also, by reducing peak demand, energy efficiency measures can ease the transition to a decarbonized grid as demand increases through electrification and extreme weather events pose additional challenges. The Government of Canada is making investments in energy efficiency programs, such as the Low-Carbon Economy Fund and the Canada Greener Homes Grant program to help reduce emissions while saving money for consumers.
• Finally, during consultations and the development of the CES, the critical importance of ensuring grid reliability will be taken into account.

Clean Fuel Regulations

Q1. What is the timeline for the publication of the final Clean Fuel Regulations?

• The final Clean Fuel Regulations are on track to be published in spring 2022.
• At that time, an updated Regulatory Impact Assessment Statement will also be published. It will include an up-to-date cost benefit analysis for the Regulations.

Q2. What do the Clean Fuel Regulations cover?

• The Regulations aim to reduce greenhouse gas emissions from liquid fossil fuels used in Canada for transportation, i.e. gasoline and diesel. The Regulations will require liquid fossil fuel suppliers to reduce the carbon intensity of the fuels they produce and import for use in Canada.

Q3. Do the Clean Fuel Regulations duplicate what would be achieved by carbon pollution pricing or the oil and gas cap?

• The Clean Fuel Regulations will complement carbon pricing.
  • Carbon pricing sends a broad signal across the economy to spur the lowest cost reductions wherever they may be found.
  • The Clean Fuel Regulations will complement these general signals by sending a targeted incentive to drive transformational changes along the lifecycle of liquid fuels for longer-term capital investments such as carbon capture and storage.
  • Actions taken under the Clean Fuel Regulations can also reduce the overall emissions of a refinery, helping it to meet compliance under other provincial or federal regulations like the Output-Based Pricing System.
• As the oil and gas cap is designed, it will take into account the Clean Fuel Regulations.
• The price on carbon, Clean Fuel Regulations, and oil and gas cap are needed in order to help exceed Canada’s current 2030 GHG emission reduction target under the Paris Agreement target, and to put Canada on a path towards achieving the goal of net-zero emissions by 2050.

Inefficient fossil fuel subsidies

Q1. What is being done to stop providing fossil fuel subsidies?

• In 2009, Canada as a part of the Group of 20 (G20) Leaders committed to rationalizing or phasing out inefficient fossil fuel subsidies. The government recently accelerated its commitment to do so from 2025 to 2023.
• The Government of Canada’s efforts to reform fossil fuel subsidies have resulted in the phase-out or rationalization of eight tax expenditures that supported fossil fuel exploration or production.

Q2. What progress has the government made on the G20 commitment?

• The Government has made important progress on the G20 commitment to rationalize and phase out inefficient fossil fuel subsidies with the rationalization of eight tax expenditures for the fossil fuel sector to date that eliminate preferential tax treatment, including:
  • Phase-out of the accelerated capital cost allowance for oil sands (announced in Budget 2007; completed in 2015)
  • Reduction in the deduction rates for intangible capital expenses in oil sands projects to align with rates in conventional oil and gas sector (announced in Budget 2011; completed in 2016)
  • Phase-out of the Atlantic Investment Tax Credit for investments in the oil and gas and mining sectors (announced in Budget 2012; completed in 2017)
  • Reduction in the deduction rate for pre-production intangible mine development expenses to align with rate for the oil and gas sector (announced in Budget 2013; completed in 2018)
  • Phase-out of the accelerated capital cost allowance for mining (announced in Budget 2013; completed in 2021)
  • Allowing the accelerated capital cost allowance for liquefied natural gas facilities to expire as scheduled in 2025 (announced in Budget 2016)
  • Rationalize the tax treatment of expenses for successful oil and gas exploratory drilling (announced in Budget 2017; completed by 2021)
  • Phase out tax preference that allows small oil and gas companies to reclassify certain development expenses as more favorably treated exploration expenses (announced in Budget 2017; completed in 2019)
• In June 2018, the Minister of Natural Resources along with Argentina’s Energy and Mining Minister announced that Canada and Argentina would be partnering to perform peer reviews to ensure both countries are on track to phase out inefficient fossil fuel subsidies. The peer review process will increase transparency on Canada’s actions to fulfil the G20 commitment and further reaffirm our commitment to climate action and to sustainable economic growth at home and abroad.
• To make sure Canadians are heard from, in March 2019, the Minister of Environment and Climate Change launched a consultation on the Government’s draft framework to review measures outside the tax system.The consultation invited comments from all Canadians with an interest in Canada’s climate change commitments and policies and concluded in June 2019.
• The December 2021 mandate letters have also directed Ministers of Environment and Climate Change, Finance and Natural Resources to develop a plan to phase out public financing of fossil fuels both internationally and nationally.

Q3. Can you provide the definition of efficient and inefficient fossil fuel subsidies?

• Members of the G20 committed to phasing out or rationalizing inefficient fossil fuel subsidies that encourage wasteful consumption. There is intentionally no definition of “inefficient fossil fuel subsidies,” so that countries can define this term in the context of their national circumstances.
• However, the G20 commitment does provide some consideration by indicating that inefficient fossil fuel subsidy reform “will not apply to support for clean energy, renewables, and technologies that dramatically reduce greenhouse gas emissions.”

Q4. What is an example of an inefficient fossil fuel subsidy?

• Since 2007, the government has successfully assessed the alignment of tax measures with Canada’s G20 commitment. This work has supported significant actions by successive governments to phase out or rationalize eight tax preferences for the fossil fuel sector.

Q5. In terms of reviewing inefficient fossil fuel subsidies, Canada has committed to undergo a peer review process under the G20. When will the government complete the peer review?

• Our department is working closely with Finance Canada who is leading the peer review process under the G20 commitment.
• ECCC is working with Finance Canada and other departments to develop an approach that reflects the feedback we have received from the CESD audit, targeted and public consultations undertaken in 2019, and lessons from the 6 countries that have completed the G20 peer review so far. The pace of the review and analysis has been accelerated to meet the Government’s commitment to phase out and rationalize inefficient fossil fuel subsidies by 2023.

International climate finance

Q1. What are the main objectives of Canada’s climate finance?

• Climate finance is a critical part of Canada’s efforts to support climate mitigation and adaptation action in developing countries in line the objectives of the Paris Agreement.
• In 2021, Canada doubled its climate finance commitment to $5.3 billion (B) over the next 5 years to support developing countries to transition to sustainable, low-carbon, climate-resilient, nature-positive and inclusive development.
• To support developing countries in combating the dual crises of climate change and biodiversity loss, a minimum of 20% of $5.3B will be allocated to projects that leverage nature-based climate solutions and projects that contribute biodiversity co-benefits.
• Canada is increasing its proportion of grant funding to 40%, and its provision of funding towards adaptation to a minimum of 40% to help developing countries build resilience.
• Canada’s climate finance is aligned with our Feminist International Assistance Policy and will continue to support women’s leadership and decision-making in climate action. Canada will ensure that 80% of its climate finance projects integrate gender equality.
• Over the next five years, Canada will focus its international climate finance on four main thematic areas: clean energy transition and coal phase-out, climate-smart agriculture and food systems, nature-based solutions and biodiversity, and climate governance.

Q2. What results has Canada achieved from its international climate finance?

• To date, Canada’s previous $2.65B climate finance commitment is expected to reduce or avoid over 228 megatonnes of greenhouse gas (GHG) emissions and help over 6.6 million (M) people increase their resilience to climate change. The impacts of Canada’s climate finance will continue to increase over time as results of the investments materialize in the long-term.
• Canada’s climate finance has other impacts that are harder to quantify. For example, Canada’s contribution to the National Adaptation Plan (NAP) Global Network has enabled developing countries to build capacity and adopt best practices in developing and implementing NAPs, as well as strengthening gender considerations in NAPs.
• To achieve successful results, Canada works with partners that have clear accountability frameworks and closely monitors the progress of our support through rigorous performance measurement at the programmatic level.
• Results from Canada’s climate finance investments are published on a regular basis, notably through our Departmental Results Reports, Canada’s National Communications and Biennial Reports to the UNFCCC, the Annual Synthesis Report on the Status of Implementation of the Pan-Canadian Framework, and on our climate finance website.

Q3. Is Canada contributing its fair share of climate finance?

• Canada’s $5.3B climate finance commitment builds on the previous $2.65B commitment (2015-16 to 2020-21) and the $1.2B Fast Start Finance (2010-11 to 2012-13). As such, Canada’s $5.3B commitment is a significant increase compared with previous levels.
• But Canada’s total climate finance contribution goes much further than its core commitment. It includes climate finance mobilized from a variety of sources beyond Canada’s climate finance pledge, such as private finance mobilized through blended finance, additional international assistance with a climate component, core contributions to multilateral development banks, and climate relevant financing by Export Development Canada and FinDev Canada. For example, between 2015 and 2019, Canada’s total climate finance contribution amounted to $4.02B.

Q4. Are we on track to meet the collective $100 billion goal by 2020?

• OECD estimates that climate finance provided and mobilized by developed countries increased from US$58.5B in 2016 to US$79.6B in 2019 (2020 data is not yet available).
• Co-led by Canada and Germany, the Climate Finance Delivery Plan to 2025, based on OECD analysis recognized that developed countries will not have met the goal in 2020. However, recent increased donor pledges show significant progress being made in 2021 and 2022. The goal will likely be reached in 2023 and exceeded in 2024 and 2025.
• In support of scaling up climate finance, Canada is taking an innovative approach to mobilizing private sector financing and partnering with multilateral development banks and bilateral partners to help remove market barriers to private investments in developing countries by using targeted amounts concessional finance.

Q5. What is Canada doing to support Small Islands Developing States (SIDS)?

• One of the key objectives of Canada’s climate finance is to support the climate resilience of the poorest and most vulnerable countries, including SIDS.
• In addition to scaling up support for adaptation finance in its new $5.3B commitment, Canada is working to bolster efforts to address the barriers to accessing climate finance faced by SIDS, which compound the issue of vulnerability.
• For example, Canada supported the creation of the Climate Finance Access Network (CFAN) initiative that support developing countries build their capacity to structure and secure finance for priority climate mitigation and adaptation investments.
• Canada also contributed $60M to the World Bank’s Renewable Energy in Small Island Developing States program to support SIDS to expand their renewable energy and energy efficiency, including pursing gender equality across energy value chains.

Q6. How much of the $5.3B climate finance envelope is ECCC implementing?

• Over 5 years, ECCC will implement $160M in grants and contributions in 3 thematic areas: Clean Energy and Coal Phase-Out ($50M), Nature-based Solutions ($15M) and Climate Governance ($90M). An Emerging Priority Fund sets aside $5M to retain flexibility for PM and Minister-led events over the course of the commitment.
• ECCC’s funding will support developing countries’ transition to clean energy by phasing out coal-powered emissions and promoting equitable access to reliable and cost-effective clean energy solutions and energy efficient technologies, complementing Canada’s leadership through the Powering Past Coal Alliance.
• The funding will also support initiatives that catalyze the private sector role in the blue economy, coastal resilience and coral reef conservation to help advance ocean health, reduce vulnerability and build resilience in the most vulnerable coastal regions and communities.
• ECCC will also support projects that strengthen the enabling environments for effective climate governance in developing countries at the global, national and subnational levels.
• For FY2021-22, ECCC allocated a total of $6.24M in grants and contribution to the Climate and Clean Air Coalition (CCAC) ($6.175M) and the global phase-down of HFCs under the Montreal Protocol ($0.065M).
• In addition, the department has spent $4.2M in funding from the $2.65B commitment that was reprofiled in FY2021-22 to fulfill existing engagements with developing country partners and Canadian implementing organizations.

National Adaptation Strategy

Q1. What is the National Adaptation Strategy and why do we need one?

• Canada’s climate is warming rapidly, and across the country, Canadians are witnessing and experiencing the devastating impacts of climate change.
• Adaptation is critical to protect Canadians from the negative effects of climate change, and ambitious and collaborative adaptation action that includes all Canadians is required to address and prepare for continuing and worsening impacts.
• That’s why the Government of Canada is working with provinces, territories, Indigenous Peoples, and other key partners and experts to develop Canada’s first National Adaptation Strategy.
• The Strategy will establish a whole-of-society blueprint for climate change adaptation in Canada, which includes Indigenous Peoples, provinces, territories, and other key partners and stakeholders, and strengthens linkages and collaboration among their individual efforts and plans.
• By bringing together all partners and encouraging cross-cutting and collaborative action, the Strategy will outline a shared vision for a resilient Canada, establish priorities for collaboration, and align actions for faster, coordinated, and systemic adaptation to the impacts of climate change.

Q2. How is the Strategy being developed?

• Development of the Strategy is well underway and the Strategy will be finalized by fall 2022, in advance of COP27.
• Carrying out extensive engagement with partners and stakeholders across Canada is a foundational component of developing the Strategy, in order to ensure that the Strategy advances adaptation actions that are equitable, advance reconciliation with Indigenous peoples, and leave no one behind.
• To date, Canada has engaged with provinces and territories, Indigenous peoples, and over 100 experts, representing academia, youth, professional associations, the private sector, environmental organizations, and others, to develop transformational goals and medium-term objectives for the Strategy.
• This spring, Canada will build on these efforts by expanding engagement to include the public, and focusing developing the actions that the Strategy will advance.

Q3. What will the Strategy accomplish?

• The Strategy will be action-oriented – it will include a variety of proactive and collaborative adaptation actions, and establish clear roles and responsibilities for adaptation across Canada.
• These actions will cut across priority systems for adaptation – including infrastructure, health and well-being, the natural environment, the economy, and disaster resilience and security – focusing on supporting long-term structural changes and mechanisms for better adaptation, as well as advancing immediate actions to protect the populations and areas that are most at risk today.
• In fall 2022, alongside the release of the Strategy, Canada will release a federal adaptation action plan to outline the federal government’s role and commitments to advancing adaptation.
• The Government of Canada will continue to work with provinces and territories and Indigenous Peoples on new ways to advance adaptation action together.
• By advancing immediate action and establishing effective mechanisms for collaboration, this Strategy will help protect Canadians for the impacts of today, while also laying the foundation for more effective and continued efforts on adaptation as Canada’s climate continues to change.

National Inventory Report

Q1. What are the key highlights from 2021 National Inventory Report?

• Canada’s most recent greenhouse gas emissions data for 2019 shows little change from 2018 – about 1 megatonne (Mt) increase to 730 Mt CO₂ eq.
• This year’s report confirms Canada’s economy grew more rapidly than its GHG emissions (to end of 2019). This is an indication that the country’s economy is becoming more efficient as it transitions to newer and less-polluting technologies and cleaner energy and fuels.
• Canada’s greenhouse gas emission trends from 2005 – 2019 have remained flat as emission increases in the oil and gas and transportation sectors have been offset by decreases in other sectors, notably electricity and heavy industry.

Q2. What parts of the economy have seen emissions increases in the last decade?

• Emission increases since 2009, when emissions were at their lowest, have been driven by growth in Oil and Gas Extraction (27 Mt), in the number of light-duty gasoline trucks (13 Mt) and heavy-duty diesel vehicles in operation (12 Mt), in the production and consumption of halocarbons, sulfur hexafluoride and nitrogen trifluoride (5.5 Mt), and in the application of inorganic nitrogen fertilizers (3.5 Mt). During the same period, there was a 32 Mt decrease in emissions from electricity generation, which partly offset the growth in emissions.

Q3. Are GHG emissions data available by industrial facility in Canada?

• The Greenhouse Gas Reporting Program collects information on GHG emissions annually from over 1700 facilities across Canada under section 46 of the Canadian Environmental Protection Act. This data is complementary to NIR data, and is available online (Canada.ca/GHG-reporting).

Q4. ls Canada improving methane emissions estimates in future editions of the NIR?

• Continuous improvement is a key principle upon which Canada’s annual greenhouse gas inventory is developed. Important method improvements were implemented in the 2021 edition of the NIR (methane emissions from landfills) and more will be implemented in the 2022 edition (fugitive methane emissions from upstream oil and gas). The enhanced methods use Canadian-specific studies and knowledge, facilitate the adoption of new scientific data, and better capture the impact of improvements in technologies and industry practices on emissions.

Q5. How is Canada consulting with Province and Territories on emissions?

• The National Inventory Report is one way federal, provincial and territorial governments take annual stock of emissions reduction progress of the various federal, provincial, territories climate plans.
• Improvements to Canada’s National GHG Inventory Report (NIR) often results in revisions to historical GHG estimates and changes to provincial and territorial GHG estimates. The commitment to quality and evidence-based information includes collaborating with stakeholders to reconcile national, provincial and territorial data towards nationally-consistent data sets.
• As part of its regular consultation process, Environment and Climate Change Canada (ECCC) shares preliminary GHG emissions data with provinces and territories. ECCC reviews and addresses any comments received to the extent possible prior to the NIR’s publishing.

Q6. What impact did COVID-19 have on emissions?

• Canada’s 2022 National Inventory Report – which will report emissions through the year 2020 – will reflect any reductions in emissions from economic activities impacted by COVID-19. It is anticipated that a slowdown in activities, such as burning fuel for transportation or heating commercial buildings would result in lower GHG emissions in 2020.

Q7. When will the next edition of the NIR be published?

• Canada’s 2022 National Inventory Report – which will report emissions through the year 2020 – will be published by April 15, 2022. This will be available online at canada.ca/ghg-inventory.

Net Zero Accelerator Initiative

Q1. What is the Net Zero Accelerator Initiative?

• The Net Zero Accelerator will provide up to $8 billion in support of projects that will support innovation, enable Canada to reduce its domestic greenhouse gas emissions, as well as unlock pathways to a healthy and productive decarbonized economy.
• The initiative will support projects that promote the decarbonisation of large emitters, clean technology and industrial transformation, and the development of a Canadian batteries ecosystem.
• The initiative will help Canadian businesses seize new opportunities as the world builds a greener global economy.

Q2. What role does Environment and Climate Change have in the initiative?

• I, as the Minister of Environment and Climate Change, support the Minister of Innovation, Science and Industry in the implementation of the initiative, including by providing advice and perspective in the context of strategic investments to support Canada’s climate plans.
• As part of enhanced governance efforts, Environment and Climate Change works collaboratively to help ensure that investments drive industrial transition and significant reductions in greenhouse gas emissions. Emphasis includes consideration of scale, in order to be consistent with achieving Canada’s climate goals and ability to meaningfully transform Canadian industry to lead and compete in a net-zero emissions future.

Q3. Can you give an example of the types of investments that are being made?

• In July 2021, the Prime Minister announced an important investment. Algoma Steel Inc. will receive up to $200 million from the Net Zero Accelerator initiative to retrofit their operations and phase out coal-fired steelmaking processes at their facility in Sault Ste. Marie, Ontario.
• This funding will enable the company to purchase state-of-the-art equipment to support its transition to Electric-Arc Furnace production. This electricity-based process is expected to cut greenhouse gas emissions by more than 3 million metric tonnes per year by 2030, making a meaningful contribution to achieving Canada’s climate goals.

Net-Zero Advisory Body

Q1. What is the mandate of the Net-Zero Advisory Body?

• The Net-Zero Advisory Body (NZAB) has a mandate to provide independent advice to the Minister of Environment and Climate Change (ECC) with respect to achieving net-zero emissions by 2050, including advice related to:
  • greenhouse gas emissions targets;
  • greenhouse gas emissions reduction plans; and,
  • any matter referred to it by the Minister.
• The mandate also includes conducting engagement activities related to achieving net-zero emissions.
• Its advice will include measures to catalyze long-term, low-carbon economic growth across the Canadian economy.
• With a legislated basis, the NZAB is intended to be a permanent body, providing advice along the way to 2050.

Q2. Is the Net-Zero Advisory Body independent?

• Yes, the NZAB is independent and apolitical. The NZAB will give independent advice to the Minister.
• NZAB members represent themselves as individuals, not the organizations that they are employed by or affiliated with.
• Each member brings their own expertise and experiences to the roles.
• The Canadian Net-Zero Emissions Accountability Act (CNZEAA) provides a statutory basis for the NZAB, and adds certainty and clarity to their mandate.
• On February 21, 2022, pursuant to CNZEAA, ten members of the NZAB were appointed by the Governor-in-Council.
• While the NZAB is supported by a Secretariat based within Environment and Climate Change Canada (ECCC), its decisions, materials, discussions, and reports are not subject to departmental approvals.

Q3. Who has the Net-Zero Advisory Body met with so far?

• The NZAB has met with a range of domestic and international experts who have completed net-zero pathways, including:
  • Canada Energy Regulator
  • Canadian Climate Institute
  • Canadian Centre For Policy Alternatives
  • David Suzuki Foundation & University of Victoria
  • Haut conseil pour le climat (France)
  • Indigenous Clean Energy
  • International Energy Agency
  • International Institute for Sustainable Development
  • McKinsey & Company
  • National Academies Of Sciences Engineering And Medicine
  • *Redacted*, Carleton University, Transition Accelerator
  • *Redacted*, Princeton University
  • UK Climate Change Committee
  • Trottier Energy Institute
• To inform the advice on Canada’s 2030 Emissions Reduction Plan, the NZAB conducted a range of engagement activities over the course of summer and fall 2021 and early 2022. The NZAB:
  • Heard from sector and scientific experts, decision-makers, the public, businesses and industry, and civil society organizations and associations, including those representing workers and Indigenous peoples;
  • Hosted 15 discussions and briefings with decision-makers and sectoral experts;
  • Received more than 1,200 submissions and comments via its website; and,
  • Held roundtables to hear from representatives of 58 organizations.

Q4. What work has the Net-Zero Advisory Body done this year?

• During the first three months of its mandate, the NZAB met with a range of domestic and international experts who had developed net-zero pathways.
• In June 2021, the NZAB released its pathways summary which identifies ten observations – essential values and principles – that they believe are essential to defining net-zero pathways that are achievable and lead to a fairer, healthier, and more secure future for all Canadians.
• The NZAB also set lines of inquiry and priorities for analysis and engagement.
• The NZAB is currently working on its submission to the Government of Canada’s 2030 Emissions Reduction Plan.
• The NZAB’s first annual report with substantive advice will be completed within the next year.

Q5. What are the Net-Zero Advisory Body’s lines of inquiry?

• The NZAB’s lines of inquiry are the subject matter that it is exploring in detail this year, on which it will provide advice on to the Minister.
• Its current lines of inquiry are governance, oil and gas, buildings, and transportation.

Q6. Who are the members of the Net-Zero Advisory Body?

1. Marie-Pierre Ippersiel, co-chair (QC)
2. Dan Wicklum, co-chair (AB)
3. Catherine Abreu (NS)
4. Gaetan Thomas (NB)
5. John T. Wright (SK)
6. Kim Thomassin (QC)
7. Kluane Adamek (YK)
8. Linda Coady (BC)
9. Sarah Houde (QC)
10. Simon Donner (BC)
11. Yung Wu (ON)

• The NZAB brings a range of experiences and expertise to its work, including in backgrounds in science, business, labour, policy-making, rural economic development, and Indigenous governance.

Q7. What requirements does the Canadian Net-Zero Emissions Accountability Act place on the Minister of Environment and Climate Change in relation to the Net-Zero Advisory Body?

• The Minister may determine and amend the terms of reference of the advisory body and must make any terms of reference or amendments to those terms available to the public.
• When recommending a member for appointment, the Minister must consider the need for the advisory body as a whole to have expertise in, or knowledge of certain areas.
• The Minister must make the NZAB’s annual report available to the public within 30 days after receiving it. Within 120 days of receiving the report, the Minister must publicly respond to the advice included in the NZAB’s report, including any national greenhouse gas emissions target that is recommended by the advisory body if the Minister has set a target that is different from it.
• When setting or amending a national greenhouse gas emissions target or establishing or amending an emissions reduction plan, the Minister must, in the manner the Minister considers it appropriate, provide the governments of the provinces, Indigenous peoples of Canada, the NZAB and interested persons, including any expert the Minister considers appropriate to consult, with the opportunity to make submissions.
• When establishing a greenhouse gas emissions reduction plan, the Minister must take into account the United Nations Declaration on the Rights of Indigenous Peoples, the submissions provided by the advisory body and advice it provided in its annual report, and any other considerations that are relevant to the purpose of this Act.
• When setting a greenhouse gas emissions target, the Minister must take into account:
  • the best scientific information available
  • Canada’s international commitments with respect to climate change
  • Indigenous knowledge
  • submissions provided by the NZAB and advice it provided in its annual report

Q8. What advice has the Net-Zero Advisory Body provided on setting cap and targets for the oil and gas sector?

• On November 1, 2021, I, in my role as Minister of Environment and Climate Change, together with the Minister of Natural Resources, sent the Net-Zero Advisory Body (NZAB) a joint letter requesting specific advice on key guiding principles to inform the development of quantitative five-year targets for emissions reductions in Canada’s oil and gas sector.
• We thank the NZAB for accepting our request. Their guiding principles are critical to our collective goal of defining an ambitious and achievable path to a prosperous net-zero emissions economy by 2050 and will help inform our 2030 Emissions Reduction Plan.

Methane emissions reductions

Q1. Why is methane important? Why is it necessary to have a strategy focused specifically on methane rather than all greenhouse gases?

• Methane is a potent greenhouse gas and a short-lived climate pollutant with a global warming potential of more than 25 times greater than carbon dioxide over 100 years, and 86 times greater than carbon dioxide over a 20-year period.
• Methane is responsible for about 30% of the global rise in temperature and half a million premature deaths globally each year. The IPCC has made it clear that there is no pathway to limiting warming to 1.5 degree Celsius without strong, rapid and sustained reductions in methane, in addition to reductions of carbon dioxide.
• Unlike other greenhouse gases, methane is also an energy source (it’s the main component of natural gas), so there is economic value from capturing methane emissions or preventing methane leaks.
• Natural gas is composed almost entirely of methane, and is a valuable resource used by Canadians to heat their homes and power factories. However, a significant amount of the natural gas extracted by the oil and gas industry is wasted due to leaks and intentional releases into the air. In addition to oil and gas, landfills and agriculture are Canada’s other major sources of methane emissions.

Q2. What is the government doing or planning to do about methane emissions?

• At the November 2021 UN Climate Summit (COP26), Canada joined the Global Methane Pledge, along with the United States, the European Union and over 100 other countries. The Pledge aims to reduce global anthropogenic methane emissions across economic sectors by at least 30% below 2020 levels by 2030.
• Our government is now developing a methane strategy to reduce methane emissions across the broader Canadian economy, consistent with the Global Methane Pledge.
• The strategy will outline plans for addressing methane from the three sectors that account for over 90% of Canada’s anthropogenic methane emissions: oil and gas (40%), agriculture (29%), and landfills/waste (27%).
• In 2016, Canada set a target of reducing methane emissions from the oil and gas sector by 40–45% below 2012 levels by 2025, and has had regulations in place since 2018 to help achieve it.
• In late 2021, we published a report on the effectiveness of the suite of federal actions we have taken to achieve this 2025 goal. The report concluded that Canada is on track to meet its 2025 target for methane reductions from the oil and gas sector. This sets a strong foundation for continued progress on reducing methane emissions. It provides a solid basis for launching consultations in early 2022 on new federal regulations that will be developed to reduce oil and gas methane emissions by at least 75% by 2030 compared with 2012 levels.
• As part of Canada’s COVID-19 Economic Response Plan released in April 2020, the Government launched the Onshore Program of the $750 million Emissions Reduction Fund to support emission reduction efforts by providing financial support to struggling companies in the sector. It offered up to $675 million to help onshore (that is, land‑based) oil and gas companies to, among other things, accelerate their deployment of equipment to reduce greenhouse gas emissions, with a particular focus on methane.
• Responding to the global imperative for further cuts, Canada has committed to reduce oil and gas methane emissions by 75% below 2012 levels by 2030, and will soon be releasing a discussion paper to launch discussions on Canada’s approach to achieving this.
• We also plan to develop new federal regulations to increase the number of landfills that collect and treat methane, and ensure that landfills already operating these systems make improvements to collect all they can. We began consultations on landfill methane regulations by publishing a discussion paper in January 2022.
• We will also be supporting Canadian farmers and industry partners who are taking action to reduce emissions, sequester carbon and make their operations more sustainable, productive and competitive.

Q3. What is the status of the government’s commitment to develop an economy-wide methane plan, as per the Environment Minister’s mandate letter?

• Our government is developing a methane strategy to reduce methane emissions across the broader Canadian economy, consistent with the Global Methane Pledge, which aims to reduce global anthropogenic methane emissions across economic sectors by at least 30% below 2020 levels by 2030.
• It will focus on the three sectors that account for over 90% of Canada’s anthropogenic methane emissions: oil and gas (40%), agriculture (29%), and landfills/waste (27%).
• Timelines are still being determined but we expect to publish the strategy later this year well before the COP27 conference in November.

Q4. Is the Global Methane Pledge target of reducing methane economy-wide by 30% by 2030 achievable? How are you going to achieve that target?

• Our government’s progress on addressing oil and gas methane shows that significant methane reductions are achievable in Canada.
• In 2016, Canada set a target of reducing methane emissions from the oil and gas sector by 40–45% below 2012 levels by 2025, and in 2018, we put regulations in place to help achieve it.
• In late 2021, we published a review report on the effectiveness of the suite of federal actions we have taken to achieve this 2025 goal. The report concluded that Canada is on track to meet its 2025 target for methane reductions from the oil and gas sector. This sets a strong foundation for continued progress on reducing methane emissions.
• At the November 2021 UN Climate Summit (COP26), Canada joined the Global Methane Pledge, along with the United States, the European Union and over 100 other countries. The Pledge aims to reduce global anthropogenic methane emissions across economic sectors by at least 30% below 2020 levels by 2030.
• Our government is now developing a methane strategy to reduce methane emissions across the broader Canadian economy, consistent with the Global Methane Pledge. The strategy will outline plans for addressing methane from the three sectors that account for over 90% of Canada’s anthropogenic methane emissions: oil and gas (40%), agriculture (29%), and landfills/waste (27%).
• Canada has now committed to reduce oil and gas methane emissions by at least 75% by 2030 below 2012 levels, with an approach that will include stronger regulations. The government will soon be releasing a discussion paper to launch consultations about Canada’s approach to achieving this.
• We also plan to develop new federal regulations to increase the number of landfills that collect and treat methane, and ensure that landfills already operating these systems make improvements to collect all they can. We began consultations on landfill methane regulations by publishing a discussion paper in January 2022.
• By going further on oil and gas methane reductions, introducing new methane regulations for landfill methane, and exploring opportunities to address methane from agriculture, we are confident that we can achieve economy-wide methane reductions consistent with the Global Methane Pledge.

Q5. Are the government’s methane plans going to impact farmers?

• Our government is exploring ways to reduce methane emissions from all of the top-emitting sectors, including agriculture.
• We will be consulting with farmers and the agricultural industry about the best opportunities and approaches for reducing methane from agriculture.
• Our government is committed to supporting Canadian farmers and industry partners who are taking action to reduce emissions, sequester carbon and make their operations more sustainable, productive and competitive.

Returning proceeds from carbon pollution pricing

Q1. What is the Government of Canada doing with the revenues it collects through carbon pollution pricing?

• All proceeds from the federal carbon pollution pricing system are returned to the province or territory of origin. Jurisdictions that have voluntarily adopted the federal fuel charge and/or the Output-Based Pricing System (OBPS) can choose to have those proceeds returned directly.
• In jurisdictions where the federal fuel charge applies on an involuntary basis, the majority of proceeds are returned to households through Climate Action Incentive payments. Remaining proceeds are returned to support key sectors and populations, including small and medium-sized businesses, farmers and Indigenous peoples.
• OBPS proceeds collected from the current or past backstop jurisdictions of Saskatchewan, Manitoba, Ontario and New Brunswick are being returned through the OBPS Proceeds Fund to further support industrial decarbonization.

Q2. What is the OBPS Proceeds Fund?

• Launched on February 14, 2022, the OBPS Proceeds Fund is designed to further reduce industrial greenhouse gas emissions and support clean electricity projects. The program has two streams:
  • The Decarbonization Incentive Program stream is a merit-based program that incentivizes the long-term decarbonization of Canada’s industrial sectors by supporting clean technology projects to reduce greenhouse gas emissions. Most OBPS regulated facilities can apply and applications are currently being accepted.
  • The Future Electricity Fund stream is designed to support provincially managed clean electricity projects and/or programs. Eligible projects will be determined during the negotiation of funding agreements in each jurisdiction. Initial discussions to support future formal negotiations are underway.

Q3. How will the Government of Canada return proceeds to provinces or territories that have transitioned out of the federal OBPS and implemented their own carbon pollution pricing system for industrial emitters?

• If a province or territory implements its own carbon pollution pricing system that meets the federal benchmark and transitions away from the OBPS, the OBPS Proceeds Fund would continue to support any projects that have been approved for implementation in those jurisdictions. The program would continue in the jurisdictions where the OBPS is no longer in effect until proceeds have been returned.

Q4. How much funding is available under the OBPS Proceeds Fund? How is it allocated?

• Available funding depends on the amount of proceeds collected from OBPS regulated facilities during a given compliance period.
• Approximately $161 million was collected from the federal OBPS for the 2019 compliance period. The following table shows the estimated funding available.

OBPS Proceeds Fund (proceeds for 2019)

Province	DIP estimated funding available (in millions)	FEF estimated funding available (in millions)
Manitoba	$5.3	$0.3
New Brunswick	$0.9	$5.9
Ontario	$68.3	$17.0
Saskatchewan	$6.9	$56.3

Q5. How will the Government of Canada return proceeds to Indigenous groups or governments?

• Canada committed to work on a distinctions-basis to co-develop the mechanisms by which a portion of fuel charge proceeds would be returned to First Nations and Métis recipients in jurisdictions where the federal fuel charge applies, beginning in 2020-21. The purpose of this approach is to provide long-term, flexible mechanisms that better support Indigenous-led climate action.

Sustainable Finance Action Council

Q1. What is the purpose and the mandate of the Sustainable Finance Action Council?

• The SFAC was established in May 2021, to bring together public and private sector financial expertise to support the growth of a strong, well-functioning, sustainable finance market.
• Sustainable finance enables the mobilization and alignment of private sector investments towards climate and environmental objectives, promotes financial stability related to climate risk, and supports a smooth transition to a net-zero economy.
• The Sustainable Finance Action Council is made up of 25 senior executives who represent a regionally diverse list of leading Canadian banks, insurance companies and pension funds, which combined, have more than $10 trillion in assets. The council is chaired by Kathy Bardswick, former President and Chief Executive Officer of The Co-operators Group and inaugural President of the Canadian Institute for Climate Choices.
• The SFAC’s principal mandate is to make recommendations on critical market infrastructure needed to attract and scale sustainable finance in Canada, including: enhanced assessment and disclosure of climate risks and opportunities; better access to climate data and analytics; and common standards for sustainable and low-carbon investments.

Q2. What is sustainable finance and why is it important for reaching Canada’s climate goals?

• The transition to net-zero emissions by 2050 is estimated to require hundreds of trillions of dollars in global investment. In Canada alone, this transition may require $2 trillion over the next three decades.
• Canada’s financial sector will play a key role in raising and guiding the necessary funds. To do so, the financial sector will need to incorporate environmental, social, and governance factors throughout financial decision-making.

Q3. What is the Government doing to advance sustainable finance in Canada?

• Climate-related financial disclosure is a key component of sustainable finance to ensure that the risk of climate change is reflected. This is why the SFAC’s early emphasis has been on enhancing climate-related financial disclosures aligned with the recommendations of the Task Force on Climate-related Financial Disclosure (TCFD).
• Budget 2021 announced that Crown corporations with assets over $1 billion will be required to make climate-related financial disclosures starting in 2022.
• In the December 2021 Ministerial mandate letters, the Government expanded on its support for climate-related disclosures, committing to work with provinces and territories to move toward mandating disclosures. This will require federally regulated institutions, including financial institutions, pension funds and government agencies, to issue climate-related financial disclosures and net-zero plans.
• In March 2022, the Government of Canada published its Green Bond Framework in advance of an inaugural green bond issuance of $5 billion. The Framework defines eligibility criteria and provides example expenditures aligned with the International Capital Markets Association Green Bond Principles. Green bonds will support Canada’s green transition by offering investment opportunities in both climate and environmental measures, while also fostering the development of Canada’s sustainable finance market.

Q4. Is the goal of sustainable finance to divest from fossil fuel sectors?

• The Government of Canada recognizes that no credible plan to achieve significant emissions reductions by 2030, and net-zero emissions by 2050, can neither ignore the emissions-reduction and the innovative potential of heavy industry, including the Canadian energy sector, nor the intersection between ambitious decarbonization and ensuring a just transition and economic opportunity for communities and individuals across Canada.
• Sustainable finance is intended to ensure that environmental, social, and governance considerations are taken into account in financial decision-making. This includes highlighting and mitigating risks or climate change, but also opportunities posed by future climate change. It is not intended to drive capital towards or away from specific sectors of the economy.

Q5. How do you respond to the Bank of Canada and the Office of the Superintendent of Financial Institutions recently released Climate Change Scenario Analysis report that indicates that the transition to net-zero will be extremely costly?

• The Government welcomes this report from the Bank of Canada and the Office of the Superintendent of Financial Institutions. Similar to other sectors of the economy, it is important that Canada’s financial sector assess their stability and resilience in the face of climate change, and make changes needed to adapt to its impacts.
• Their exercise is an important first step in helping financial institutions and the public sector improve their ability to analyze the financial risks tied to climate change.
• The analysis is based on international standards for climate scenarios used by central banks and the report presents illustrative scenarios that should not be considered predictions. They were deliberately designed to highlight some of the financial and economic risks related to the transition to a low-carbon economy. The report does not provide an assessment of Canada’s domestic climate policies and their impact on the financial sector
• The scenarios show how the transition to a low-carbon economy can lead to financial impacts for certain companies and the institutions that finance them. The analysis also shows that whatever path is chosen, delaying action exacerbates the risks to the financial sector and to the economy as a whole.

Zero-emission vehicles

Q1. What is the role of zero-emission vehicles in GHG emissions reduction?

• Canada is taking action across all sectors in order to meet its commitment under the Paris Agreement to reduce GHG emissions by 40% to 45% below 2005 levels, by 2030. It is also committed to reaching net-zero emissions by 2050.
• Recognizing that the transportation sector accounts for about 25% of Canada’s GHG emissions, the Government is taking multiple actions to reduce transportation emissions, including to expand the number of zero-emission vehicle (ZEVs) on Canadian roads.
• We are going to introduce mandates to require that over half of all new light duty vehicles offered for sale in 2030 are ZEVs, and 100% by 2035.
• We are also going to introduce a similar requirement for selected classes of medium- and heavy-duty vehicles offered for sale to be zero emission by 2040.
• We will also continue to align emission standards for light and heavy-duty vehicles with the most stringent performance-based standards in North America.
• The Government is also strategically investing in key areas such as consumer rebates for ZEV purchases, consumer education and awareness, expanding charging infrastructure, etc.
• Setting ambitious targets, backed by significant federal investments and industry action, will send a strong signal domestically and internationally that Canada is serious about moving towards a low-carbon transportation system.

Q2. Is Canada’s ZEV target too ambitious?

• The ZEV targets are ambitious, but also required to deliver on the Emission Reduction Plan and our international commitments.
• Canada is not alone in setting ambitious ZEV targets. Quebec, BC, California and at least 15 States have similar ZEV mandates.
• We are complementing mandates with measures to make ZEVs more affordable, significantly expand charging infrastructure, and lead by example via federal procurement rules.

Q3. Your department recently completed consultations. What are the views of industry, stakeholders to the Government’s ZEV targets?

• The traditional automakers want the Government to continue to align our emission standards with those of U.S.
• The U.S. is expected to release draft regulations for more stringent performance based standards of the 2027-30 model years to deliver on the commitment of 50% ZEV by 2030.
• Non-Governmental Environmental Organizations do not think our ZEV targets are ambitious enough.
• All stakeholders have pointed to the importance of complementing regulations with measures that match President Biden’s proposed EV tax credit, new investments in EV charging, etc.

Q4. How does Canada compare to other countries in terms of ambition?

• The transition to ZEVs will require a suite of regulations and enabling measures to support industry and Canadians in the ZEV transition. No country in the world has high ZEV adoption without providing consumer incentives and ensuring adequate charging infrastructure.
• The Netherlands, Sweden and Denmark have a target of 100% of light-duty vehicle sales to be ZEVs by 2030. Norway has committed to get there by 2025. Quebec, the UK, Japan, and Thailand, as well as California and other states that comprise up to 40% of the U.S. market have committed to 100% light-duty ZEVs by 2035. China is pursuing a 25% by 2025 sales target and the European Union is regulating GHG performance standards to achieve 100% ZEV sales by 2035.
• Norway is the world leader in ZEV sales. It has achieved 74% in 2020 through a series of strong disincentives and incentives including sales tax exemptions for ZEV, making them cheaper than internal combustion engine vehicles. Norway does not have a sales mandate per se but it has implemented the EU GHG performance standards for vehicles.
• In Glasgow last year, there were numerous announcements and commitments to transitioning the on-road fleet to zero-emission vehicles. These were supported by Canada – and many other countries, governments, businesses, and organizations.
  • For example, the Glasgow Breakthrough on Transportation, where by 2030, zero-emission vehicles are the new normal and accessible, affordable, and sustainable in all regions.
  • Also during the Transport Day Declaration, governments, businesses, and other organizations committed to working towards all sales of new cars and vans being zero emission globally by 2040, and by no later than 2035 in leading markets.
  • Canada with the support of the U.S. and Europe also proposed the adoption of a ZEV sales target of at least 50% ZEV sales by 2030 at the recent Major Economies Forum.
  • For heavy-duty vehicles, under the Global MoU on Zero-Emission Medium- and Heavy-duty Vehicles called Drive to Zero, leading countries committed to working together to enable 100% zero-emission new truck and bus sales by 2040 with an interim goal of 30% zero-emission vehicle sales by 2030.

Q5. How is Canada going to support the existing on-road medium and heavy-duty vehicle fleet?

• Natural Resources Canada is the lead department for managing the on-road fleet of medium and heavy-duty vehicles. Minister Wilkinson’s mandate letter incudes a requirement to develop a plan for making investments to retrofit large trucks currently on the road, and supporting the production, distribution and use of clean fuels, including low or zero carbon hydrogen.
• Canada is not alone in setting ambitious transportation decarbonization targets. Under the Global MoU on Zero Emission Medium- and Heavy-duty Vehicles called Drive to Zero, leading countries committed to working together to enable 100% zero-emission new truck and bus sales by 2040 with an interim goal of 30% zero-emission vehicle sales by 2030.
• Since announcing our sales targets, our departments have held a series of engagement sessions with the vehicle manufacturing industry, the broader private sector, provinces and territories, as well as the freight sector, to better understand their concerns, and needs.

Q6. How are GHGs from passenger automobiles and light trucks currently regulated?

• GHGs from new passenger automobiles and light trucks are regulated under the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations. These set progressively more stringent GHG emission standards over the 2011 to 2026 model years that are aligned with the standards in the U.S. These standards are expected to result in the deployment of 17% ZEVs in 2026.
• The standards are company-unique in that each company’s performance is determined through its sales-weighted fleet average emissions performance for a given model year, expressed in grams per mile of carbon dioxide (CO₂) equivalent based on standardized emissions tests.
• Companies can use banked or purchased credits to comply if their performance exceeds their compliance standard.
• The average compliance value for new passenger automobiles has decreased from 255 g/mi to 194 g/mi from 2011, representing a 24% average reduction in GHGs. The compliance value for light trucks has decreased by 17%, from 349 g/mi to 290 g/mi.
• Heavy-duty vehicles and their engines of model years 2014 and beyond are regulated under the separate regulations. These also set progressively more stringent GHG emission standards for the broad range of types of HDVs.