The recent COP28 has seen the climate commitments of several nations to help keep within the 1.5°C global temperature and mitigate the impact of climate change. These efforts align with the goals set in the Paris Agreement, which advocates a 45% reduction in emissions by 2030 and achieving net-zero emissions by 2050 and to date, the commitments made by governments have not met the necessary standards (United Nations, n.d.). We explore Canada’s potential sectors to lead decarbonization and the government’s regulations in helping achieve its zero emissions goal by 2050.

Zooming in on Canada’s emissions contributions, it is still far off from the major contributors US, China, India, and the EU with only 1.41% of total GHG emissions (EDGAR, 2023). However, the country still has a long way to go before it achieves 45% reduction in emissions by 2030. In 2021, Canada has enacted its Canadian Net-Zero Emissions Accountability Act to cement its commitment to zero emissions by 2050. In line with this law, several key components been established to help achieve this goal such as the 2030 Emissions Reduction Plan, a Net-Zero Advisory Body to provide guidance on five-year targets for emission caps, and a Net-Accelerator Fund that provide assistance for large emitters to reduce emissions. The 2023 Budget or “A Made-In-Canada Plan: Affordable Energy, Good Jobs and a Growing Clean Economy” has also put its industrial policies at the forefront of a greener economy aside from boosting industries’ growth.

Going back to basics, addressing carbon emissions involves actions such as minimizing fossil fuel consumption, employing carbon sequestration, transitioning to renewable energy sources, and cutting down on food waste. Let's examine potential sectors in Canada's journey toward a net-zero economy and consider ways to optimize them for further emission reduction:

Minimizing Fossil Fuel Consumption

Fossil Fuels has been overwhelming the planet by contributing 75% of global GHG emissions and nearly 90% of all carbon dioxide emissions resulting to climate change. Canada is one of the biggest fossil fuel producers in the world and continues to extract more oil and gas than what is required to limit global warming to 1.5C above industrial levels. There are intentions to cut down fossil fuel produced emissions through its carbon tax on oil and gas, the introduction of a national cap-and-trade system, and their framework to remove inefficient fossil fuel subsidies but Canada will have to take more drastic actions to limit fossil fuel consumption.

With the call from COP 28 to transition away from fossil fuel, Canada can start reducing fossil fuel use through hastening the electrification of vehicles

a. EV Charger Manufacturing and Deployment

Starting 2035, sales of all cars, trucks, and SUVs will be hybrid, electric or hydrogen-powered as mandated by the government. Consumers are still apprehensive towards switching to electric vehicles because of the high price, limited electric vehicle (EV) charging stations, and lack of rebates (CBC, 2023). High prices can be addressed by communicating the effective cost of EV vs. gas-powered vehicles where EV shall outweigh conventional vehicles in the long run considering fluctuating gas prices. Currently, the challenge lies in the limited availability of EV charging stations. Despite having 457,836 registered zero-emissions vehicles in Canada, there are only 20,478 charging ports. The ratio between charging ports and EVs is 1:22 which indicates a lack of infrastructure to meet the demand of the growing number of vehicles. So far, China is the exemplary model for EV charging infrastructure with its 1.8 million charging stations or a 1:7 ratio that dates back to planning years ahead in anticipation of EV transition (The Messenger, 2023). Canada can learn from its strategic approach for its deployment of charging stations:

A mandate that dictates that 10% of newly constructed public and residential buildings must be designated for charging purposes, paired with incentives for companies to install chargers in their offices.
Setting targets on a provincial scale and seeking the help of public-private partnerships to achieve the goal. There are several Canadian companies with expertise in EV charging manufacturing which can be optimized to help expand charging stations. Corporations and Real estate developers can also partner with these manufacturers to produce the chargers and be given tax credits by the government for this implementation.

b. Battery Manufacturing

Sales of electric vehicles is increasing steadily and a part of the reason why Canadians are not swiftly moving to electric vehicles is the lack of availability of units. Sourcing materials from different parts of the world in order to produce an electric vehicle can be a daunting task. Canada has the land mass and several raw materials that can help scale EV manufacturing. In fact, battery manufacturing is something that Canada is looking into. Volkswagen’s subsidiary Power Co, will house its first overseas gigafactory in St. Thomas, Ontario which will represent a significant portion of the North American battery manufacturing sector. This is a double win for Canada as it can also be an opportunity to enhance its critical minerals sector and eventually attract additional manufacturing opportunities from other corporations.

c. Clean Hydrogen as Alternative

Hydrogen is considered a low-emission substitute for fossil fuel in power generation, home heating and transportation but it is still not in the clear since hydrogen can still be produced using fossil fuel through the process of steam methane reforming or separating hydrogen from carbon in natural gas. However, there are other cleaner methods to produce hydrogen:

Blue Hydrogen – fossil-fuel produced hydrogen combined with carbon capture
Green Hydrogen – produced through renewable electricity or electrolysis, employing an electric current to separate water (H2O) into hydrogen and oxygen

Across Canada’s provinces, there is a lot of potential to produce blue hydrogen particularly in fossil-fuel heavy provinces and green hydrogen for those who have high renewable energy sources. One of the initiatives that the government has implemented to stimulate production is the Clean Hydrogen Investment Tax Credit (CHITC). The government will provide reimbursement to green and blue hydrogen developers, covering up to 40% of their taxes related to the acquisition and installation of “eligible equipment” but the extent of support will depend on the expected lifecycle greenhouse gas emissions.

Aside from the tax credit, there are several projects taking place in pursuit of clean hydrogen such as the $461-million investment on a hydrogen plant with carbon capture technology in Edmonton, Alberta, a Carbon Recycling facility in Quebec, a clean hydrogen plant in Vancouver, and two clean hydrogen projects in their early phases in Manitoba (CBC, 2023). With Canada’s plans to transition to EVs, it will have to double or triple its electricity grid capacity to support EV charging and promoting clean hydrogen as an additional source of electricity could play a crucial role in ensuring an ample and sustainable energy supply for this transition.

Hydrogen may be used in replacement of fossil fuel for transportation and home heating. There are already 8 hydrogen vehicle fueling stations in Canada but these will need to expand since hydrogen-powered cars will be part of the line up in 2035. The government can also look into promoting the use of hydrogen in heavy-duty and long-haul applications where battery-powered EVs may face limitations. As for home heating, substituting oil with hydrogen presents a viable solution however, careful consideration must be given to factors such as distribution infrastructure, appliance modification, and cost implications. There is a proposal for the first hydrogen-powered community that has received $2 million in subsidy for its assessment with about 150 homes using hydrogen for home heating. If the feasibility is demonstrated successfully, there may be a potential for its expansion (EnergyNow, 2023).

Employing Carbon Sequestration

Carbon sequestration or the absorption and storage of carbon dioxide from the atmosphere is another way to reduce existing carbon emissions. While reducing fossil fuel usage is a great way to trim down carbon emissions, carbon capture, utilization and storage (CCUS) is also one way by which we can remove carbon emissions for a zero emissions economy. In Canada, there are about 7 CCUS projects currently operating and it has been capturing approximately 2.7 million tonnes of CO₂ equivalent per year or roughly 27% of Canada’s total carbon emissions. It is necessary to build more carbon capture and storage hubs and it involves substantial capital investment. Canada has imposed a Carbon Capture, Utilization and Storage Investment Tax Credit that aims to develop and operate more carbon capture, utilization and storage facilities in Canada. The tax credit is applicable to businesses incurring eligible expenses on or after January 1, 2022, with specific conditions. These include requirements such as a minimum of 10% of captured carbon anticipated to be stored or used in an eligible manner, and the project must have a planned operational span of at least 20 years, among other conditions. Private equity and venture capitalists have collectively invested a substantial amount of about USD $253 million in CCUS (Carbon Capture, Utilization, and Storage) to expand its development. Apart from these investments, another method to expand the scale of CCS facilities involves certifying these projects for voluntary carbon credits. This allows companies to invest in them, thereby meeting emissions caps and facilitating the transition to carbon neutrality, especially for carbon-intensive industries.

Switching to Renewable Energy

Canada is actually a global leader in electricity generation from renewable resources. Most of its electricity is through hydropower and it has remained committed in decreasing the use of non-renewable resources such as its shut down of coal power plants in Alberta as mentioned in a previous post and the increased installation of wind and solar energy. Greater strides may be achieved if we combine energy efficiency measures with the deployment of renewable energy as it can accomplish 90 percent of the emissions reductions needed to achieve the 1.5°C goal according to the International Renewable Energy Agency (IRENA). Capitalizing on Canadian clean tech companies and its natural resources, Canada may be able to develop technologies that are energy-efficient and powered by renewable energy.

a. Clean Tech Manufacturing

There are 2,426 cleantech firms in Canada in which 26% of which are dedicated to renewable energy and 13% dedicated to energy efficiency. The challenge of these firms is raising capital in order to scale operations. In support of these firms, the government has been providing support including $8 billion assistance from the Net Zero Accelerator Fund for large-scale investments in clean technologies. Additionally, the Clean Technology Investment Tax Credit allocates rebates of up to 30% to Canadian companies engaged in the manufacturing or processing of clean technologies. This tax credit not only supports companies directly involved in clean technology production but also provides assistance to those incorporating clean technologies into their operations.

While the tax credit and the net zero accelerator fund can help decrease operational costs, these clean tech industries will need more financial support to increase development and expansion in different locations. To assist investors in pursuing clean technology investments, the following factors should be taken into consideration:

Incentives or tax breaks for clean tech investments: patterned after the Investment Tax Credit of the US, which is granted to individual taxpayers or corporations investing in specific projects involved in renewable energy.
Clear and stable regulatory frameworks: the government can impose cleantech firms to submit ESG reports to assure investors.
Public and private partnerships (PPP): these collaborations can leverage public funds to attract private investments such as Green ETFs as well as global funds such as the Green Climate Fund.

b. Critical Minerals

Canada has about 31 minerals that have been recognized as critical due to their importance to the country’s economy, diminishing supply, necessity for transitioning to a low-carbon economy, and serving as a sustainable source for our partners and allies. Hence, the Critical Minerals Strategy, released in December 2021, aims to secure the supply of responsibly sourced critical minerals and foster the growth of domestic and global value chains for a green and digital economy. The focus of the Critical Minerals Strategy will be on 6 key minerals: lithium, graphite, nickel, cobalt, copper, and rare earth elements. A part of this strategy is the $3.8 billion support for Canada’s mining sector to maximize opportunities.

Minerals are actually necessary for the development of green technologies to reduce emissions from consumer goods to manufacturing. These are essential in particular for constructing renewable energy technologies: (1) Lithium and Nickel as components for energy storage systems of wind and solar and batteries for EVs, (2) Copper for the construction of electrical wiring and components of a hydropower infrastructure, (3) Graphite and Cobalt for anodes for lithium-ion batteries and portable electronic devices and (4) Rare Earth Materials for permanent magnets for wind turbines and energy efficient lighting. Aside from increasing supply of critical minerals and utilizing these for renewable energy technologies, the government can also mandate the following in order to reduce carbon emissions:

Sustainable mining practices: mining companies will have to implement sustainable mining practices to minimize environmental impact.
Recycling and circular economy: develop a circular economy approach by reusing and recycling materials used in renewable energy technologies to extend the lifespan of critical minerals.

Reducing Food Waste

In Canada, $31 billion worth of food is wasted annually and over 60% of these food waste ends up in landfills which emit methane gases into the atmosphere (Ontario.ca, 2020). Given the pressing issue of food insecurity aggravated by the effects of climate change, minimizing food waste has the potential to optimize vital resources (such as water, energy, land, and labor) and enhance overall food production and availability.

a. Sustainable Agriculture

Sustainable agriculture contributes to food waste reduction through prioritizing efficiency, conservation, and responsible resource management including a stable supply for its citizens. The Canadian government launched the Sustainable Canadian Agricultural Partnership (Sustainable CAP), a $3.5 billion, 5-year agreement uniting the federal, provincial, and territorial governments. This partnership aims to enhance the competitiveness, innovation, and resilience of the agriculture, agri-food, and agri-based products sector with $1 billion for federal programs and activities and $2.5 billion in cost-shared programs and activities within the regions. One of the cost-shared programs between federal and provincial governments is the Resilient Agricultural Landscape Program that supports producers in conserving and enhancing the resilience of agricultural landscapes for on-farm adoption.

Agriculture Technology (Ag-Tech) can also help mitigate food loss and improve efficiency when it comes food production. For its sustainable agricultural partnership, Canada can start looking into ag-tech that may be adaptive to Canada’s landscape/environment:

Precision technologies: like intelligent tractors that collect data on farm productivity and fertilizer usage, empower more informed and detailed decisions regarding where and in what quantities inputs should be applied. This leads to a reduction in inefficient food production. In Israel, which has little arable land like Canada, the use of digital fertigation helps determine targeted release of water and fertilizer directly into plant’s roots through sensors and cloud-based analytics.
Controlled environment farming/vertical farming: because of frequent wildfires that can damage crops, livestock and farming as an impact of climate change which eventually leads to damage losses and excess waste. Controlled environment farming, food production in a controlled environment such as a stacked layers (vertical farms), can help ensure food supply despite the effects of climate change not to mention that it emits lower gases as compared to conventional farming because of fertilizer application. Vertical farming is also resource efficient as it requires only 10% land and 90% less water compared to conventional farming. Singapore and Japan both use controlled environment farming because of space issues and climate crisis, and has been a stable source of food supply.

As Canada continues its journey towards a sustainable and zero emissions future, it is imperative to identify and prioritize key sectors that will play a pivotal role in achieving these ambitious goals. Canada has several initiatives and frameworks that pave the way for the growth of these sectors but it cannot do it alone without the help of several stakeholders such as investors, organizations, researchers, corporations, and even its citizens. Optimizing these sectors will not only address its climate goals but also position itself as a leader in the fight against climate change. It may be essential to develop a cross-disciplinary approach to unlock different synergies, maximize impact and ensure a smooth and equitable transition towards a greener and more sustainable Canada. In taking more assertive steps within these sectors, Canada has the potential to set an inspiring example for nations worldwide, illustrating that a prosperous, low-carbon future is not only desirable but achievable through strategic vision and communal effort.

Unveiling Canada’s Key Sectors Paving the Path to Zero Emissions