Appendix 1: Domestic Climate Policy Assumptions
All dollar figures throughout the report are in Canadian dollars unless stated otherwise.
Domestic climate policies include laws, regulations, and programs put in place by governments with the goal of reducing GHG emissions. Around 80% of Canada’s GHG emissions are energy-related, so climate policy aimed at reducing emissions will affect Canada’s energy system. We make assumptions about the climate policies we model in each scenario in EF2023. This appendix includes additional details about the climate policy assumptions, beyond those included in the Scenarios and Assumptions chapter.
Federal, provincial, and territorial climate policies that are currently in place are the basis of the Current Measures Scenario. A policy is “in place” if it was enacted prior to March 2023. We do not include announced policies that are not yet implemented in the Current Measures Scenario.
The Global and Canada Net-zero scenarios include all in-place federal, provincial, and territorial climate policies. Both net-zero scenarios also include all announced but not-yet-implemented policies, to the extent possible. We applied the following criteria to determine whether an announced policy was included in our net-zero scenarios:
- The policy was announced prior to March 2023
- Sufficient details exist to model the policy
Final details of some of these policies were not available at the time of analysis. We include these policies by relying on assumptions about them, as necessary.
Table A1.1 provides an overview of all major federal policies included in the three scenarios. Table A2.2 provides an overview of key policies in provinces and territories. In the Global Net-zero and Canada Net-zero scenarios, if the federal policy is more stringent than its regional equivalent, the federal one is modelled instead.
All dollar values are given in $2022 Canadian unless otherwise stated
Table A1.1: Overview of Major Federal Policies in the Global Net-zero, Canada Net-zero, and Current Measures Scenarios
|Policy||Description||Global Net-zero and Canada Net-zero Scenarios||Current Measures Scenario|
|Backstop carbon pricing||Applies a regulatory charge on fossil fuels at the end-use level based on the relative GHG emissions intensity of fuels.||
The fuel charge rises from $50 per tonne ($50/t) by 2022, then to $140/t ($170/t in nominal dollars, not adjusted for inflation) by 2030. It remains constant in nominal terms from 2030 to 2050 or $95/t in inflation-adjusted terms by 2050.
Our modelling assumes most provincial systems follow this schedule, and by 2030 all provinces and territories match the federal price.
|Aggregate cost of carbon||A hypothetical suite of policies, regulations, and programs in the 2030 to 2050 period represented by a carbon price that is added to the backstop carbon pricing.||
The aggregate cost of carbon is added to the carbon price backstop in both scenarios.
Global Net-zero Scenario: Starting at $0/t CO2e (carbon dioxide equivalent) in 2030 and rising to $330 in 2050.
Canada Net-zero Scenario: Starting at $0/t CO2e in 2030 and rising to $380 in 2050.
|Output-based pricing system (OBPS)||A performance-based carbon pricing system for industrial facilities. Applies the carbon price for every ton of excess emissions above a specified annual intensity limit. This system maintains a marginal incentive for reducing CO2 emissions, but reduces the average cost of compliance so industries can maintain international competitiveness.||
Global Net-zero Scenario: A 2% yearly tightening rate on emissions intensity is applied from 2023 to 2030, followed by a 3% tightening rate until all emissions are covered in 2050. The backstop carbon price and aggregate cost of carbon is applied to emissions above the intensity limit.
Canada Net-zero Scenario: A 2% yearly tightening rate on emissions intensity is applied from 2023 to 2050. The backstop carbon price and aggregate cost of carbon is applied to emissions above the intensity limit. Given that the rest of the world does not reach net-zero in the Canada Net-zero Scenario, this trajectory maintains a level of support for trade-exposed industries.
|Most industrial sectors are required to reduce their emissions intensity by 20% relative to their 2014 to 2016 average from 2020 to 2050. If a facility exceeds the emissions intensity limit, it must pay the backstop carbon price on excess emissions or submit eligible credits. If a facility's emissions are below the limit, it receives credits to sell or use later for compliance.|
|Oil and gas emissions cap||A cap on emissions from the upstream oil and gas sector at a pace and scale necessary to achieve Canada’s goal of net-zero by 2050, while allowing the sector to compete in a transitioning global economy.||
At the time of analysis, the oil and gas emissions cap was announced but was still in development. To model the emissions cap, we developed some simplifying assumptions for modeling purposes. These assumptions have no bearing on what the final policy will include.
|Methane regulations for the upstream oil and gas sector||Oil and gas facilities are required to reduce their methane emissions either through adoption of new methane control technologies or process change.||Facilities must reduce their methane emissions by 40-45% from 2012 levels by 2025 and 75% by 2030.||Facilities must reduce their methane emissions by 40-45% from 2012 levels by 2025.|
|Investment tax credit for CCUS||A federal investment tax credit for CCUS projects that permanently store captured CO2 in geological storage or in concrete.||An investment tax credit for capital investments in CCUS. Tax credit is set at 50% of upfront costs for CCUS. The tax credit for carbon capture is 50% until 2030, 25% from 2031-2040, and 0% onwards.|
|Net-zero accelerator initiative and strategic innovation fund||A federal investment of $3 billion over five years for the development and adoption of low-carbon technologies in all industrial sectors. Budget 2021 provided an additional $5 billion over seven years for the Net Zero Accelerator.||Development and adoption of low-carbon technologies in the industrial sector. Examples include fuel switching to low-carbon heat sources, adoption of inert anodes, CCUS, replacing fossil fuel feedstocks, hydrogen-based steel making, and DAC.||Examples include fuel switching to low-carbon heat sources, adoption of inert anodes, and CCUS|
|Clean Electricity Regulations||The Clean Electricity Regulations would establish an emissions performance standard having an intensity form (i.e., t/GWh). It would be set at a stringent, near-zero value in line with direct emissions from well-performing, low-emitting generation such as geothermal or combined cycle natural gas with CCS.||
Net-zero electricity generation by 2035 through to 2050. Small generating units and those that produce electricity for remote communities are excluded from the regulation.
The full regulatory details of the Clean Electricity Regulations are still under development. We follow the details in the Proposed Frame for the Clean Electricity Regulations.
|Not included. Electricity generation facilities are covered under the OBPS.|
|Phase out of coal-fired generation of electricity||A carbon intensity performance standard for coal-fired power plants.||Limits emissions intensity of existing coal-fired electricity generation to 420 t/CO2e per gigawatt hour (GWh) by 2030.|
|National energy code for buildings||Sets out technical requirements for the energy-efficient design and construction of new buildings.||New buildings are "net-zero energy ready" by 2030 and net-zero by 2050. These codes are still under development, so we follow modeling in the Emission Reduction Plan that result in substantial increases in the efficiency of building shells.||Assumes that the 2017 building code applies throughout the projection period, with marginal efficiency improvements to building shells and space conditioning.|
|Energy Efficiency Regulations||Minimum energy efficiency standards for energy-using technologies in the residential, commercial, and industrial sectors (e.g. space conditioning equipment, water heaters, household appliances, lighting).||Marginal efficiency gains occur from 2030-2050.||Includes Amendment 17 to the Energy Efficiency Regulations. Energy efficiency gains end in 2030 and are carried through to 2050.|
|Hydrofluorocarbon (HFC) regulation||A phase down of HFC consumption from a baseline.||An 85% reduction in consumption of HFCs by 2050 from 2019 levels.|
|Zero Emissions Vehicle (ZEV) mandate||A sales mandate for new light-, medium-, and heavy-duty vehicles that increases in stringency over time.||
The ZEV sales target for light-duty vehicles is 20% by 2026, 60% by 2030, and 100% by 2035.
Medium- and heavy-duty sales targets are 35% by 2030 and 100% by 2040, where feasible. At the time of analysis, these regulations were still under development. We made the simplifying assumption that 80% of sales met the threshold of “feasible” by 2040, and over 95% by 2050.
|Not included. Provincial mandates for ZEV sales can be found in Table A.1.2|
|ZEV incentives||Major policies include the iZev subsidy program, the iMHZEV subsidy program, funding for charging network initiatives, and tax write-offs for businesses.||Vehicle purchase rebates and assumptions on the build-out of infrastructure needed for charging and refueling ZEVs.|
|Light-duty vehicle GHG emissions standards||New light-duty vehicles sold in Canada must meet progressively more stringent GHG emissions standards.||Incorporates LDV-1 (2011-2016) and LDV-2 (2017-2026) Light-duty vehicle GHG emission standards. In the projection period, new light-duty vehicle fuel economy improves approximately 5% per year to 2026.|
|Heavy-duty vehicle GHG emission standards||New heavy-duty vehicles sold in Canada must meet progressively more stringent GHG emission standards.||Incorporates HDV-1 (2014-2018) and HDV-2 (2021-2027) heavy-duty vehicle GHG emission standards. In the projection period, new heavy-duty vehicle fuel economy improves approximately 2-3% per year to 2027.|
|Clean fuel regulations||
Reduction in carbon intensity of gasoline and diesel over time, through several mechanisms, including:
|Carbon intensity decrease of 12g CO2e/megajoule (CO2e/MJ) below 2016 levels by 2030. Post 2030, we make the simplifying assumption that fuels continue the same rate of decrease (about 1.2g CO2e/MJ per year). This decrease is modeled as an increasing share of renewable fuels and increased renewable natural gas blending, incentivized by the regulation’s credit creation mechanism.||Carbon intensity decrease of 12g CO2e/MJ below 2016 levels by 2030.|
|Renewable fuel regulations||Minimum renewable fuel content for all regions except for Newfoundland and Labrador and the Territories.||Specifies a minimum renewable fuel content of 5% in gasoline and 2% in diesel fuel sold in Canada by volume.|
|Northern REACHE program||Program to reduce diesel use for electricity and heat in remote communities.||Increase the market share of alternative technologies.|
|Fertilizer emissions reduction target||Target to reduce greenhouse gas emissions from fertilizer application in agriculture by 30% below 2020 levels by 2030||2030 target met, with reductions starting in 2023 and additional reductions achieved post 2030.||Not included.|
|Proposed municipal solid waste (MSW) landfill methane emissions regulations||Proposed approaches for MSW landfills to help meet Canada's commitment under the Global Methane Pledge of reducing global methane emissions by 30% below 2020 levels by 2030.||MSW landfill methane emissions are reduced by 45% below 2020 levels by 2030 (as per federal government projections), with additional reductions achieved post-2030.||Not included.|
Table A1.2: Overview of the major provincial policies included in all three scenariosFootnote 23.
|British Columbia||Zero Emissions Vehicle Act||Requires automakers to sell a minimum share of zero- or low-emission vehicles via a credit market. Achieves 10% light-duty zero-emission vehicles sales by 2025, 30% by 2030, and 100% by 2040.|
|CleanBC Go Electric Program||Incentives for electric vehicles and charging station installation. Includes rebates for light-duty vehicles of up to $3,000 and up to 50% of charger installations.|
|CleanBC Industry Fund||Government investment into low-emission technologies using a portion of carbon pricing revenue above $30/tCO2e to support competitiveness in industry.|
|CleanBC Better Homes and Better Buildings program||Incentives for residential and commercial building efficiency improvements.|
|Energy Efficiency Act||Sets energy efficiency performance standards for energy-using technologies.|
|Low Carbon Fuel Standard||Requires a decrease in the average carbon intensity of 30% by 2030 from 2020 for transport fuels through several compliance pathways.|
|Renewable Fuel Regulation||A minimum renewable fuel content of 5% ethanol for gasoline and 3% biodiesel for diesel fuel.|
|Renewable Natural Gas Regulation||Requires that 15% of natural gas consumption be provided by renewable natural gas by 2030.|
|Alberta||Renewable Fuels Standard (RFS)||Requires renewable fuels to be blended into gasoline and diesel fuel.|
|CCUS investments||Investments in CCUS projects, including the Alberta Carbon Trunk Line and Quest projects.|
|Methane emissions reduction regulation||Requires the reduction of methane emissions from oil and gas operations by 45% by 2025 relative to 2014 levels.|
|Saskatchewan||Ethanol Fuel Regulations and Renewable Diesel Act||Regulations requiring a minimum of 7.5% of ethanol content in gasoline and 2% biodiesel content in diesel.|
|Methane Action Plan||Requires the reduction of methane emissions from oil and gas operations by 45% by 2025 relative to 2015 levels.|
|Manitoba||Biofuels Mandate amendment||Regulations requiring a minimum of 10% ethanol content in gasoline and 2% biodiesel content in diesel.|
|Efficiency Manitoba Act||Rebates and other incentives on lighting, air conditioning, and building shell rebates across residential, commercial, and some industrial sectors.|
|Green Energy Equipment tax credit||A 15% tax credit on geothermal heat pumps in residential and commercial sectors.|
|Ontario||Cleaner Transportation Fuels: Renewable content requirements for gasoline and diesel fuels||A regulation requiring 15% ethanol content in gasoline and 4% biodiesel content in diesel by 2030.|
|Quebec||Western Climate Initiative cap-and-trade regime||A cap-and-trade system for industrial and electricity sectors, as well as fossil fuel distributors. Declining annual caps are set out to 2030 and the revenue generated by the policy is invested in low-carbon technologies. As caps are not set after 2030, the federal pricing systems (fuel charge and OBPS) apply.|
|Renewable Natural Gas Regulation||Minimum 5% renewable natural gas content in natural gas by 2025.|
|Chauffez Vert Program||Rebates for residential renewable energy space or water heating systems, if replacing fossil fuel system.|
|Roulez Vert Program||Incentives for electric vehicles and charging station installations. Rebates include up to $8,000 for new vehicles and $600 for home charging stations.|
|Zero Emissions vehicle standard||Requires automakers to sell a minimum share of zero- or low-emission vehicles via a credit market. The credit target is 100% by 2035.|
|New Brunswick||Energy Efficiency programs||Provides purchase incentives for energy efficient appliances in residential, commercial, and industrial sectors.|
|Nova Scotia||EfficiencyNS Programs||Incentives for residential, commercial, transportation and some industrial sectors. Incentives include the transition from oil heating to electric, heat pumps, and charging stations.|
|Newfoundland and Labrador||Energy Efficiency Programs||Incentives for residential, commercial, and some industrial sectors. These programs include a home energy savings program, heat pump rebates, and commercial sector rebates for select appliances.|
|Prince Edward Island||EfficiencyPEI Rebates||Incentives for residential, commercial, and some industrial sectors. Various rebates on energy-efficient appliances, such as heat pumps, solar systems, biomass heating, and fuel-efficient furnaces.|
|Northwest Territories||2030 Energy Strategy||Measures that aim to support low-carbon energy for transportation and space heating. Includes promoting the use of wood as an alternative source of energy to fossil fuels, supporting the development and implementation of community energy plans, incentives for energy efficiency and alternative energy projects, support for alternatives to diesel electricity generators, rebates for zero- and low-emission vehicles.|
|Yukon||Our Clean Future||Measures including 10% ZEV new sales by 2025 and 30% by 2030, ZEV rebates, blending of renewable fuels into diesel and gasoline, energy efficiency incentives and regulations, and renewable energy projects for remote communities.|
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