Market Snapshot: Technology and efficiency contribute to projected decrease in transportation fuel use

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Release date: 2020-01-15

The Canada Energy Regulator’s Canada’s Energy Future 2019: Energy Supply and Demand Projections to 2040 report (EF2019) projects that energy use in the transportation sector will decline slowly over the next two decades. Energy demand from the transportation sector declines by an average of 0.6% per yearFootnote 1. The transportation sector demand includes road, marine, and air travel. Changing vehicle technology and federal emissions policy are primary drivers of this decline.

Figure 1 – Canadian transportation fuel demand 2005-2040

Source and Description

Source: EF2019

Description: For Canada, the top graph shows total energy demand by sector. In the projection period-2018 to 2040-the average annual growth rates show residential increasing 0.3%, commercial 0.6%, industrial 0.4%, and transportation decreasing -0.6% per year. The bottom graph shows transportation energy demand. Between 2017-2040 gasoline demand decreases about 1.3% per year.

EF2019 projects growth in both battery-electric vehicles (BEV) and plug-in hybrid electric vehicles (PHEV), collectively referred to as electric vehicles. Growth in electric vehicles is a result of falling costs as well as policy measures.Footnote 2 By 2040, electric vehicles could make up 20 to 30% of Canada’s vehicle stock; three-quarters of these electric vehicles being based in the provinces of Quebec, Ontario, and British Columbia.

Electricity use in the transportation sector increases from 4.4 petajoules (PJ) in 2017 to 64.8 PJ by 2040. This represents around 3.0% of all transportation energy use in 2040. However, the corresponding decrease in gasoline and diesel demand due to the adoption of electric vehicles is much larger. This is because electric motors are much more efficient at converting energy to movement compared to internal combustion engines, where much of the energy is lost to heat from the engine. This is analyzed in more detail in the CER’s Market Snapshot on the levelized cost of driving.

While the rise of electric vehicles contributes to decreasing gasoline demand, the federal vehicle emission standards remain a major influence on declining gasoline and diesel use.Footnote 3 These standards result in improving fuel economy, which along with electric vehicles adoption, lead to total gasoline and diesel consumption dropping by 500 PJ by 2040. The pace and extent of change in vehicle technologies is a major uncertainty in the EF2019 projection. Other significant factors which will also influence future transportation energy use include: changing demographics, consumer preferences, urban design, and driving habits.

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