Canada must brace for economic pressures caused by climate change
Canada’s industrial factories employ more than one million people and make the raw materials from which most of this country’s manufactured goods are made.
While the shift to a low-carbon economy is essential to meet Canada’s greenhouse gas emission reduction targets, these industries — economic drivers that are already vulnerable to international market fluctuations — must not be hobbled by commitments to combat climate change.
This is at the core of the Senate Committee on Energy, the Environment and Natural Resource’s third interim report on Canada’s transition to a low-carbon economy. The report, released Tuesday, focuses on the country’s emission-intensive and trade-exposed industries, so named because they require large amounts of energy to operate and because they compete with international firms for markets at home and abroad.
Although they emit greenhouse gases, in Canada these industries, which include manufacturers of refined petroleum products, fertilizers, iron and steel, cement, aluminium, and pulp and paper, leave a carbon footprint that is among the smallest in the world compared to their competitors. This is due to Canada’s clean electricity generation (hydroelectric and nuclear) and abundant supply of natural gas. Many foreign competitors, conversely, rely on coal for energy and chemical feedstock. There is no cookie-cutter solution that can be applied across the country’s diverse regions for reducing greenhouse gases emitted by this economic activity. Provinces and regions will need to find solutions that are tailored to their unique economic circumstances.
The committee heard concerns about the government’s approach to meeting its Paris Agreement climate change commitments. Many witnesses wanted to ensure carbon-pricing policies would be implemented without putting Canada’s heavy industries at a disadvantage relative to their foreign competitors, who will not face similar increases in their operating costs.
Another issue senators looked at was whether the federal government’s own purchasing decisions should take into consideration the carbon-intensity of materials it buys. It would seem counterproductive to award contracts to foreign producers who are able to offer cheaper materials because of weaker emissions-reduction regulations.
The committee will continue its five-part study of the transition to a low-carbon economy with an examination of the oil and gas sector.
- As a signatory to the 2015 United Nations Agreement on Climate Change, Canada is committed to bringing the country’s greenhouse gas emissions to 30% below 2005 levels by 2030.
- In 2015, Canada’s heavy industries (including petroleum refining) accounted for 13% of Canada’s greenhouse gas emissions, behind transportation (24%) and oil and gas (23%).
- Over 80% of Canada’s electricity is generated by non-carbon emitting sources.
“Carbon pricing is a sensible, even necessary policy if Canada is to do its part to reduce emissions. However, we must be cautious — if we diminish the competitiveness of our heavy industries, we risk stimulating growth in other countries with more lax environmental policies. That’s not good for our economy or the environment.”
- Senator Rosa Galvez, chair of the committee.
“It is essential that the government strike an appropriate balance between achieving our emissions reduction targets and supporting industries that are the lifeblood of the Canadian economy. Overly stringent policies risk putting thousands of Canadians out of work and damaging our economic competitiveness.”
- Senator Michael L. MacDonald, deputy chair of the committee.
- Read the report, Decarbonizing Heavy Industry: The Low-Carbon Transition of Canada’s Emission-Intensive and Trade-Exposed Industries.
- Read the committee’s earlier reports in its study of the transition to a low-carbon economy.
- Follow the committee on social media using the hashtag #ENEV.
- Sign up for the Senate’s eNewsletter.
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