In the lead-up to COP26, Canadians have been dining on news stories about Canada’s commitment to reduce greenhouse gas emissions to net zero by 2050.
Now here’s the bill: $2 trillion.
That’s a 2 and 12 zeros – $67 billion a year for 30 years. That’s how much RBC Economics’ new The $2 Trillion Transition report estimates it will cost to get Canada to net zero in 30 years. Just getting a 75% reduction would cost $60 billion a year, the report estimates.
“While those are large numbers, they’re also affordable, especially when measured against the economic returns of new technologies, products and even entire industries in which Canada can be a global leader,” the report states. “For context, Ontarians alone spend nearly $70 billion a year on health care, an essential national priority.”
Critical to achieving Canada’s targets is carbon pricing that reliably and predictably increases in stringency, the report warns. Also critical to Canada’s energy transition is electrification of many sectors, especially transportation and buildings – the second- and third-largest emitters, respectively.
Canada will need to double its electricity production, storage and transmission. Fortunately, it already has a grid that is 80% carbon-free and the resources and technical expertise it needs in the form of abundant natural gas, hydro power and nuclear know-how.
A critical part of electrification will be better interprovincial grid connections, which would reduce the need for the storage of intermittent wind and solar power.
Ensuring the huge private investment needed for decarbonizing sectors like oil and gas and heavy industry will require “an overhaul of industrial regulation and tax policy, and more government backstops, to offset the inherently risky frontier of clean technology, sustainable infrastructure and new consumer products.”
Though Canada’s oil and gas sector is the single largest sectoral emitter, the report warns against killing the industry and urges a “step-by-step” approach to reducing its emissions intensity through initiatives like carbon capture and reducing methane emissions – the latter being the “top priority.”
“Curtailing oil production in Canada would put at risk our existing engineering advantages, especially if demand remains strong for some time, and could undermine our ability to study and develop other energy innovations, including green hydrogen, small nuclear reactors and electricity storage.”
Annual costs, total sectoral emissions reductions needed in millions of tonnes (MT) of CO2
Transportation: 93 MT, $25 billion
Oil and gas: 92 MT, $13.7 billion
Buildings: 65 MT, $5.4 billion
Heavy industry: 35 MT, $4.4 billion
Agriculture: 31 MT, $2.5 billion
Electricity: 11 MT, $5.4 billion