The “Scenarios and Assumptions” chapter discusses the domestic climate policy assumptions included in the Evolving Energy System Scenario (Evolving Scenario) and the Reference Energy System Scenario (Reference Scenario). The Reference Scenario includes only policies currently in place. The Evolving Scenario assumes greater policy action over time, at roughly the same pace as historical policy implementation. It does this by assuming a hypothetical suite of policy initiatives that build upon current policies. Table 1 describes the criteria for inclusion of current policies, and assumed future policies. Table 2 provides a brief67 overview of several key current policies. Table 3 provides an overview of future policies assumed in the Evolving Scenario.
|Criteria for Inclusion of Current Policies Included in Reference and Evolving Scenarios||Considerations for Future Policy Assumption Included in the Evolving Scenario Only|
The Reference Scenario includes only current policies. In the Evolving Scenario, current policies provide a baseline that is built upon over the projection. In order to determine whether a policy was included in the analysis, the following criteria were applied:
The Evolving Scenario includes a hypothetical suite of future policy developments. These policy assumptions take into account several considerations:
|Pan-Canadian Framework on Clean Growth and Climate Change||
In December 2016, Canada’s First Ministers released the Pan-Canadian Framework on Clean Growth and Climate Change (Pan-Canadian Framework), which outlined the actions that will contribute to meeting, or exceeding, Canada’s 2030 climate change target of a 30% reduction below 2005 GHG emission levels. Pillars of the Pan-Canadian Framework include:
The framework describes many new actions associated with the four pillars. Several elements of the framework are in place and qualify as a current policy, as described in this table.
|Vehicle Emission Standards||
Light Duty Vehicles
In 2014, the federal government adopted phase 2 of the light-duty vehicle GHG regulations which progressively increased GHG standards. Given these standards are harmonized with the U.S., the recent U.S. rollback of standards starting with model year 2021 is included.
Heavy Duty Vehicles
Phase 2 heavy duty vehicle standards, which increase stringency to model year 2027, are included. The regulation reduces GHG emissions from on-road heavy-duty vehicles through emission standards applicable to manufacturers and importers of new heavy-duty vehicles, engines and trailers.
|Pricing Carbon Pollution||
EF2020 includes provincial and territorial carbon pricing systems, as well as the Federal Carbon Pricing Backstop (Backstop). Implementation of carbon pricing systems currently varies across the country, and details on each region’s approach are available from Environment and Climate Change Canada. Most provinces have an end-user carbon price at similar levels to the Backstop, which is C$30 per tonne in 2020, increasing to $40/tonne in 2021 and $50/tonne in 2022, where it remains for the remainder of the projection.
For provinces such as Quebec and Nova Scotia that have adopted a cap-and-trade program, the price of carbon is market-based, determined by the supply and demand of emission permits. Like crude oil and natural gas prices, EF2020 makes simplifying assumptions for the future outlook of carbon pricing. EF2020 assumes the carbon price in these provinces remains below the Federal Backstop in the early 2020s, before converging to $50 per tonne in 2025 and remaining at that level for the remainder of the outlook.
Many provinces, as well as the Federal Backstop, include specific programs for large industrial emitters. For provinces where these systems are fully detailed and implemented, they are included in EF2020 as current policies. Examples include:
|Canada-U.S. joint action to reduce methane emissions from the oil and gas sector||
In March 2016, Canada and the U.S. announced joint action to reduce methane emissions from the oil and gas sector by 40 to 45% below 2012 levels by 2025.
In May 2017, the federal government released a technical backgrounder detailing the proposed regulations to deliver on this commitment. The regulations will apply to oil and gas facilities responsible for the extraction, production and processing, and transportation of crude oil and natural gas, including pipelines. The first federal requirements come into force in 2020, with the rest of the requirements coming into force in 2023.
|Federal phase-out of traditional coal-fired generation by 2030||
In November 2016, the federal government announced it is amending the regulations applicable to coal-fired electricity generation to ensure that all traditional coal-fired units are phased out by no later than 2030. Alberta, Saskatchewan, New Brunswick, and Nova Scotia have coal-fired power plants that are impacted by these regulations. Prior to this announcement, Alberta had already committed to phasing out pollution from coal-fired plants by 2030.
|Renewable Fuel Regulations||
There are various renewable fuel blending requirements in place across Canada.
Gasoline and Diesel
On average, federal regulations require 5% ethanol blending in gasoline and 2% biodiesel blending in diesel. Various provinces have their own renewable fuel regulations that go beyond these limits. Recent provincial regulations include:
In recent years, Quebec and British Columbia have established regulations for consumed natural gas to contain a minimum content of renewable natural gas.
Clean Fuel Standard
A federal Clean Fuel Standard is currently under development, which aims to reduce the emission intensity of liquid, gaseous, and solid fuels through increased use of low carbon fuels, energy sources, and technologies. In June 2019, ECCC released the Proposed Regulatory Approach for the Clean Fuel Standard. Proposed regulations for the liquid fuel class of the Clean Fuel Standard are expected to be published for consultation in fall 2020. Regulations for gaseous and solid fuel classes will follow.
The Clean Fuel Standard is not included in the EF2020 scenarios, as regulations are still in development for all fuel streams. The Evolving Scenario includes a hypothetical emission intensity standard that reflects preliminary details of the Clean Fuel Standard where available.
|Energy Efficiency Programs and Regulations||
|Northern REACHE Program||
In 2016, the Federal Government implemented the Northern Responsible Energy Approach. This program intends to reduce diesel use for electricity and heat.
|Support for Electric Vehicles||
Many provinces have policies and initiatives to support low and zero emission vehicles (ZEV). This includes Quebec’s ZEV mandate, as well as British Columbia’s Zero-Emission Vehicles Act.
Federal action includes subsidies for electric vehicles, as well as support for charging infrastructure through the zero emission vehicle infrastructure program. These initiatives are included as current policies.
|Renewable Electricity Generation||
Many utilities, and provincial and territorial governments, provide support for increasing levels of renewable generation. EF2020 electricity capacity expansion outlooks generally align to province and territory utility, government, and system operator expansion plans and expectations in the near-to-medium term.
|Rising Carbon Price||
The Evolving Scenario assumes carbon prices continue to rise beyond 2022. The price rises to 2019 CDN $60 in 2030, $75 in 2040, and $125 by 2050. Currently, carbon price systems across Canada are diverse. The increasing price in the Evolving Scenario should be taken as a hypothetical increase. It should not be taken as analysis of any particular carbon pricing scheme.
Carbon pricing revenue is redistributed through the economy. Credits for large emitters are reduced over the projection period. On average, emitters from large energy-intensive trade-exposed sectors pay 50% of carbon costs in 2040 and 75% in 2050.
|Low Carbon Fuel Standard/Clean Fuel Standard||
The Evolving Scenario includes a country-wide low carbon or clean fuel standard aimed at reducing the lifecycle emission intensity of fuels. Targets and structure are generally consistent with the approach outlined in the proposed Clean Fuel Standard’s Proposed Regulatory Approach for Liquids. It is important to note that the Clean Fuel Standards are not final, and additional information would be necessary to model the policy. As such, EF2020 projections should not be taken as analysis of the Clean Fuel Standard, or any other single policy initiative. Further, the Clean Fuel Standard is only proposed to 2030. In the Evolving Scenario we extrapolate reductions beyond 2030, which again should be taken as hypothetical.
Liquid Fuel Class
Gaseous and Solid Fuel Classes
|Energy Efficiency Regulations||
Canada has a long history of improving energy efficiency through standards, regulations and policies. The Evolving Scenario continues this trend. Specifically:
|Zero Emission Vehicle Standards||
The adoption of low and ZEVs in the Evolving Scenario is driven by technology, consumer choice, and policy. A minimum ZEV requirement is assumed in the Evolving Scenario, requiring a national minimum of 5% sales by 2030, 25% by 2040, and 50% by 2050.
Given the other factors that influence ZEV adoption, individual provinces vary in their adoption of ZEVs, with some having greater or less than the national minimum. The provincial levels are based on economics and/or provincial policies that exceed these minimums. See “Towards Net Zero” for discussion of higher penetration of ZEVs.
|Support for Clean Energy Technology and Infrastructure||
The continuing energy transition shown in the Evolving Scenario requires significant levels of technology and infrastructure development. Historically, governments have played key roles, in collaboration with specific industries, regulators, and other participants in these areas.
This trend continues in the Evolving Scenario. It assumes government infrastructure and technology development are key contributors to the deployment of new energy technologies, including: