In addition to carbon pricing, the nation will need to incorporate electrical power into the economy and deploy low-emissions technologies throughout industry and society. This will be neither easy nor inexpensive. To successfully make the transition, governments and the private sector will need bold leadership and a mutual willingness to make the required investments. They’ll also need to help ensure those investments aren’t redirected from those reserved for other segments of the economy.
Reaching net-zero will be neither easy nor inexpensive
While cost curves can change, it’s possible to estimate some of the additional decarbonization investments that would be required over and above the status quo of no carbon pricing, as depicted in figure 7. The options presented are not comprehensive, but merely illustrate infrastructure investments that will likely be part of the path to net-zero. With some technologies still under development and not yet fully commercialized, such as CCS and DAC, it’s difficult to closely estimate what the required infrastructure costs might be.
Figure 7: Select clean-technology investment estimates for net-zero
The annual investments required across these four areas total $126 billion over and above what would be needed if carbon pricing were not implemented. In 2020, non-residential business investments in Canada (adjusted for inflation) totalled $197 billion.25 Thus, an extra $126 billion is a significant sum. If costs were to be shouldered entirely by the business community, spending would need to increase by about 65% over 2020 levels.
The combination of carbon pricing and technological investments is poised to shift Canadian energy usage dramatically. Households would be incentivized to switch to EVs and use electricity rather than natural gas for heating. Industry would also be encouraged to shift toward electrical energy, but it’s unlikely that fossil fuels would disappear entirely from the mix, since CCS would allow for their continued (albeit much reduced) use. Overall—and largely due to EVs being much more efficient than combustion engines—total energy consumption should decrease substantially relative to our model (see figures 8 and 9).
Electricity’s share of the energy total is expected to rise, from 27% to 55% at net-zero. Conversely, the share of natural gas and oil products is projected to fall from 60% to 22% at net-zero. The proportion of hydrogen and bioenergy usage is expected to rise considerably, although these resources will account for less than 16% of Canada’s energy consumption once net-zero has been achieved.
Largely due to EVs being much more efficient than combustion engines, total energy consumption should decrease substantially
