Climate and Energy: Accelerating a Necessary Transformation

This companion paper to the Fall 2021 Economic Outlook focuses on Canadian and global climate targets and policies, commitments to emissions reduction and ambitions to transform energy systems. 

Highlights

• Coming out of the COP26 in Glasgow, global public and private sector leadership has affirmed ambitious climate targets, including deep reductions in greenhouse gas (GHG) emissions by 2030, and net zero emissions around mid-century.
• Canada has pledged, and established in law, a target of 40-45 percent of emissions reduction by 2030 relative to 2005, and a target of net zero by 2050, with supporting commitments from the private sector.
• To date, the plans of economies globally are not aligned with their policy pledges, and projections show the world still falling far short of its targets. In Canada, while projections may show progress ahead, current emissions are roughly where they were in 2005: we are still in the starting blocks.
• Transforming energy systems and economies to turn ambition into reality will require massive investment. For Canada, our judgement is that meeting the target for 2030, and setting a course to net zero, requires an added flow of public and private investment of some 1.5 percent of GDP by 2030. 
• Securing the necessary investments and driving change requires drawing on the forces of technology, markets and policy operating together and closing critical gaps.
• Policy must create the environment that provides the private sector with the predictability and the incentives to invest in innovation and in capacity in such a manner as to capture opportunity and bolster productivity and competitiveness while driving to net zero.  
• Otherwise meeting targets will mean scaling up sharply imports of technology and equipment, or curtailing domestic production, with damaging impacts for our current account and prosperity.  
• Exceptional collaboration between the public and private sectors is essential to:
  • operate a transition and capitalize on opportunities through to 2030 and beyond, including realizing value from our energy resources;
  • recognize the connected nature of energy systems, the complexity of supply chains, and thus deliver the integration of solutions necessary for orderly market adjustment;
  • align not only on a plan, but on execution, including on timelines for decision making.
• Sustained progress requires acting simultaneously and collaboratively on a number of policy and market levers: measurement and disclosure of emissions, investment, innovation, and trade. Clearly, the hard work of implementation is still ahead, and it cannot be back-end loaded.