Canada’s energy system is poised for a strong renewables focus in the energy transition, while the country maintains its role as a vital oil and gas exporter, a policy review from the International Energy Agency (IEA) found.

“Canada’s wealth of clean electricity and its innovative spirit can help drive a secure and affordable transformation of its energy system and help realise its ambitious goals,” IEA executive director Fatih Birol said.

“Equally important, Canada’s efforts to reduce emissions — of both carbon dioxide and methane — from its oil and gas production can help ensure its continued place as a reliable supplier of energy to the world.”

The Canada Energy Regulator expects demand for renewable and nuclear power will increase by 32% from 2019 to 2050, making up at least 90% of the country’s electricity generation in the next few decades.

The country already has strong clean-electricity generation, with more than 83% of its electricity production coming from non-emitting sources, including hydropower. But not all provinces have the same access to clean electricity.

The IEA recommends the Canadian government improves interconnectivity of electricity between provinces to discourage the development of new greenhouse gas-emitting power plants.

Canada has the groundwork to support a clean-energy transition, with 13 Canadian companies making the Global Cleantech 100 — Cleantech Group’s list of the top 100 players that will make a significant market impact in the industry in the next five to 10 years.

Five of those companies are in the energy and power sector, and another five are in materials and chemicals, several of which focus on utilising carbon products and decarbonisation.

Future of oil and gas in Canada

The IEA noted that as a large energy exporter — exporting 44% of its domestic energy production in 2020 — Canada must ensure it maintains energy security through the transition. The role of oil and gas in the transition has been heavily debated in Canada, as the country's greenhouse gas intensity in upstream crude oil production is the third highest in the world.

In provinces like Alberta and Saskatchewan, oil and gas play a leading role in local economies, and the provinces’ energy ministers are looking towards innovation within oil and gas for transition technologies. One solution is carbon capture, utilisation and storage (CCUS), which aims to reduce CO2 emissions as well as increase efficiency of oil production.

However, Canada has established clear net-zero policies that oil and gas companies will need to take into account moving forward.

Oil and gas emissions in Canada have declined 32% since 1990 levels, and the country anticipates a 17% to 27% decrease in emissions in the period from 2018 to 2030, but some of these emissions reductions are offset by increasing oil and gas production, according to the IEA.

The Canada Energy Regulator says oil and gas production will peak in 2039 and 2040 respectively, but this does not represent the federal targets to reach net-zero emissions by 2050. The IEA said in its policy review that innovation is necessary within oil and gas to keep the sector secure, while still contributing to the net-zero targets.

Policy and recommendations

Canada has made several policy changes to support the energy transition since the IEA last reviewed the country in 2015. The Net Zero Advisory Body was established in February 2021, but the IEA said the body needs a mandate and the capability to review and monitor national, provincial and territorial progress.

Canada’s Strengthened Climate Plan from 2020 also put C$15 billion (US$12 billion) of investments into CCUS and other emissions reduction efforts, and the country’s Nationally Determined Contributions for the Paris Agreement target a reduction in emissions of 40% to 45% by 2030, compared with 2005 levels.

The IEA calls for the country to develop national strategies for energy efficiency and emissions reductions, and for the federal government to support research, development and demonstration in clean technologies and innovation.

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