PROSPECTS FOR MEETING EMISSION REDUCTION GOALS: THE CASE OF QUEBEC

Contributed by Robert Lyman © 2017

Introduction

Much of the controversy in Canada concerning climate change issues takes place at a very general level. People discuss first whether one should believe those scientists and modelers who predict catastrophic global warming, and second what are the implications of this for the emissions reductions measures, if any, we should take in Canada. A lively debate still takes place on both questions. We might gain more insights by asking, “What if”. What if, for example, Canadians in each province tried actually to meet the official greenhouse gas emission reduction targets already set by governments?

The purpose of this note is to explore the possible implications if the residents of Quebec actually had to meet the targets that have been set for them by the federal and provincial governments over the next thirty-three years (i.e. to 2050) and beyond. A thorough analysis of this would require the use of sophisticated econometric models and an enormous amount of data, which I lack. The comments that follow should thus be considered as attempts to offer qualitative insights into the analysis that must be done and the choices that lie ahead.

The Targets

The Government of Canada formally has committed to the United Nations to reduce GHG emissions from current levels (722 megatonnes, or Mt, of carbon dioxide equivalent, in 2015) to 622 Mt in 2020 and 525 Mt in 2030. In 2008, former Prime Minister Stephen Harper made a political commitment that Canada would reduce its emissions by 50% or more from 2005 levels by 2050; that would mean a reduction to 369 Mt.

The Government of Quebec has made a political commitment to reduce provincial GHG emissions to 20% below 1990 levels by 2020. As provincial emissions in 1990 were 90 Mt, this implies a 2020 target of 72 Mt. Quebec has also committed to reduce emissions by 80 to 95% below 1990 levels by 2050. That implies emissions levels in a range of 18 Mt to 4.5 Mt by mid-century.

Neither the federal nor provincial commitments include any condition concerning future increases in population or economic activity. The goals are based upon the expectation, one can only assume, that somehow emissions reductions can be achieved at rates that will offset economic and population growth and, in addition, achieve very significant reductions in the emissions intensity of the economy.

There is also no official connection between the goals articulated by the two different orders of government. Clearly, for example, Quebec’s 2050 target far exceeds what would be required for the province if the emissions reduction measures contemplated to achieve the federal goal were to be applied proportionately across all provinces and territories.

The Current Situation

The most recent data on GHG emissions in Quebec are for 2015. According to Environment Canada, Quebec emitted 80.1 Mt in that year, 11.4% of the Canadian total.

Table 1 indicates the breakdown of those emissions.

Table 1

Source: Environment and Climate Change Canada National Inventory Report, 2015

Quebec’s emissions stayed virtually unchanged from 1990 to 2006. Following the onset of the global financial crisis, they declined steadily to 2011, rose briefly in 2012 and then declined again to 2015. Other things equal, they are on a path to meet the 2020 target of 72 Mt. However, a number of background factors may affect this.

Quebec’s economic and population growth rate has lagged behind the Canadian average since 1981. From 2011 to 2016, according to Statistics Canada, Quebec’s population grew by 3.3%, compared to 5.0 % for Canada as a whole.  The Quebec Statistics Institute reports that Quebec’s real growth in GDP declined from almost 3% in 2010 to around 1% from 2013 to 2015.  These low rates of population and income growth facilitated emissions reductions. Since late 2015, in contrast, provincial GDP has been rising at a rate above 2% per year.  If Quebec can continue or increase this pace of economic growth, emissions may move higher than forecast.

The Potential Implications of the 2050 Targets

The structure of Quebec’s energy economy differs from that of some other Canadian provinces in two important respects. The first is that, unlike most other provinces, the Quebec economy is not based heavily on resource extraction in the form of hydrocarbons development or hard rock mining, although there are some large mines in the province. It is primarily a service economy. The second is that it is blessed with access to large and already developed hydroelectric power resources that have allowed the province to establish an electricity generation system with very low emissions of greenhouse gases. On a per capita basis, Quebec is one of the lowest GHG emissions jurisdictions in the world.

This means that the options available for Quebec to make significant additional emissions reductions at low cost are much more limited than in the case of other provinces, and especially the major hydrocarbon producers and users. For example, while transportation-related emissions represent less than 25% of the total in the western provinces and in Canada as a whole, at 42% in Quebec they constitute the largest share. Emissions from large stationary sources and emissions-intensive industry combined constitute 41% of Quebec emissions. If Quebec’s goals are to be met, the cuts must come in these two areas.

This will not be easy.

Transportation

Reducing emissions in transportation is far more complex than the general public believes. The complexity arises from the differences among the surface, marine and aviation modes of transport and from the many ways in which emissions can be affected, including efficiency improvements in existing vehicle technologies, development and market penetration of new technologies, changes in the behavior of vehicle operators, inter-modal shifts and use of alternative fuels. The academic literature and the media are full of positive expectations about the emissions reduction potential of new technologies, but many of these technologies have not yet been developed, and may not be developed for decades.

Most transport-related emissions come from surface vehicles. About half come from cars and light passenger trucks (SUVs), a quarter from commercial trucks, 10% from aircraft, 4 % from rail and the remainder from buses, motorcycles, and off-road vehicles, including those used for farming and construction.

The recent and near-term trends in passenger vehicle emissions are almost entirely due to the effects of regulation. In October 2010, Environment Canada issued the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations, which prescribed progressively more stringent annual emissions standards for new vehicles in model years 2011 to 2016. In 2014, Environment Canada introduced even more stringent standards for the 2017 to 2025 model years. Under both phases of light-duty vehicle regulation, the fuel efficiency of new cars will increase by 41% and the fuel efficiency of new passenger light trucks will increase by 37%. In addition, new emissions standards for heavy-duty vehicles (buses and trucks) are expected to reduce Canada’s emissions by about 2 Mt by 2020.

These emission reductions will come at a high cost to vehicle manufacturers, a cost that will be passed on to consumers via the prices of the vehicles. The vehicle industry argues that, after more than 30 years of increasingly stringent regulations, it is reaching the limits of current technology. Certainly, the regulations are changing the types of vehicles available to consumers. It is unlikely that Quebec can do anything on its own that would change the fuel efficiency and emissions of North American vehicles beyond what is agreed jointly by the U.S. and Canadian governments.

Increasing carbon taxes on gasoline will make driving more expensive for drivers, but experience in Europe has shown that even very high prices will not substantially reduce fuel use. In Norway, for example, gasoline prices were CDN $2.46 per liter in the first quarter of 2017, the highest in Europe, and yet gasoline demand there continues to rise. We would need a carbon tax of $60 per tonne to raise average Canadian prices to that level.

The “bottom line” is that the combined effect of regulations and higher fuel taxes will increase fuel efficiency and reduce per vehicle emissions, but as has happened to date, the increasing number of cars on the roads will probably leave emissions stable or very slightly declining. It is extremely unlikely that regulation and taxes will force consumers to abandon their cars altogether, as would be required by an emissions reduction of 80 to 95%.

What about electric vehicles (EV)? Electric vehicles are the beneficiaries of both large government subsidies and pervasive media hype. However, a 2010 report by J.D Power and Associates that offered a pessimistic view of EV market prospects has proved prophetic. The study concluded that the combined global sales of hybrids and all-electric plug-in vehicles might total 5.2 million units in 2020, just 7.3% of the 70.9 million passenger vehicles to be sold worldwide in that year. At the end of 2016, global sales just passed the 2-million-vehicle mark, well below the J.D. Power estimate for 2020. This is also far less than the numbers projected by the former Obama Administration in the U.S. and Chancellor Angela Merkel of Germany. EVs constitute less than 1% of new vehicle sales in Canada. While sales grow every year, they are unlikely to become a significant portion of the total vehicle fleet for at least 20 years, and perhaps much longer.

John Lawson, one of Canada’s foremost transportation economists, has studied the potential for reducing emissions through modal shift (i.e. encouraging passengers or freight movers to switch from high-emission modes of transport to lower-emission modes). The results may be surprising.

• Doubling of intercity train passenger travel would actually increase emissions slightly, because of the low occupancy rates of trains.
• Doubling of intercity bus travel would reduce emissions, but only by half a megaton to 2020, because traffic is so limited.
• Doubling of urban passenger travel by transit (a very ambitious goal) would only save 2.53 Mt in all of Canada by 2020.

Municipal governments are already struggling to make the transit capital expenditures they consider necessary to alleviate congestion, and they hardly have the funds needed to double the capacity of the current systems.

There are even more limited prospects for massive reductions in freight transportation through inter-modal shifts. Trucks are the fastest growing source of GHG emissions in transportation. Shifting 10% of freight from trucks to rail is considered a significant goal, as businesses prefer trucks for their flexibility; unlike rail, trucks can pick up and deliver freight to many destinations. If a 10% shift from large trucks could be achieved, this would only reduce emissions in all of Canada by 0.42 Mt in 2020.

Environmentalists celebrated when a two-seater all-electric aircraft won a race in Europe, beating conventional piston-driven models, and a solar-powered plane flew around the world. The subsequent media coverage rarely mentioned that in both cases most of the aircraft’s weight was the battery, or that it took the solar plane a year to make the trip because of problems with its battery. There are a number of ways to improve the fuel economy of commercial aircraft and these are now being pursued by the international civil aviation industry. The idea that long-distance commercial jetliners could be powered by battery packs, however, lies more in the realm of Jules Verne than in serious aviation planning. The only way to drastically reduce GHG emissions from commercial passenger and freight aircraft is to restrict, indeed possibly ration, their use. This was actually proposed in an early version of the Canadian Green Party’s Platform posted online prior to the federal election of 2015, but it was wisely dropped in the final version. Severely limiting commercial flights in Quebec to meet the 2050 target, of course, would have the double benefit of sharply reducing emissions in the hotel and restaurant industries.

Stationary Combustion Sources and Emissions Intensive Industries

These sectors of the economy include many of the industrial plants that consume large amounts of oil, natural gas or coal. Across Canada, the firms are mostly in industries related to mining and metals fabrication, petrochemicals, automobile and truck manufacturing (and related parts manufacturing), iron, steel, cement and pulp and paper industries, among others. In the period 2005 to 2012, emissions in these sectors declined, partly due to the effects of the economic recession.

As in other sectors, there are opportunities to improve energy efficiency and thereby reduce GHG emissions in Quebec’s emissions-intensive industries. However, reducing total emissions to the range of 18 to 4.5 MT would lower Quebec’s per capita emissions to a level similar to that of Somalia today. Without radical measures, there seems no way to so transform the provincial economy in 33 years, or even in 60 years.

Environment and Climate Change Canada publishes the names of the large facility GHG emitters in Canada. There are almost 80 in Quebec, of which the following are the 10 largest:

To say the least, closing these plants to achieve the emissions reduction target would have important regional implications within Quebec.

Conclusion

Quebec likely will meet its 2020 emissions reduction target. As increasingly more demanding targets are set, they will be much more difficult to attain. Indeed, it is not clear what set of policy measures could be implemented to achieve the 2050 goal.

The most comprehensive policy instrument would be a revenue-neutral carbon tax. The tax regime currently being implemented by the federal government, however, would only raise carbon taxes to $50 per tonne (equivalent to 11.5 cents per liter of gasoline) by 2022. The former National Round Table on the Environment and the Economy, in a 2012 report, estimated that a carbon tax of at least $300 per tonne (equivalent to $1.30 a liter of gasoline) would be required to meet a 2050 goal of a 50% reduction in Canadian GHG emissions. The more ambitious Quebec goal of an 80% to 95% reduction would probably require a much higher tax. The political acceptability of carbon taxes may well depend on whether they are fully recycled into the economy through reductions in other generally applied taxes.  Quebec politicians, like those in other provinces, seem very unlikely to pass up the opportunity to spend a revenue windfall on a wide range of favoured projects and groups. In this and many other ways, politics seems likely to undermine the 2050 target.

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