Think big: The best climate solutions embrace integration

Photo by K Kendall

It’s hard to think of a bigger, more complicated challenge than successfully transitioning to a low-carbon economy while the climate changes rapidly around us.

The implications are wide-reaching. Climate change will affect Canadians’ health and the places we love, while the transition away from fossil fuels will affect our lives and livelihoods. And an effective response requires transforming the way we develop our infrastructure, use our energy grids, manage our transportation networks, and build our communities.

Yet too often, we’ve focused narrowly on one part of the problem or one part of the solution. Narrow problems are usually easier to fix. And knowledge and data—the underpinnings of sound policy—are often fragmented across disciplines. But narrow framing also leads to incomplete solutions.

We need to think bigger. It’s time for a more integrated approach to developing climate policy: one that addresses the causes and effects of climate change while also keeping life affordable, reducing health risks, and making Canada’s communities, infrastructure and economy more resilient to what’s coming.

The transformation of all transformations

Consider the complexity and scale of the challenges ahead.

Avoiding costly and potentially catastrophic climate change requires making urgent and deep cuts in global greenhouse gas emissions. For wealthy countries like Canada, this means moving toward net-zero emissions by the middle of the century.

But reducing emissions is only one part of the story. Transitioning to a low-carbon economy will have big implications for Canadian workers, affecting both the types and availability of jobs. The most emissions-intensive industries could face big challenges, while lower-carbon industries could flourish. New technologies and energy systems will also affect how local governments plan and build transportation systems and how businesses invest.

At the same time, the physical impacts of climate change pose risks to our health and well-being. Even if we succeed in reducing global emissions, extreme weather events are expected to become more frequent and severe.

The integration imperative

These challenges are formidable, but not unsolvable. In many cases, Canada already has the tools necessary for success. Governments at all levels have already started to take action. And hundreds, if not thousands, of Canadians have been working tirelessly on climate research and policy. We’re not starting from scratch — far from it.

But it’s also clear we can do better.

Climate research is often fragmented and siloed, almost by necessity, to grapple with the size and complexity of the problem. Different disciplines often use their own methods and vernacular and don’t always talk to each other. In some cases, important connections—between economists, scientists, engineers, public servants, and social scientists—are not fully realized, or worse, are never made. In other cases, policy successes are poorly communicated from one jurisdiction to the next.

The current approach to climate research has accomplished a great deal. But it’s time to push further. Creative and innovative ideas grow best when people with different knowledge, backgrounds, and perspectives work together.

Putting words into action

Integration is easy to preach but difficult to practice. It puts a premium on engagement, dialogue, and communication. It requires pushing back against traditional ways of exploring problems and solutions. It’s about recognizing blind spots and correcting course to be even bolder and more inclusive.

The Canadian Climate Institute is built on integration. Our research will take a systematic and broad approach to climate change, acknowledging that climate change will affect nearly every aspect of Canadian life and that these impacts are complex and dynamic. We will also serve as a vehicle to connect thinkers, ideas, and solutions across Canada. We aim to spark conversations that are both difficult and necessary.

Integrated research and policy advice on climate change isn’t easy. But it is essential if we want to identify a path for Canada to a low-carbon, resilient, and prosperous future for Canadians across the country.

A world of uncertainty: Canada’s future is full of climate choices

Photo by Johannes Ko

Canadians have a reputation for being cautious by nature: polite, eager to compromise, to find some middle ground. We don’t like to rock the boat. We appreciate a steady hand on the tiller.

Unfortunately, our national temperament is now on a collision course with climate change.

We know Canada’s climate is changing, warming twice as fast as the global average, and three times as fast in the North. Extreme weather events are becoming more common. At the same time, global momentum is building to move away from fossil fuels, which is shifting patterns of investment and demand important to Canada’s economy.

But within each trend there is uncertainty. We don’t know how bad climate change will ultimately get, or how quickly the global economy will transition.

That inherent Canadian caution has led some to suggest we ought to wait a while longer, to let other countries test new technologies and policies, to gather more clues on how climate change and global transition is going to affect us before taking decisive steps to prepare.

But that’s a risky strategy. Uncertainty combined with high stakes justifies greater action, not less.

Things are not looking good for the climate

Scientists say that greenhouse gas emissions must reach net zero by mid-century if we are going to have a chance of keeping global temperature increases well below 2 degrees Celsius and avoid severe climate impacts. The world is already 1 degree warmer than preindustrial times, and the latest projections show we are on track to reach over 3 degrees of warming on average by the end of the century. And every year the world’s collective emissions keep increasing, the harder it gets to turn things around.

While we know that a 3 degree trajectory will result in significant climate impacts, there is a risk that impacts will be much worse than what we expect. Climate tipping points that accelerate temperature increases and sea level rise may be happening sooner than anticipated. Feedback effects from ocean warming, wildfires, and thawing permafrost could release even more greenhouse gases into the atmosphere. The collapse of ice sheets could accelerate sea level rise and lead to more rapid sea ice melting than predicted. These effects could interact with each other, creating a cascading cycle that drives runaway climate change.

Economic transformation could come quickly

Though it won’t be easy, the world still has time to get its act together. Over 60 countries, including Canada, have already committed to net-zero emissions by 2050. The costs of renewable energy and batteries used for electric vehicles and energy storage are dropping faster than expected. New clean technologies are popping up every year that could be game changers. U.S. states and cities are making bold decisions to cut emissions, despite inaction at the federal level. China is the largest global investor in renewable energy, accounting for around half of the world’s US $280 billion investment in renewable energy in 2017.

While our children and grandchildren will be far better off with concerted global action, the speed and scale of economic transformation required to meet global climate targets could be devastating for companies slow to adjust. At the same time, the shift to a low-carbon economy brings massive new opportunities for those poised to capture them.

The International Energy Agency shows what the enormous global energy transformation could look like. In its Sustainable Development Scenario (the middle graph in the figure below), declining demand for coal, oil, and gas occurs much faster than in scenarios that only consider what governments are currently doing or have planned. Global greenhouse gas emissions would fall sharply as a result.

World primary energy demand and related CO2 emissions by scenario

A close up of a map

Description automatically generated

Source: International Energy Agency World Energy Outlook 2019

Which future should Canada prepare for?

So, where does this future uncertainty leave Canada—should we focus our energy on preparing for the worst and adapting to a changing climate? Or should we drive hard to be ready for a rapidly transitioning global economy? The answer is, in fact, both.

Investors facing uncertain, high-risk scenarios often hedge their bets, spreading their investments across potential futures to limit losses regardless of outcome. Economists faced with “fat-tailed uncertainty”, where multiple low-probability risks have very high costs, advocate action today as a form of insurance against future risk.

Canada can learn from these strategies. We should act now so that we’re ready for both significant changes to our climate and a global low-carbon transition.

Waiting for certainty is not an option

It may feel safer to argue that Canada should wait and see how things progress before making our move. That there’s no reason for Canada to reduce its emissions until the U.S. or China do. Others make the case that we shouldn’t invest in adapting to climate impacts until we have done everything possible to reduce emissions.

These are actually very risky strategies for Canada. Given how quickly Canada’s climate is warming, and the fact we are a small trade-dependent economy vulnerable to changing commodity prices, shifts in global demand, and global economic shocks, we can’t afford to delay. If we wait to respond, it will be too late.

We can’t turn around on a dime. If we continue to make long-lived investments that are inconsistent with a changing climate and changing global economy, we risk stranded assets and costly fixes down the line. We also risk missing the boat on economic opportunities that could provide new sources of jobs for Canadians. New sectors don’t develop overnight. Canadians tend to be cautious in most things, and it’s an approach that has served us well. Yet in the case of climate change, a passive response is—perhaps counter-intuitively—more risky. Change is coming. To realize a future where Canadians across the country thrive through the coming storm, we must make deliberate choices. Otherwise, they might be made for us.

Getting to zero: Canada plans to hit net-zero emissions by 2050. What’s next?

Photo by Bright Autumn Color

Canada’s joined an exclusive club. The federal government has pledged to reduce its greenhouse gas emissions to “net zero” by 2050, joining a small but growing list of countries, states, provinces, and cities. The goal doesn’t seem to be an empty one either: Environment and Climate Change is tasked with leading “government-wide efforts to develop a plan to set Canada on a path to achieve a prosperous net-zero emissions future by 2050.”

But before Canada can deliver on its promises, it first needs to figure out what achieving net zero actually means for the country. The idea is lofty and abstract, and maybe even means different things to different people. Better data and research can help.

**Does zero mean zero?**

Hitting net zero requires making big reductions in our emissions. It requires shifting away from burning fossil fuels for energy and replacing them with lower-carbon alternatives, such as renewable electricity and other low- or non-emitting fuels. Better energy efficiency and flexibility, in the form of improved energy storage, will also play an important role.

Reaching net zero doesn’t require eliminating all emissions everywhere. The “net” amount of emissions going into the atmosphere (over a given time period) is what matters. For example, we can achieve net-zero emissions in 2050 even if Canada hasn’t fully decarbonized. It’d require us to offset the remaining emissions from that year, either by using new technologies that capture, store, and utilize carbon, using traditional approaches, such as planting trees, or when verifiable, by reducing emissions in other countries. The more emissions we reduce up front, the less we have to offset to reach net zero.

Zero never felt so big

The benefits of the world going net zero within the next few decades are huge. It means avoiding some of the most extreme impacts expected under a high-emissions scenario, including rising seas and more frequent and severe droughts, floods and hurricanes. This outcome alone could keep millions—maybe billions—of people safer and healthier, particularly the poorest and most vulnerable. Fewer people will be forced from their homes and countries. Fewer dollars will be spent fortifying homes and businesses to withstand more extreme weather.

It may not always feel like it or look like it, but the global transition to a low-carbon economy is well underway. Over 60 countries have pledged to achieve net-zero emissions within the next thirty years, reflecting the global commitment countries made in Paris in 2015 to achieve net-zero emissions by the second half of the century. Even though some big emitters like the U.S.A. haven’t committed, several states, including California and New York, and some big American cities are forging ahead.

Less time, more work

Net zero by 2050 is the most ambitious climate target ever set by a Canadian government. The target is grounded in hard science and demonstrates Canada’s willingness to lead on the global stage.

Yet it’s impossible to ignore Canada’s dismal track record when it comes to setting and meeting targets. We didn’t achieve our Rio, Kyoto, or Copenhagen targets, and we’re still a long way—at all levels of government—to meeting Canada’s 2030 emissions target. Our past performance in no way determines our future, but it’s history we shouldn’t forget.

Achieving net zero by 2050 will be more difficult than any of these previous targets. On one hand, it’s difficult due to the scope, scale, and pace of the transition required. Canada has one of the most emissions-intensive economies in the world. Getting to net zero requires a fundamental transformation in our energy system and complete decarbonization in most sectors… and it needs to happen within three decades. It’s probably not impossible, but it’s a tall order. And every year we collectively drag our heels makes it that much harder to achieve.

Increasing the number of strong bridges between different levels of government is critical. The federal government can’t go it alone on this one; aside from Nova Scotia, the commitment to net zero still faces stiff headwinds in several provincial legislatures. Reaching net zero requires collaboration with other levels of government, as a significant chunk of Canadian emissions fall under provincial and municipal jurisdiction.

The first step of many

Better data and analysis can help on all fronts. It’s still very unclear what the transition to net-zero emissions could look like, let alone how Canada might get there by 2050. Better data and analysis can help identify sectors and communities that face the biggest challenges, along with policies to address these challenges.

Just as importantly, data and analysis are building blocks in developing a shared vision of what Canada is trying to achieve. More and better information can add precision and clarity to the abstract. It can help make a clear case for why Canada needs to make deep cuts in our emissions.

Canada has taken the first step in setting an ambitious and science-based target. But the hard work has just begun, and we don’t have any time to waste. It’s time to dig into the details of what net zero means for Canada and how we can get there.

Prospering through change

Climate change, and the world’s response to it, are increasingly important drivers of economic change. On one side, the changing climate is creating new sources of business risk. On the other side, investment patterns and consumer demand are shifting toward low-carbon goods and services.

Canada’s economy—and, by extension, Canadian workers—face both risks and opportunities from these changes. Businesses that anticipate and adjust can thrive. Those that are complacent and slow to change could be left behind. To secure a prosperous future, we need to stop thinking of climate change as purely an environmental issue. It is also a critical economic issue.

Reflecting climate risk

A certain amount of climate change is already locked in. It’s inevitable that Canadians will face a growing burden of risk and costs from rising seas, the spread of insect-borne diseases, thawing permafrost, and more frequent and severe wildfires, droughts, heatwaves and floods.

Canada is also vulnerable to climate change impacts elsewhere in the world, which can disrupt supply chains, lead to volatile commodity prices, and generate financial losses that ripple through the global economy. Flooding in Thailand in 2011, for example, led auto assembly plants in Canada to cut production in half due to a shortage in parts from Thai factories. Yet only a third of Canadian public companies are disclosing the climate-related risks they face, and just over half of public infrastructure owners are considering some element of climate change in decision-making.

Global demand for fossil fuels will slow, peak, and eventually decline, and this will happen regardless of the choices Canadian governments make. What remains unclear is how fast change will happen. Many Canadian companies and investors are betting that change will come slowly. That has led the Bank of Canada to express concern that asset prices are not adequately reflecting carbon-related risk—since, if change happens faster than expected, large losses could affect the stability of Canada’s financial system.

Governments can help markets better reflect these climate-related risks. For example, the federally-appointed Expert Panel on Sustainable Finance engaged financial sector experts to provide recommendations to scale and align sustainable finance with Canada’s climate and economic goals. Governments can require financial disclosure or project-level stress-testing. They can also help realign incentives through policy. Carbon pricing, for example, sends a signal to invest in reducing emissions. This can encourage innovation and efficiencies that ultimately reduce long-term carbon risk. It can also encourage companies to diversify product lines and supply chains.

Seizing climate opportunities

Competitiveness in the face of change is not just about managing risk. One person’s risk is another person’s opportunity. In emerging economies alone, climate-related investment opportunities are worth an estimated US$23 trillion.

Canada is well-positioned to capture opportunities in a low-carbon world. Canada’s clean technology sector is growing, providing an estimated 282,000 jobs in 2017, which is similar to Canada’s agriculture sector. In addition, natural resource sectors could benefit from increased demand for minerals and metals for electric vehicles and growing interest in bio-based products.

Significant opportunities exist throughout the economy, not just in conventional “cleantech.” For example, what if oil companies could get value from the oil sands that did not result in burning bitumen? One study suggests alternative uses of bitumen could have an annual market value of US$218 billion by 2030. It may also be possible to generate hydrogen – a non-emitting fuel – from the oil sands. Yet these types of innovations are often not eligible for financing from green bond markets, suggesting that a new class of “transition bonds” may be needed, with clear criteria to ensure consistency with Canada’s long-term climate and environmental goals.

A changing climate could also provide new opportunities. Crop losses in one part of the world could mean Canadian crops could help prevent food shortages. Water constraints are already driving growing demand for water efficiency, recycling, and desalination technology—areas where Canadian companies have expertise that can help other countries adapt. Companies developing fire-resistant building materials could also see demand grow in areas at risk of wildfire, helping protect vulnerable communities.

Governments can help increase the chances that companies capture these emerging opportunities. They can develop policies that drive domestic demand and technology adoption. They can provide financial support at critical stages of innovation, or guidelines for new financial products. They can remove regulatory and other barriers. And they can invest in enabling infrastructure.

Making smart choices

The choices made by governments and businesses over the next decade will determine the competitiveness of Canada’s economy for generations to come. The days of considering climate change policy as separate from economic policy are over, and governments are taking huge risks if they don’t consider them in tandem. Canadians should be optimistic about the potential for Canada’s economy in a future influenced by climate change. But they should not underestimate the scale of effort required to realize that potential. As we increase the ambition of climate policy, we also need to expand measures to drive low-carbon and resilient sources of economic growth. Our future prosperity depends on it.

Photo by Lambert Rellosa

Three sneaky ways Canada’s climate action can have big international impacts

Photo by Venture Minimalist

To what extent can Canada lower climate risk by reducing the warming and disruption we’ll ultimately face? More to the point, how much do our domestic efforts matter if the rest of the world’s top emitters aren’t acting with us?

Short answer: more than you might think. Yes, Canada is only one contributor to global greenhouse gas emissions. And yes, our emissions matter for their own sake. But our actions could actually have impacts that extend well beyond our 1.6% of global emissions, depending on the choices we make.

Climate change is a particularly thorny collective action problem. In other words, everyone would be better off if all countries took significant action to achieve deep decarbonization, but no individual country wants to move too far ahead of the others. That logic isn’t wrong—collective action does pose some big challenges—but it’s not the whole story, either.

Let’s look at three ways Canada can influence global action on climate change, while advancing our own interests at the same time.

#1 Leverage technology spillovers

Canada can affect emissions elsewhere by developing new technologies and innovations that have additional benefits that “spillover” beyond Canada’s borders. Here’s how it can work:

Smart Canadian climate policy drives clean innovation by signaling to clever engineers, entrepreneurs, and investors that new technologies or processes that reduce more emissions at lower costs will be valuable in the future. By encouraging Canadian businesses and households to adopt technologies and processes that reduce emissions, domestic policy creates demand for low-carbon innovations.
Growth in market demand, scaling up of production, and strong competition all encourage more learning and even lower costs. That innovation helps Canada achieve domestic emissions reductions.
It also can make reducing emissions elsewhere cheaper and easier. That means more global climate action, amplifying Canada’s own—which, in turn, has the potential to create new economic opportunities for Canadian innovators in international markets.

Consider, for example, the case of wind and solar power. Germany was once the hottest market, thanks to its feed-in-tariff policies for renewable energy. China then dominated with huge government investments in renewable electricity, in an effort to reduce air pollution.

The resulting surge in demand from the two countries, as well as others, led to more supply and more competition, helping drive down the overall costs of generating renewable power in a relatively short period of time. Two decades ago, wind and solar electricity were costly options to reduce emissions. Today, they are cost-competitive with fossil fuels.

Expanding renewable production domestically also appears to have supported new opportunities internationally. As of 2017, six out of the top-10 global wind turbine manufacturers were German or Chinese. More than 70% of solar panel manufacturers are Chinese. On their own, these outcomes do not prove a causal relationship between domestic policy and international market share, but they do support the hypothesis that the two are connected.

#2 Leverage policy spillovers

Selecting and designing sound climate policy is hard, in Canada or elsewhere. Sound policy must manage a range of trade-offs, from the impact on the economy and employment, implications for government budgets, costs faced by individuals, and the implications of insufficient action.

Those challenges mean that policy experiments—and especially policy successes—have value beyond our borders. If Canadian governments develop policies that achieve results while managing these concerns, foreign governments will be interested in hearing the details. In this way,policy spillovers can demonstrate successful policy at home to catalyze action abroad.

Canada’s efforts to phase-out coal-fired electricity for example, has significantly reduced emissions at home (and improved local air quality), but is also having impacts beyond Canada’s borders. In 2017, Canada moved to leverage its leadership by partnering with the U.K. to create the Powering Past Coal Alliance. The Alliance encourages other countries to implement similar policies. To date, 30 countries have joined the coalition along with more than 50 sub-national governments, businesses and other organizations.

#3 Influence climate policy elsewhere

Canada also has more direct ways to influence climate policy in other countries.

Emerging “climate clubs” provide one avenue. Small coalitions of countries provide an opportunity for Canada and others to coordinate climate and innovation policy—and even institutions—in mutually beneficial ways.

In other words, climate clubs could be a platform for creating technology spillovers. As University of California professor David Victor notes, “The strongest case for clubs lies in the ability of small groups to develop and demonstrate solutions to hard problems—and for those solutions to expand into more widespread use.”

Climate clubs can also facilitate policy spillovers. For example, MIT researcher Emil Dimantchev shows how the EU has expanded climate policy. Poland was willing to accept a price on carbon pollution—despite its heavy use of emissions-intensive coal-fired electricity—because it was the cost of joining the EU. The EU effectively leveraged economic incentives to broaden significant climate policy.

Border Carbon Adjustments (BCAs) provide an even more direct channel of influence. BCAs effectively impose a carbon price on the greenhouse gas emissions embedded in imports from other countries. As a result, they would create powerful incentives for countries that trade with Canada to impose strong climate policy (and thus avoid tariffs on carbon-intensive goods). While it might be hard for Canada to implement BCAs unilaterally given their complexity and the size of Canada’s market, moving in parallel with the EU or the United States could be a way to leverage domestic climate policy into international emissions reductions. At the same time, BCAs could level the competitive playing field in the market for global capital and market share.

Canada, carbon, and the world

Yes, it’s global efforts to reduce carbon emissions that can ultimately stave off a climate catastrophe. Yet Canada is not powerless to affect policy elsewhere. If we can develop and implement sound policy, we can drive emissions reductions at home, catalyze global action, and be ready for opportunities that arise from a changing global economy.