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Is your province ready for a low-carbon future?

Canada’s future economy will be lower carbon. New research shows that some provinces may be more ready for this future than others.

The global low-carbon transition is accelerating. Canada, the European Union, and China (and potentially the US under a Biden presidency) have all pledged to achieve net-zero emissions by mid-century. Investors are starting to incorporate climate change into decision-making. Technology costs are coming down, accelerating the transition. 

Canada as a country faces risks and opportunities in this future, and some provinces are better positioned than others to take advantage and even thrive in the new low-carbon reality. Which ones are ready? We draw on data from our new report, 11 Ways to Measure Clean Growth, to answer this question.

All provinces have made progress, but some are moving faster than others 

The good news: Canada as a whole is managing to separate economic growth from greenhouse (GHG) emissions, which shows it’s possible to strengthen our economy and address climate change. But progress isn’t evenly distributed (Figure 1). Here are a few ways we can measure it.

Figure 1: Separation of provincial GDP and GHG growth, 2005-2018

Our first metric considers the extent to which provincial economic growth (measured by gross domestic product, or GDP) is diverging from GHG emission trends (using a standardized index). Provinces with bigger spreads—that is, the difference between the change in values for both GDP and GHG emissions between 2005 and 2018—could be considered more prepared for a low-carbon future. However, they will need to continue these trends to stay on pace with global change. Between provinces, the spread ranges from just two in Newfoundland and Labrador to 43 in Prince Edward Island. 

There are also signs that separating GHGs and GDP slowed between 2016 and 2018. In those three years, emissions increased with GDP in all provinces with the exception of New Brunswick (Figure 2). 

Figure 2: Year-over-year change in GHG emissions by province, 2005-2018

 The future economy will be lower carbon. New research shows that some provinces may be more ready for this future than others.
Source: Environment and Climate Change Canada, author’s calculations.

Another metric, which we call GHG Productivity, provides additional insight. This metric measures the amount of economic activity generated per tonne of CO2 equivalent; a higher score means more economic activity per tonne of emissions. Saskatchewan, with a score of 1, generates less economic activity for a given amount of emissions than Quebec, which has a score of 3.75. 

Measuring employment against GHG emissions again reveals differences between provinces. Saskatchewan and Alberta each generate less than one new job per tonne of CO2 equivalent (0.75 and 0.86 respectively) whereas Ontario, PEI, and Quebec generate many jobs per tonne (4.39, 4.53, and 5.16 respectively). 

Accelerating the decoupling of GHGs from GDP growth, increasing GHG productivity, and reducing the linkage between employment and GHG emissions will help provinces reduce vulnerability to low-carbon transition.

Four building blocks for a low-carbon economy

Provinces differ for good reasons, including energy resources and economic structures. But there are four areas where additional effort could help drive progress.

  1. Technology Development

Investing today in low-carbon technologies could pay dividends for provinces down the road. They can help high-carbon businesses reduce their emissions intensity and develop new sources of growth, exports, and jobs that are consistent with low-carbon transitions. In Alberta and Saskatchewan, this could include technologies like carbon capture and storage, geothermal electricity generation, or hydrogen as a low-carbon fuel alternative.

  1. Technology Adoption

Adopting clean technologies can play an essential role in separating emissions from GDP. They can drive down emissions while generating market demand for Canadian-made technologies. Adopting lower-carbon electricity generation options in electricity generation has driven the bulk of emissions reductions in Nova Scotia, New Brunswick, and Ontario, with little sign of a meaningful impact on growth. All provinces could also benefit from adopting clean technologies in the transportation sector, which is now the largest source of emissions in a number of provinces. Fuel-switching technologies (electric or hydrogen vehicles, buses, trucks) all have significant potential to reduce greenhouse gas emissions and improve air quality, while generating demand for Canadian-manufactured products

  1. Trade and Competitiveness

Trade in low-carbon and resilient goods is key to maintaining Canada’s competitiveness in a low-carbon economy. Exports are a key source of economic growth and job creation, while imports can offer low-cost options to address climate change. Currently, trade in environmental and clean tech (ECT) products stands at about 1.5 per cent ($30 billion) of national GDP and increased moderately since 2012. Ontario is by far the highest trader of ECT at $13.7 billion, followed by Quebec ($5.8 billion) and British Columbia ($4.4 billion). Proportional to the economy, however, Manitoba comes out on top with two per cent of GDP traded in ECT (with a greater proportion of imports than exports). 

  1. Infrastructure

Climate-related infrastructure will be crucial to low-carbon transition, and resilience to a changing climate, given the long lifespan of energy, transport, and building infrastructure. While there is limited data to fully assess infrastructure investments, investment flows towards hydroelectric production, power transmission, and power distribution experienced the large increases in both public and private capital expenditures between 2009 and 2019. This coincides with observed downward trends in electricity emissions intensity. However, investment in wind and solar energy, and in buses, declined between 2009 and 2019. 

Planning for clean growth

We’re already seeing clear signs that the global economy in 2050 may look very different than today. Canada and its provinces have made gradual progress in reducing emissions but some could face greater risks from global low-carbon transition. A combination of technology development and adoption, trade, and infrastructure investments will be key to ensuring a prosperous low-carbon future in Canada.