In short, we must seek safe passage through the storm. To do so, we need a healthy and strong crew (thriving Canadians) and a sturdy and nimble ship (economic prosperity). We also need to do what we can to calm the waters, working internationally to collectively drive down emissions and dampen economic and societal shocks (global action).
The complexity and magnitude of climate change mean that we cannot consider challenges in isolation. This section presents a new, integrated framework for weathering the storm, and even thriving through it as much as possible. It outlines three high-level goals and ten specific objectives that, together, reframe Canadian climate policy (Table 2). The framework connects actions focused on reducing emissions (mitigation), capturing clean technology opportunities (clean growth), and preparing for climate impacts (adaptation) more directly to the welfare of current and future generations of Canadians. This broader approach helps situate and clarify policy choices by identifying shared objectives across and within governments.
3.1 THRIVING CANADIANS
We know that the risks and opportunities of climate change will not be distributed evenly. Those that are most vulnerable will bear the brunt of negative impacts, and those that are privileged will capture most of the opportunities. In fact, the distributional impacts of climate change are likely to be more significant than aggregate impacts at the national level. How well we succeed at creating a future where Canadians thrive will depend on how we address four key objectives: (1) healthy Canadians, (2) resilient Canadians, (3) sustainable ecosystems, and (4) intergenerational fairness.
BOX 7: AN INNOVATIVE APPROACH TO TRACKING THE SPREAD OF LYME DISEASE
Researchers at Ouranos mapped the potential spread of Lyme disease across Quebec using a model of the expected future habitat of the white-footed mouse, the favourite host of the black-legged tick that carries the Lyme disease bacteria. Comparing the characteristics of current white-footed mouse habitat, such as vegetation, average temperature, snow cover, and winter length, with modelling of future conditions under climate change, researchers projected the northern expansion of the species over time. This in turn provides a prediction of the likely spread of Lyme disease. Governments can use this information to warn residents and visitors of the risk.
Source: Ouranos (2013).
Objective 1: Healthy Canadians—managing risks and improving outcomes
Health consistently ranks as a top priority among Canadians (CMA, 2019). However, many Canadians are unaware of the risk climate change poses to their health or of the climate change solutions that could improve their health outcomes.
Climate change will exacerbate pre-existing Canadian health challenges such as an aging population, high rates of diabetes, mental health concerns, and increasing healthcare costs (CIHI, 2015, 2017). Heatwaves, for example, are particularly dangerous for older Canadians and those with pre-existing health issues. Climate change could increase the threat of diseases transmitted by mosquitoes, fleas, and ticks such as Lyme disease and West Nile, further increasing healthcare costs (Hierlihy, 2017). All of these health risks increase significantly as average global temperatures rise.
BOX 8: IMPROVING CHILDREN’S HEALTH AND SCHOOL PERFORMANCE
Caravans of idling school buses and concentrated air pollutants inside buses expose children to high levels of diesel exhaust. Young children have greater vulnerability to lung and heart impacts from air pollution, as they breathe in more air relative to their body weight. Studies have also linked air pollution to poor school performance.
Electric school buses offer an opportunity to eliminate the emissions risk for children, while also reducing greenhouse gas emissions. School boards in California and Quebec have started making the switch. While the cost of an electric bus can be as much as $200,000 more than a diesel bus, operating costs are 10 times cheaper. Since buses can travel around 120 kilometres after a 4.5- hour charge, they are ideal for school bus routes. Canada also has its own school e-bus manufacturers. The Lion Electric Co., for example, is supplying a fleet of 14 electric school buses in Montreal, QC, that will reduce nearly 4,000 tonnes of GHG emissions over the vehicles’ lifetimes.
Sources: CBC News (2017); CBC News (2016); Government of Canada (2017); Health Canada (2016); Perara (2017); Torrie Smith Associates (2005); Wargo (2002); The Lion Electric Co. (2018); Smart Cities World (2018).
If communities are unprepared, extreme weather events could also significantly affect the physical and mental health of Canadians. For example, breathing in smoke from wildfires provokes an immune system response that leads to systemic inflammation, creating issues throughout the body, including the brain. The elderly, young, and those with pre-existing health issues such as asthma or emphysema are particularly vulnerable (Ferreras, 2019; Reid et al., 2016).
Canadian researchers have improved their understanding of the health risks of climate change, but the information could be better channelled into actions that meaningfully improve outcomes. Communities and healthcare workers need a better understanding of the interaction of risks with other factors. More detailed information on risks could empower individuals to take protective measures themselves (Box 7). Response strategies following extreme weather events could better reflect physical and mental health risks. Municipalities could also take a more proactive role in protecting those at risk, such as setting new standards for snow and ice management to reduce the risk of falls and the mental health impacts of isolation.
Many of the options to reduce GHG emissions, and short-lived climate pollutants such as black carbon, can also generate important health benefits. Reducing the use of fossil fuels such as coal, oil, or natural gas can also reduce air pollution, which is linked to heart disease, stroke, chronic obstructive pulmonary disease, lung cancer, and acute respiratory infections (World Health Organization, 2019). Air pollution from diesel school buses also affects the ability of children to concentrate in class (Box 8). Shifting to electric alternatives can improve both GHG emissions and health outcomes.
Questions that must be considered to support Healthy Canadians:
- How will climate change affect the health of Canadians?
- To what extent are existing policies protecting Canadians from health risks linked to climate change?
- How can we best capture opportunities that improve health outcomes and address climate change?
Objective 2: Resilient Canadians— protecting, supporting, and empowering vulnerable people
Canada’s actions on climate change should, at a minimum, seek to ensure that vulnerable Canadians are not worse off than they are today. Ideally, they will lead to better outcomes in the future for all Canadians.
Who are vulnerable Canadians? They are living in poverty or on low-incomes; they are old and young; they have health issues or disabilities; they live in rural, northern, or Indigenous communities; they rely on social support systems; they are recent immigrants; they work in emissions-intensive sectors; and they live near Canada’s forests, rivers, or coastlines. This includes the vast majority of Canadians.
Vulnerability, however, does not imply weakness. In fact, many of those vulnerable to climate change are strong and resourceful Canadians (Cameron, 2012). It is the scale of change they are facing—in combination with other challenges and histories—that makes them vulnerable. The problem is we do not always have the data or analysis to understand the specific risks they face or how to leverage existing strengths to improve resilience.
Vulnerable Canadians will be disproportionately affected by climate change, and risks to these Canadians increase with the severity of global temperature change. Research in the U.S., for example, has started to explore differences in climate change damages between counties based on income (Box 9). Other studies have looked at the distributional impacts of natural disasters and the implications for women in particular (Government of Canada, 2019). One study, for example, found that low-income women and women of African American descent disproportionately bore the impacts of Hurricane Katrina since they had nowhere to go when they were forced from their homes (Butterbaugh, 2005). Internationally, there has been growing interest in taking an intersectional and gender-based analytical approach that considers the impacts of climate change across a range of pre-existing vulnerabilities (Kaijser and Kronsell, 2014; Government of Canada, 2019).
Some Canadians may be more vulnerable to job loss in a low-carbon economy than others, whether it is driven by shifts in global markets or domestic policy. While currently only 0.8% of Canada’s labour force is unemployed for longer than one year, those most at risk of long-term unemployment are normally male, older, and individuals with lower levels of education (OECD, 2019b; Canadian Index of Wellbeing, 2016). Workers in high-carbon sectors and communities dependent on those sectors could be at a higher risk if the world transitions rapidly to a low-carbon economy. Around 200,000 workers, a little more than 1% of Canada’s workforce, are directly dependent on fossil fuel industries in Canada (Mertins-Kirkwood, 2018).
BOX 9: POORER REGIONS BEAR THE BRUNT OF CLIMATE CHANGE IMPACTS
U.S. researchers used climate science, econometric analysis, and process models to analyze future climate change risks across six areas: agriculture; crime; coastal storms; energy; human mortality; and labour. At the national level, they show costs of roughly 1.2% of GDP per 1° C increase in global mean temperature. However, the risk is not distributed evenly. By the late 21st century, the poorest third of counties in the U.S. would experience damages between 2% and 20% of county income under a business- as-usual emissions scenario.
Source: Hsiang et al. (2017).
Planning for the transition can help reduce risk and create new opportunities. Indigenous communities, for example, will be disproportionately affected by climate change, yet some have started to benefit from their expansion of clean energy projects (Box 10). Targeted skills training and education programs could also position vulnerable populations for employment in low-carbon goods, technologies, or services.
Protecting vulnerable Canadians requires a greater focus—both in research and policy development processes—on the risks they face. It also requires integrating more diverse perspectives from across Canada. To move forward, we need better data on vulnerabilities, as well as more disaggregated, more nuanced, and more human-centred analysis of impacts.
BOX 10: CHALLENGES AND OPPORTUNITIES FOR CANADIAN INDIGENOUS COMMUNITIES
Climate change will have a disproportionate impact on Canada’s
Indigenous and northern communities and could have future implications on their treaty rights. Important cultural activities such as hunting, fishing, and foraging could be impacted by ecosystem changes such as melting sea ice. Many Indigenous Peoples and communities—especially in Canada’s North— also rely on the natural environment for their food and livelihoods. Extreme climate events and thawing permafrost will exacerbate existing challenges such as poverty, housing, access to clean drinking water, and transportation access, all of which have complex and deep-rooted connections to colonialism and systemic discrimination.
Some communities are, however, leveraging new opportunities. A survey by Lumos Clean Energy Advisors found Indigenous participation in 152 medium and large-scale clean energy projects and 1,200 small renewable energy projects in operation, with many more planned. The projects are estimated to have provided 15,300 person-years of direct Indigenous employment. Local projects in Indigenous communities can also help transition away from diesel energy, improving health outcomes and long-term affordability
Sources: Assembly of First Nations (2019); Council of Canadian Academies (2019); Council of Canadian Academies (2014); ECCC (2019a); Van Tassel (2019); NRTEE (2009); ESDC (2018).
Questions that must be considered to support Resilient Canadians:
- Who is most vulnerable to the impacts of a changing climate and how are they vulnerable?
- Who is most vulnerable to economic transitions related to global and domestic decarbonization?
- What policies could protect Canadians most vulnerable to risks from climate change?
- What policies could help vulnerable Canadians capture opportunities that arise in response to climate change?
Objective 3: Sustainable Ecosystems— preserving the foundation of human wellbeing
Sustainable ecosystems protect the natural assets that underpin our economy and our society. Ecosystems are the foundation of human wellbeing—they are critical to our economy, health, and culture (Table 3).
They provide food, raw materials, fresh water, and medicine. They also help to cool local climates, filter air and water pollutants, and limit the impact of floods and storm surges. Birds, bats, flies, wasps, frogs, and fungi, for example, help control pests and vector-borne diseases (TEEB, 2019). Ecosystems are the homes, nesting grounds, and food sources for Canada’s wildlife, and support recreation and tourism. Indigenous peoples also have a strong spiritual connection to the earth and all things living on it (Assembly of First Nations, 2019).
BOX 11: THE VALUE OF PEATLANDS
Peatlands—a type of wetland—provide habitat and food for species, filter water, and help limit flood risk. Peatlands also store more carbon than all other vegetation types combined, helping mitigate climate change.
Damaged peatlands, on the other hand, are a source of greenhouse gas emissions. Drained peatlands contribute to over 5% of global human-caused CO2 emissions. Wildfires and thawing permafrost can also turn peatlands from a sink into a source of emissions.
In Canada, 12% of our territory is peatland (mainly bogs and fens). While there are efforts in some provinces to protect these valuable ecosystems, Canada does not have a national inventory or monitoring program for wetlands. Since the 1800s, Canada has lost 80% to 90% of its wetlands in and around settled areas. Loss and degradation continue as a result of development, agriculture, hydroelectric flooding, pollution, invasive species, recreation, grazing, and climate change.
Protection and restoration efforts by governments and non-profit organizations can slow this trend if they are large enough in scale. In 2018, for example, a series of agreements between the Tallcree Tribal Government, Nature Conservancy of Canada, the governments of Alberta and Canada and Syncrude Canada led to the creation of the Birch River Wildland Provincial Park, now part of the largest stretch of protected boreal forest in the world. The agreement also seeks to address long-standing issues around reconciliation and treaty rights, as it will give Indigenous communities responsibilities in both the management and preservation of the park.
Sources: Assembly of First Nations (2019); Council of Canadian Academies (2019); Council of Canadian Academies (2014); ECCC (2019a); Van Tassel (2019); NRTEE (2009); ESDC (2018).
Natural ecosystems are critical to addressing climate change. Trees and wetlands absorb carbon dioxide, helping reduce the concentration of GHG emissions in the atmosphere. Some studies show that nature could contribute more than 30% of the emission reductions needed to achieve net-zero global emissions by 2050 (Wu, 2019). With 9% of the world’s forest and 30% of its peatland, Canada is responsible for a significant proportion of global carbon stores (CCFM, 2018; Canadian Wildlife Federation, 2013).
Vibrant and healthy ecosystems can also play a pivotal role in climate adaptation. Trees and green spaces have a cooling effect that can reduce health effects during heatwaves, particularly in large cities. Wetlands and forests can help limit flooding and storm surges. Vegetation can help prevent soil erosion.
Unfortunately, however, the value of ecosystems is often not well understood or factored into decision making. Valuable Indigenous ecological knowledge is often not considered (Robbins, 2018; Council of Canadian Academies, 2014). At the global level, and in Canada, natural ecosystems are being destroyed, degraded, and reduced by human activity on an unprecedented scale, jeopardizing the invaluable benefits that humans receive from them. A recent report by the United Nations (2019a), for example, finds a 47% reduction in the extent and condition of ecosystems compared to what they would have been in the absence of human activity.
Canada’s ecosystem services are also vulnerable to climate change—particularly in high-emissions scenarios—and require additional effort to protect and restore (Box 11). Forests, for example, can suffer from the increased frequency and intensity of wildfires, insect infestations, and changing climate and precipitation patterns (Natural Resources Canada, 2017). Lakes, rivers, and aquifers can deteriorate from too much or too
little precipitation, which influences water availability and quality. Risks to pollinators, soils, and water can combine to affect the availability and cost of food. Thawing permafrost and peatland fires can also release greenhouse gas emissions, worsening climate change.
Questions that must be considered to support Sustainable Ecosystems:
- How can ecosystems contribute to Canada’s mitigation and adaptation efforts?
- What valuable ecosystem services are at risk from climate change?
- What policies could improve the contribution of ecosystems to climate change efforts?
Objective 4: Intergenerational Fairness— considering youth and future Canadians
Our descendants are the future of Canada. They are our legacy and often our inspiration. Is it fair to burden them with the impacts of climate change? Should the decisions we make today not reflect their concerns and their needs? Intergenerational fairness considers how costs and benefits can be more fairly distributed over time.
As illustrated in Section 2, climate risks will increase over time, with costs growing toward the end of the century under all emission scenarios. Under a high global emissions trajectory, costs and health risks become devastating by mid-century (OECD, 2015b). While many of today’s decision makers may not be alive in the latter half of the century, the decisions
we take today will influence the extent of impacts on youth and future generations, both in terms of global outcomes and Canada’s preparedness.
Most relevant decisions, however, largely focus on short-term criteria. Businesses focus on positive quarterly results for shareholders. Governments focus on delivering policies that fit within election cycles. And human nature drives most of us to focus on the here and now, instead of what may come. In reaction to the short-term nature of decision making, a global youth movement has garnered considerable momentum (Box 12).
BOX 12: A GROWING VOICE FOR THE VOICELESS
Decades of insufficient climate policy, coupled with a growing awareness of the future risks of inaction, has sparked a global youth movement on climate change. The movement started with a 15-year old Swedish girl in 2018, Greta Thunberg. She started missing school to protest a lack of adequate climate action by the Swedish government. By 2019, students from an estimated 2,300 schools across the world participated in school strikes, covering some 130 countries.
While the demands of youth vary across the world, the united purpose of the strikes is to get more ambitious, accountable, and aggressive climate action. Top officials at the UN have since adopted the language from the growing youth movement, declaring that “Climate justice is intergenerational justice.”
In Canada, a group of young Quebecers launched a class action lawsuit against the federal government for what they argue is a failure to combat climate change. The group ENvironnement JEUnesse argues that those under 35 years old are being deprived their right to a healthy environment and will suffer the effects of climate change more than older generations.
Sources: United Nations (2019b); Irfan (2019), Marin (2019).
Some government decision-making processes consider longer-term impacts. At the federal level, and in some provinces, decision makers evaluate regulations using estimates of costs and benefits over 30-plus years. The Climate Lens for federal infrastructure investments also requires consideration of climate change emissions and impacts over the life of the asset (Infrastructure Canada, 2018).
Still, despite this progress, most public and private actors fail to adequately consider long-term implications. Rarely do we consider, for example, impacts beyond 30 years. Most long-term analyses discount future impacts, putting greater weight on short-term considerations. The range of benefits and costs considered is also usually limited and rarely evaluates cumulative impacts on the overall quality of life of future generations. To truly achieve intergenerational fairness, we need to do a better job of thinking longer term and reflecting the welfare of youth and future generations in our decisions.
Questions that must be considered to support Intergenerational Fairness:
- What are the potential impacts of climate change on the quality of life of youth and future generations?
- How should we balance costs and benefits today against costs and benefits for future generations?
- How can we better incorporate the interests of future generations into near-term decision making?
3.2 ECONOMIC PROSPERITY
The wellbeing of Canadians is inextricably linked to the strength of Canada’s economy. Economic growth supports jobs and income. Ensuring economic prosperity in the face of change requires both managing risks and seizing opportunities. Three objectives sit at the nexus of climate change and the economy: (1) low-carbon competitiveness, (2) climate resilience, and (3) cost-effectiveness.
Objective 5: Low-Carbon Competitiveness —preparing for shifting global markets
Low-carbon competitiveness means being well positioned to compete in global markets that are beginning to recognize constraints on GHG emissions. It matters in terms of maintaining the competitiveness of existing industries facing new market conditions, but also positioning Canadian firms to take advantage of markets for new, emerging low-carbon products and services.
While global decarbonization is not the only challenge facing Canadian firms, these trends pose a particular risk to high-carbon sectors and are a growing opportunity to generate new sources of income and jobs. Firms that adapt, innovate, and respond to trends can emerge stronger than they were before, but those that are slow to change may be left behind.
Despite continual improvements, Canada remains vulnerable, particularly if the world decarbonizes quickly. Key sectors of our economy are relatively emissions intensive (i.e. with high emissions generated per unit of output) and we have a large proportion of jobs linked to high-carbon sectors (OECD Statistics, 2019a). The Bank of Canada has raised concerns that asset prices may not reflect carbon-related risk as a result of a lack of information on carbon exposures, misaligned incentives, and difficulty in accounting for uncertain and complex events in the future (Bank of Canada, 2019).
Canadian companies have also been slow to adopt innovations that could lower their costs of reducing emissions (WGCTIJ, 2016). In 2017, only 10% of Canadian enterprises reported using clean technologies (Statistics Canada, 2019c).
As a result, Canada’s economy faces significant risks if the global economy decarbonizes rapidly. Pressure to reduce emissions quickly—from changing investor preferences or trade measures linked to the carbon- content of goods—would pose high costs and competitiveness challenges, particularly for emissions- intensive regions and sectors. Internationally, many firms are starting to explicitly measure and consider carbon risk in response to investor concerns and guidance issued by the international Task Force
on Climate-related Financial Disclosures (Box 13) (Financial Stability Board, 2019). However, few are fully integrating climate change risks and opportunities into core business strategies (CDP, 2018).
BOX 13: BENCHMARKING RESILIENCE TO A LOW-CARBON FUTURE
One example of measuring firm-level risk to a low-carbon future is the approach developed by Wood Mackenzie, a global energy, chemicals, renewables, metals, and mining research and consultancy group. It uses two metrics to assess the low-carbon resilience of oil and gas companies. The first is a measure of carbon efficiency, defined as net present value (NPV) per tonne of CO2. The second is an oil and gas price resilience metric, measured as the measured as the cash margin after capital expenditures (post-cape) cash margin. It measures the relative level of upstream cash flow generation per unit of production.
Shell, for example, is deemed relatively resilient. Shell proactively developed a long-term strategy for resilience to the global energy transition, using their own future scenarios to inform decision making. Their strategy provides assurance to investors and shareholders concerned about the company’s exposure to carbon risk.
Pre-2030, Shell’s strategy focuses on diversifying its portfolio, improving CO2 performance, and maintaining a strong financial framework. Shell’s business segments include conventional oil and gas, deep water, shale, integrated gas, oil products, chemicals, and new energies in power and fuels. It also operates in more than 70 countries, including Canada. Individual projects incorporate lower-carbon options, such as using electricity instead of natural gas at a B.C. processing plant. Every year, they test their portfolio under different scenarios and CO2 prices to identify vulnerabilities.
Post-2030, Shell is much more ambitious, aiming to reduce the full life cycle carbon footprint of its portfolio of energy products by around half of its current value by 2050. They commit to reporting their net carbon footprint numbers every year to measure progress. In practice, this could mean shifting into large offshore wind farms and biofuels, increasing the proportion of gas produced relative to oil, greater use of carbon capture and storage (building on their Quest plant in Alberta), and planting large areas of forest to offset remaining emissions.
Sources: Wood Mackenzie (2018); Shell (2019).
Canada can also tap into opportunities from changing global markets. The Canadian clean technology sector has grown steadily over the past decade. It contributed $58 billion in Canadian gross domestic product (GDP) in 2017, growing at an average rate of 3.9% between 2007 and 2017, compared to an overall rate of economic growth of 2.2% (Peters, 2019; Statistics Canada, 2018a). Exports of clean technologies, goods, and services rose almost 50% over the same period, more than double the growth in exports from other sectors (Statistics Canada, 2019b).
However, the sector may not be capturing its full potential, as many companies cite ongoing barriers to financing, commercialization, and growth (WGCTIJ, 2016; Felder and Gouvela, 2018). With investment opportunities in emerging economies alone estimated at US $23 trillion between 2016 and 2030, addressing these barriers quickly is critical to positioning Canadian firms to compete (Box 14).
BOX 14: CLIMATE-RELATED OPPORTUNITIES IN EMERGING ECONOMIES
An analysis by the International Financial Corporation of the World Bank Group found $23 trillion in investment opportunities between 2016 and 2030, from climate-related commitments in 21 emerging economies representing 62% of the world’s population and 48% of global GHG emissions.
|Region||US $ trillions |
|Green buildings||East Asia||16|
|Sustainable transport||Latin America||2.6|
|Energy efficiency & transport||Eastern Europe||0.67|
|Renewables||Middle East & |
Source: International Finance Corporation (2016).
Improving the low-carbon competitiveness of Canada’s economy will require a major push on innovation in areas where Canada has carbon risk
or potential to compete internationally. And while Canada has made progress, the scale of our effort pales in comparison to other countries, who are using domestic markets as a springboard for international success (Box 15). Some of the key ingredients include certainty and flexibility of government climate policy; assessing and disclosing climate risks and opportunities; making significant investment in research, development, and demonstration; financing to scale and commercialize innovations; building strong skills and education systems; enabling infrastructure; and government procurement (Smart Prosperity Institute, 2018).
Questions that must be considered to strengthen Low-Carbon Competitiveness:
- How exposed is Canada’s economy to decarbonization risk?
- What are the opportunities for Canada in the global transition to a low-carbon economy?
- Are existing policies appropriately targeted and at the right scale to manage carbon risk and capture opportunity?
BOX 15: CHINA PLANS TO DOMINATE THE ENERGY AND AUTO SECTOR MARKETS OF THE FUTURE
China has been positioning itself for market success in renewable electricity and electric vehicles for over a decade, ready to seize the opportunities created by a global transition away from fossil fuels. Through a combination of subsidies, infrastructure investments, and stringent regulations, China is driving strong domestic demand that is fuelling the growth of companies increasingly able to compete
on a global scale. In 2017, for example, China represented 99% of the global e-bus market. The city of Shenzhen alone has 16,000 e-buses, with 80% supplied by Chinese manufacturer BYD. Bloomberg New Energy Finance expects almost 80% of global municipal bus fleets to be electric by 2040.
Source: BNEF (2019; 2018; 2017); GCGET (2019); Niu (2019); Ren (2018).
Objective 6: Climate Resilience—Preparing for direct and indirect climate risk
Climate resilience means preparing the economy to withstand the risks associated with a changing climate under various future scenarios. At the same time, it also means being ready to capitalize on opportunities where they exist.
How climate resilient is Canada? Canada is warming at twice the rate of the rest of the world, and as a small open economy, it is vulnerable to global economic downturns, supply chain disruptions, and fluctuating commodity prices linked to a changing climate (ECCC, 2019a). Yet our level of preparedness is unclear. Data and analysis of risk are uneven across sectors
and regions in Canada (EPCCARR, 2018). There are, however, strong indications that we need to do more (Box 16).
BOX 16: INDICATORS OF INSUFFICIENT PREPAREDNESS FOR CLIMATE RISK
- Only 31% of publicly-traded companies in Canada disclose physical risks from climate change in regulatory filings (CPAC, 2017)
Only 58% of core public infrastructure
owners are including some element of climate
change risk as a factor in decision making
for core infrastructure assets (Statistics Canada, 2018b)
Insured losses from catastrophic weather
events exceeded $1 billion per year in eight
of the nine years between 2009 and 2017,
up from an average of $400 million per year from 1983 to 2008 (values are in 2017 dollars, adjusted for inflation and per-capita wealth accumulation) (Moudrak et al., 2018)
- The average annual federal share of natural disaster response and recovery costs reached $360 million 2011–2016, up from $110 million 1996–2010 (in nominal terms) (Public Safety Canada, 2017)
Information on direct physical risks to Canada, such as changes in temperature and precipitation, has gradually improved through efforts such as the Canadian Centre for Climate Services and the Pacific Climate Impacts Consortium. Yet physical risk information alone is not enough to drive the actions needed to adapt and improve economic resilience. The Expert Panel on Climate Change Risks and Adaptation Potential identified major areas of climate change risk facing Canada that could involve significant losses, damages, or disruptions over the next 20 years. These risks include damages to infrastructure and disruption of government services, along with financial losses in key sectors, such as agriculture, fisheries, and forestry. Their work underscored the need for additional research and analysis to address gaps in understanding the complex and interconnected linkages between climate change, the economy, and society (Council of Canadian Academies, 2019).
In 2019, British Columbia published its first province-wide Strategic Climate Risk Assessment. It first identified a list of risk events that would have provincially significant consequences. It then evaluated the likelihood of each risk event scenario, as well as potential consequences, to develop an overall risk rating for each event. Severe wildfire seasons and seasonal water shortages were ranked as the highest risks (MECCS, 2019). While the approach did not develop a quantitative estimate of the potential economic impact of climate change, it helped to clarify risks and identify areas of priority.
Some international studies have tried to quantify the economic risk of climate impacts using comprehensive climate and economic modelling. While such analyses do not cover every possible impact, they can help identify key issues and how they may interact across the economy (Benzie et al., 2018). For example, the analysis could look at disruptions to trade infrastructure from flooding and wildfires, heatwave impacts on worker productivity, the potential for increased demand for tourism, and how shifting global agricultural markets could impact farmers. A comprehensive assessment of economic risk provides a more complete picture of direct and indirect national, regional, and sectoral economic risks and opportunities, including interactions and feedback effects (Box 17).
BOX 17: COMPREHENSIVE ASSESSMENTS OF CLIMATE RISK IN AUSTRIA
In 2015, the Austrian Climate and Energy Fund financed a research project to develop a national-scale economic evaluation of the potential negative and positive implications of climate change under three scenarios. The project consisted of 18 research teams looking at 13 impact fields, including agriculture, forestry, water supply and sanitation, tourism, energy, construction and housing, human health, ecosystem services, transportation, manufacturing, cities, natural hazards, and disaster risk management. The analysis used a consistent approach across the impact field, allowing researchers to capture cross-sectoral linkages and economy-wide effects. It also undertook supplementary analysis of non-market impacts.
The research detailed the impact on Austria’s GDP out to 2065, while also highlighting important sector- level issues. For example, the analysis projected tourism to improve in the summer but decrease in winter, with important feedback effects to the rest of the economy. It projected that manufacturing and trade sectors will face significant costs from increased cooling needs, the impact of extreme weather on transport networks, and labour productivity loss during heatwaves.
Source: Steininger et al. (2015).
Improving climate resilience will require better information and analysis, as well as increased effort by businesses and governments to use that information to assess their own specific vulnerabilities and develop responsive actions. At the local level, Canadian communities are already beginning to build resilience into planning and decision making. The City of Vancouver, for example, updated its adaptation strategy in 2018 to focus on core impact areas, integration, and mainstreaming across city operations and services (Box 18).
Preparation at home can also help position Canada to capture opportunities internationally. For example, crop losses in other parts of the world could lead to increased demand for resilient Canadian crops. Canadian expertise could also help other countries enhance their own resilience. Canada is already a leader in water technology, which could be an advantage as water shortages related to climate change drive demand for water efficiency, recycling, and desalination.
Questions that must be considered for improving Canada’s Climate Resilience:
- How exposed is Canada’s economy to direct and indirect impacts of a changing climate, and which sectors and regions are most vulnerable?
- What additional information and capacity building is required to enable better, broader, and faster adaptation?
- What are the economic opportunities for Canada in a changing climate?
- What policies would improve resilience to climate change?
BOX 18: THE CITY OF VANCOUVER ADAPTATION STRATEGY FOCUSES ON INTEGRATION AND MAINSTREAMING
The City of Vancouver updated its climate change adaptation strategy in 2018, refocusing actions into five core areas as well as mainstreaming adaptation across city operations and services. It also seeks to increase integration with other efforts and consider equity implications. The update draws on new climate projections downscaled for Vancouver that show wetter, warmer winters and hotter, drier summers. For example, cooling requirements for buildings are expected to increase fourfold by 2050.
One of the core action areas in the strategy is “Climate Robust Infrastructure,” with plans to improve the understanding of water flow in the city and integrate management across green and grey infrastructure, parks and public spaces. Another is “Climate Resilient Buildings” with a focus on future-proofing the building stock. Others focus on coastline preparedness, natural areas, and prepared communities.
Source: City of Vancouver (2019).
Objective 7: Cost-Effectiveness—Making smart choices along the way
Objectives 5 and 6 lay out two key elements— competitiveness and resilience—for economic prosperity. Yet the ways in which we achieve these objectives also matter. In particular, some solutions cost more than others. Actions or policies that reduce risk or enable opportunities at very high cost can backfire; they can undermine growth and international competitiveness while exacerbating societal vulnerabilities. Choosing more cost-effective solutions— and phasing out costly and ineffective ones—is also a key part of supporting economic growth for Canada.
Innovation is a key factor in cost-effectiveness. Innovation in technologies or processes can help lower the costs of reducing emissions or adapting to climate change, especially over time. It can also generate new opportunities, offsetting the costs of transition. While businesses and individuals play a key role in developing and adopting innovations, governments can enable innovation by relying on more flexible policies and creating the right incentives for innovation (Popp, 2016).
Efficiency also tends to reduce costs. Using less energy can not only reduce emissions but save money (Box 19). Reducing water use is a cost effective way to reduce risks from seasonal water shortages. Finding ways to reuse, repair, or recycle products can save money while reducing the emissions associated with producing and transporting new products.
BOX 19: METAL FABRICATION COMPANY FINDS MONEY SAVING EFFICIENCIES
Veriform, an emissions-intensive metal fabrication company in Cambridge, Ontario, reduced its carbon footprint by 77% between 2006 and 2019 through over 100 energy-saving measures. This is even more remarkable given that its staff increased by 30% and it doubled its building size over that period.
The changes helped reduce emissions, but they also improved the company’s bottom line. Its sales per kilowatt hour of energy consumed tripled. Some of the measures were simple, such as turning off the lights at night and reducing the temperature of the water heater. Others required making different decisions when it was time to invest in new machinery, choosing models that use less energy.
One of the key drivers of change has been the extensive data gathering and calculations done at the company to measure emissions and cost savings. These led the company to conclude that every tonne of emissions eliminated results in $900 in cost savings.
Source: Craig-Bourdin (2019).
Timing is another important element of cost- effectiveness. Making dramatic changes quickly makes it difficult for companies and workers to adapt. But waiting too long for change can also increase costs. This is particularly true for long-lived infrastructure. If we are not building infrastructure to withstand future climate impacts and decarbonization trends, costs will increase down the line. It is generally cheaper to make changes at the time of construction than retrofit or replace existing structures. The City of Vancouver, for example, is working to assess major capital projects against known climate hazards and risks to support decision making (City of Vancouver, 2019).
More cost-effective government policy drives lower- cost actions. In deliberating policy options, governments should consider not only the full range of environmental, social, and economic benefits, but also the full range of costs. Many lessons can be learned from policy experience in Canada, and around the world, to help improve the cost-effectiveness of policy approaches.
Has Canada done a good job thus far in advancing a cost-effective transition? Could we do more? Without comprehensive indicators, the answer is unclear. At the national level, Canada’s GDP has continued to rise during the past decade of increased climate policy, and provinces with over a decade of policy experience have seen strong growth (Statistics Canada, 2019a; Monahan & McFatridge, 2018b).
There are, however, indications that we have not yet captured all cost-effective opportunities. A 2018 report highlighted the significant potential for greater energy efficiency in Canada out to 2050 (IEA, 2018b). Canada has also persistently underperformed relative to its peers on innovation metrics, including clean innovation (OECD, 2017). Additionally, governments do not always comprehensively assess the cost- effectiveness of a range of options to address climate risks. For example, a U.S. Gulf Coast study comparing the costs of different protection measures for sea-level rise found that after sandbags, the most cost-effective adaptation measures were nature-based, including wetland and reef restoration (Reguero et al., 2018). Too often, Canadian governments do not consider these types of nature-based solutions.
Questions that must be considered to support Cost Effectiveness:
- What climate change actions and policies are likely to be most cost-effective?
- What can we learn from climate policy experience, both here in Canada and internationally, that could support cost- effective action?
3.3 GLOBAL ACTION
While global climate change outcomes rely on the collective actions of all countries, Canada is not powerless to influence change. Our actions at home can echo internationally, in sometimes subtle but important ways.
Canada can, and should, punch above its weight by influencing global outcomes across three objectives: (1) leveraging Canada’s efforts to reduce emissions to press other countries to do the same (global emission reductions), (2) developing good policies at home and sharing our experiences (policy spillovers), and (3) developing innovations that make it easier and less costly for others to transition (technology spillovers).
Objective 8: Global Emission Reductions— Leveraging Canadian commitments to influence global effort
Reducing global GHG emissions is a collective action problem. 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. Since there is no global government that can mandate emission reductions, the only solution is for countries to work together through international, multilateral, and bilateral co-operation.
Yet we need not be paralyzed by the challenges of collective action. Canada has a role to play in supporting global emissions reductions. Doing so serves our own interests as well.
BOX 20: CANADIANS AMONG WORLD’S TOP EMITTERS OF CARBON POLLUTION
- GHG Emissions per person: 3rd highest out of 45 (OECD + 9 emerging)
- GHG Emissions per unit of GDP: 3rd highest out of 45 (OECD + 9 emerging)
- Total CO2 Emissions: 10th highest out of 195 countries
- Cumulative CO2 Emissions since 1750: 9th highest out of 195 countries Sources: Fleming (2019); Carbon Brief (2019); OECD (2019b).
Canada contributes 1.6% of global CO2 emissions. It also has the 10th highest emissions in the world, meaning that 185 countries have lower emissions
than Canada (Box 20) (Fleming, 2019). In terms of cumulative emissions since 1750, Canada is 9th highest (Carbon Brief, 2019). We are also the third largest emitter per person and per unit of GDP across developed and emerging economies (OECD, 2019b).
If Canada does not pursue ambitious emission reductions consistent with the global goal of keeping average temperature increase well below 2° C, our calls for others to pursue ambitious action will ring hollow. The power of our voice comes from demonstrating that the global goal is achievable through our own independent commitments and actions.
As we saw in Section 2, meeting the Paris Agreement temperature goal requires global emissions to reach net-zero between 2050 and 2060. Finland has committed to achieve a net-zero target by 2035. Sweden has done the same for 2045. And the U.K. has committed to reach net-zero emissions by 2050, bolstered by research and analysis from its independent Committee on Climate Change that concluded the target was feasible and achievable (Box 21). The number of EU countries supporting an EU-wide net-zero target for 2050 is growing (Climate Change News, 2019). The UN Secretary General is also calling on all countries to pursue more ambitious targets.
BOX 21: RESEARCH BEHIND THE UK COMMITMENT TO NET-ZERO EMISSIONS BY 2050
In May 2019, the independent U.K. Committee on Climate Change released a report detailing a specific pathway to achieve a net-zero GHG target by 2050. It concluded that the target was both feasible and cost- effective. It also noted that despite being responsible for a relatively small proportion of emissions, the U.K. could have significant influence by setting the standard for the EU and other developed countries as they consider their own approaches.
The report called for greater urgency on current plans, a broader scope than previous plans, and greater integration across all levels of government. Achieving net-zero emissions in the U.K. requires capturing resource and energy efficiency across the economy, societal shifts in diet, electrification of transport and heating, hydrogen to service industrial processes and ships, carbon capture and storage in industry, and changes in agricultural practices and land-use. The report also highlighted the importance of a just transition across society, of a just transition across society and protecting vulnerable workers and consumers. The predicted result is not economic devastation, but rather improved quality of life and lower climate risks, with potential for market opportunity from being an early mover in certain areas.
Source: UKCCC (2019).
Within this context, Canada must decide what its long-term emission reduction ambition should be. Our circumstances are different than those of the EU, but decisions we are taking today could make it more challenging and costly to achieve an ambitious 2050 goal. Like the U.K., Canada needs thorough research and analysis of the feasibility and cost-effectiveness of various emissions pathways. Canada’s Mid-Century Strategy lays out some considerations but is short on specifics and does not really consider distributional impacts (ECCC, 2016b). We need to move to the next level of detail. If we find a way to do as much as we can, we will have the right to call on others to do the same.
Questions that must be considered for Canada on Global Emissions Reductions include:
- What points of leverage does Canada have in supporting global action?
- What are practical pathways for greater, long- term ambition for Canada?
- What are the implications of emission reduction pathways for Canadians?
- What policies are needed today to lay the foundation for long-term transition?
Objective 9: Policy Spillovers—encouraging international adoption of good policy
Selecting and designing policies to meet ambitious targets and climate-resilience objectives is hard. A multitude of considerations exist, including the impact on the economy and employment, implications for government budgets, costs faced by individuals, as well as all the implications of insufficient action. Countries around the world struggle with many of the same challenges as Canada.
If Canadian governments develop policies that achieve results, while managing 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 has been working on climate change mitigation policy for over two decades and has evolved from the initial pursuit of largely ineffective voluntary and subsidy measures toward predominantly flexible regulations and pricing tools. Canada has also become a global leader in some key areas, such as phasing out coal-fired electricity (Section 4.4) and using output- based pricing to limit competitiveness concerns associated with regulating emissions-intensive, trade- exposed sectors (Box 22).
BOX 22: WIDESPREAD ADOPTION OF OUTPUT-BASED PRICING POLICIES IN CANADA
A Canadian policy that is of significant interest internationally is the output-based pricing system (OBPS) for large industrial emitters. Firms with emissions above an established emissions-intensity benchmark must either purchase credits or pay a carbon price. Those that are below the benchmark can earn credits or and sell them to other firms. The system maintains incentives to reduce emissions but discourages reductions in output, limiting incentives to slow or shift production and investment to jurisdictions with weaker policy. In a world with uneven levels of action, this type of approach can help give countries the courage to move ahead of their trading partners.
In the case of OBPS, innovative policy in one province clearly led to advancements elsewhere in Canada. Alberta was the first to introduce the policy in 2007 (and later amended it in 2018 and 2019).). Since then, similar approaches have been adopted by Saskatchewan, Ontario, British Columbia, and the federal government.
Sources: Fischer & Fox (2007); Ragan (2019); Dobson et al. (2017).
While adaptation only became an explicit international goal in the 2015 Paris Agreement, Canada has useful experience in managing climate- related impacts that is capturing international interest (UNEP, 2019). Southern Alberta has had a market- based water trading system in effect since 2006 to manage water shortages (Alberta Water Portal, 2018). FireSmart Canada developed standards for protecting communities from wildfire that have been adopted by Canadian provinces as well as Australia and New Zealand (FireSmart Canada, 2018a). Cities such as Victoria and Halifax use stormwater user fees to provide incentives to reduce hard surfaces such as driveways or parking lots on private property, helping reduce runoff and flood risk (Canada’s Ecofiscal Commission, 2018; Smart Prosperity Institute, 2019). Quebec has been one of the early Canadian leaders in climate change adaptation, with a 2013–2020
comprehensive adaptation strategy that addresses both economic and societal resilience (Figure 3). Canada could do more to champion its policy learnings and successes across jurisdictions within Canada and abroad. Canadian governments could also learn from experiences in other countries. Detailed policy case studies, for example, can help governments understand decision-making processes and important design details that would improve their ability to adopt a similar approach.
Canada also has the potential to play a leadership role in setting international climate change rules. It could contribute to climate finance, as well as initiatives to address global risks to the financial sector, approaches to international aid efforts aimed at countries vulnerable to climate impacts, and challenges associated with increased migration and conflict.
TABLE 4: CANADIAN COMPANIES LISTED IN THE 2019 CLEANTECH GROUP GLOBAL CLEANTECH 100
|Company Name||Type of Technological Innovation|
|Axine Water Technologies||Cost-effective, chemical-free solution for treating industrial wastewater|
|CarbonCure Technologies||Carbon-sequestering equipment for precast concrete production|
|Cooledge Lighting||Adaptable LED lighting solutions|
|Ecobee||Wi-fi enabled smart thermostats for residential and commercial applications|
|Enbala Power Networks||Platform enables electricity companies to navigate a more distributed power grid|
|GaN Systems||Range of efficient gallium nitride power switching transistors|
|Inventys||Technology for capturing post-combustion CO2 from various sources|
|Metamaterials Technologies||Smart materials and photonics to provide solutions in the field of optics|
|MineSense Technologies||Sensor technology that improves energy, water and chemical efficiency in mining|
|Opus One Solutions||Intelligent data analytical platform for smart grids|
|Semios||Precision agriculture, biological pest control, and data management|
|Terramera||Plant-based pest control products|
Source: Global Affairs Canada (2019); Cleantech Group, 2019
Questions that must be considered to support Policy Spillovers:
- How have climate policies in Canada performed in terms of their effectiveness in reducing emissions, their costs, and their distributional impacts?
- What international climate policy experiences are relevant to challenges in Canada?
- Where and how should Canada play an international leadership role?
- Which Canadian policies should be championed internationally as options to help achieve global goals?
Objective 10: Technology Spillovers— driving global change through innovation
Technological change has the potential to be a game changer for international climate change action. It can lower the costs of emission reductions and climate adaptation. It can help save lives and reduce economic and societal disruption.
Canada can be a source of technological change with technology spillovers into other countries that provide global benefits. The international Mission Innovation initiative—tasked with accelerating global clean energy innovation—identified eight innovation challenges critical to reducing GHG emissions: (1) smart grids, (2) off-grid access to electricity, (3) carbon capture, (4) sustainable biofuels, (5) converting sunlight, (6) clean energy materials, (7) affordable heating and cooling of buildings, and (8) renewable and clean hydrogen. Climate change adaptation will also need innovation in water use efficiency, water recycling and desalination, building resilience to flood and fire, urban cooling, crop resilience, and climate-resilient infrastructure (Deloitte & ESSA Technologies, 2016). Canada is already developing many of these technologies.
In 2019, Canadian companies took 12 of 100 spots on the Global Cleantech list of 100 companies most likely to make a significant market impact in the next 5-10 years (see Table 4). Canada is also a recognized world leader in carbon capture and storage and water technologies, in large part due to significant public sector resources invested in research and development.
While early stage research and development is essential to developing new ideas, getting technologies to market, helping them to scale up will be critical to realizing climate benefits. Growth in market demand, scaling up production, and competition help drive down technology costs over time. As costs fall, adoption increases, and the global benefits grow.
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. The surge in demand from the two countries, as well as others, led to significant market entry and competition, helping drive down costs in a relatively short time. Two decades ago, wind and solar electricity were costly mitigation options. Today, they are in many cases cost-competitive with fossil fuels (Figure 4).
Innovation in low-carbon products can also improve global outcomes. If we find ways to lower the emission content of our exports, we can displace more emissions-intensive products elsewhere. For example, our low-carbon electricity sector has a comparative advantage in this regard. Canadian aluminum manufacturers have a significantly lower emissions profile than those in other countries (Simard, 2015). Canadian provinces with hydroelectric power are also increasingly selling to U.S. customers seeking low-carbon sources.
Canadian innovation also has the potential to support international assistance objectives. The need for climate adaptation solutions will be greatest in developing countries that are already struggling to feed, house, and provide electricity to their populations. Canadian companies are working on possible solutions. For example, AWN Nanotech from Dorval, Quebec, sells a scalable technology that efficiently converts humidity into potable drinking water, providing a cost-effective solution to water shortages (McMillan, 2019; AWN Nanotech, 2019).
Technology development, commercialization, and growth to scale does not happen by itself, however. An essential driver of technology development will be ambitious government policy, which generates increased market demand for low-carbon and climate- resilient solutions. Companies and entrepreneurs also need support in their journey, with government help to overcome barriers such as financing and international market access. High-priority needs for technological innovation can also be targeted through prizes or specialized research and development programs.
Questions that must be considered to support Technology Spillovers:
- What Canadian technologies or products offer the greatest potential for international climate change benefit?
- What countries or regions have the greatest need of mitigation and adaptation technologies?
- What Canadian policies could help better capture global climate technology benefits?
This section laid out key goals and objectives that can serve as a guide to a credible, practical, and comprehensive approach to climate change in Canada. They help clarify what Canada should ultimately try to achieve on climate change, linking actions that reduce emissions, build resilience, and develop clean technologies for the wellbeing of Canadians. They also help to break down silos, identifying shared interests across multiple policy agendas.
Our aim is to support governments across the country in defining and shaping coherent climate change policy agendas, and to help Canadians better understand the breadth and depth of the challenge. Taking a broader and longer-term approach helps capture the diversity of needs and interests in Canada on climate change and build toward a unified vision.
The key questions posed for each objective highlight the significant work ahead to achieve the goals and objectives, and the scope of research and analysis needed to support decision making. Climate change is often described as one of the world’s “wicked problems,” given the immense complexity of the challenge. However, with a concerted and collaborative effort, Canadians can find and refine solutions that lay the foundation for future success.