Canada: Carbon Emissions And The Canadian Electricity Sector

In most countries, the electricity sector is a major source of carbon emissions, at least to the extent its major fuel sources are fossil fuels. Canada and the United States make an interesting and instructive contrast, given the abundance of hydropower in Canada and the vastly less significant role that fossil fuels, particularly coal, play in Canada's electricity sector.

In the United States, the electricity sector is the primary source of carbon emissions, accounting for roughly 33% of all annual emissions. In Canada, the electricity sector accounts for just over 10% of all carbon emissions, lagging well behind the oil and gas and transportation sectors in particular. The following table sets out the carbon emissions in Canada by sector, measured in millions of tons (Mt), as at the base year (2005) and the target year (2020) for measuring carbon emissions under the Copenhagen Accord.

Source: Environment Canada - Canada's Emissions Trends (2014). Numbers may not sum due to rounding.

For Canada's electricity sector, the following table breaks down the carbon emissions by fuel source, again as at the base year (2005) and the target year (2020) under the Copenhagen Accord.

Source: Environment Canada - Canada's Emissions Trends (2014). Numbers may not sum due to rounding.

In Canada's electricity sector, almost 75% of the generation mix is non-carbon emitting. Renewables, including hydro, wind and solar, currently account for almost 65% of Canada's generation mix and nuclear accounts for a further 10%. Fossil fuels, including both natural gas and coal, generate emissions but do so at vastly different rates: natural gas-fired plants generate carbon emissions at half the rate, or less, of coal plants. While coal still accounts for a meaningful portion of Canada's generation mix, particularly in Alberta and Saskatchewan, that reliance is much smaller than in the United States and is declining as utilities, particularly in Ontario, have shifted from coal to nuclear, renewables or natural gas.

In the United States, by contrast, renewables in general and hydro in particular are a much less significant component of the generation mix. Combining hydro with all other sources, renewables account for just over 10% of the current generation mix while coal has recently been as high as 45%. To address this, the US has recently introduced the Clean Power Plan to systematically promote renewables and to encourage coal to gas conversion.

The following table shows the generation mix for Canada and the United States on both a current (2014) and projected (2030) basis.

Sources: For Canada, see Canadian Electricity Association – Key Canadian Electricity Statistics (2014); Natural Resources Canada – About Electricity (2014) and National Energy Board - Canada's Energy Future 2013: Energy Supply and Demand Projections to 2035. For the United States, see US Energy Information Administration - Electric Power Monthly (2014) and US Environmental Protection Agency - Regulatory Impact Analysis for the Clean Power Plan Final Rule (2015).

Canada is in a materially better position in this sector, in terms of carbon emissions at least, for reasons that largely precede any organized policy concern about carbon. For over 50 years now, hydroelectric dams have been the backbone of electrical systems in Quebec, BC, Manitoba and Newfoundland and have been material in Ontario as well. That they happen to be carbon-free sources of electricity was not a material factor in the decision-making to proceed with these plants, at least not until the last decade or so.

To some extent though, the low-carbon profile of Canada's electricity sector, has also resulted from some difficult and costly decisions taken recently by a number of different provinces, whether in their capacity as owners of generation assets or as regulators of their electricity markets.

Ontario decided in 2002 to phase out its reliance on coal, a costly decision which has been sustained under governments of various parties and which resulted in Ontario going coal free in 2014, a year ahead of schedule. This decision in Ontario has materially contributed to a reduction in carbon emissions from electricity, whether measured by reference to Ontario alone or nationally.

BC has in recent years adopted several energy policies dedicated to the proposition that the province's electricity system should be powered by hydro and other renewables, that new exposure to coal or even gas-fired generation should be avoided and that existing gas-fired generation owned by BC Hydro itself should be operated so as to minimize usage except in an emergency.

Other provinces, most importantly Quebec but also including Manitoba and Newfoundland, have also materially contributed to the relatively low carbon-profile of Canada's electricity sector by consistently choosing to develop hydro power over other potentially competitive sources.

The majority of Canada's carbon-emitting electrical facilities are located in Alberta and Saskatchewan, which still rely principally on coal and/or natural gas and will continue to for the foreseeable future. However, each of these provinces has taken some steps to reduce the carbon-intensity of their electricity sectors. Alberta and Saskatchewan have promoted carbon capture for their fossil fueled generation plants, either by installing technology in actual power plants or by funding pilot projects and each is encouraging new investment in gas and renewables. Further, Alberta is currently developing its new climate change strategy under NDP leadership, which has signalled that the retirement of coal-fired plants will be accelerated to make way for renewables. Nonetheless, fossil fuel plants in these two provinces account for the majority of all carbon emissions from Canada's electricity sector.

Overall, Canada's fuel mix, particularly its reliance on hydro and the progress made most notably in Ontario to reduce dependence on coal, mean that Canada's electricity sector is less carbon-intensive today than the American electricity sector will be even by 2030, after fully implementing the Clean Power Plan.

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