Reducing GHG Emissions in Canada: A Formidable Challenge

Transcription

1 Reducing GHG Emissions in Canada: A Formidable Challenge Trottier Energy Futures Project Results Presented by Douglas Ruth, PEng, PhD 8 September 2017 T

2 Background TEFP Study sponsored by CAE and DSF Funding from Trottier Family Foundation Rigorous and comprehensive engineering analysis Results suggest pathways and enablers, not solutions Stimulate informed discussion

3 A Significant Undertaking What would be required to meet the goal of 80% reduction in GHG emissions by 2050 compared to 1990 levels 591 Mt reduced to 118Mt? Combustion and non-combustion emissions considered but only combustion emission reductions studied in detail

4 Important Assumptions Canadians will expect standard of living to improve at historical rates Infrastructure will be in place when required There will be no regulatory delays

5 This was a study to determine the most economic, technically possible pathways

6 Increased Emissions Challenge Year Total (Mt) Combustion (Mt) Non-Combustion (Mt) TARGET actual actual

7 Increased Emissions Challenge Year Total (Mt) Combustion (Mt) Non-Combustion (Mt) TARGET actual actual

8 Increased Emissions Challenge Year Total (Mt) Combustion (Mt) Non-Combustion (Mt) TARGET actual actual

9 Increased Emissions Challenge Year Total (Mt) Combustion (Mt) Non-Combustion (Mt) TARGET actual actual

10 Approach to the Analysis NATEM Model Linear programming optimization model with primary drivers being end-use demands CanESS Model Simulation model with primary drivers being demographic and macro-economic dynamics

11 Technology Change Approach to Analysis Alternate Futures Scenarios 8 8a 5 3 3a 4 1 Behavioural/Social Change

12 Technology Change Approach to Analysis Alternate Futures Scenarios 8 8a 5 3 3a 4 1 Behavioural/Social Change

13 Technology Change Approach to Analysis Alternate Futures Scenarios 8 8a 5 3 3a 4 1 Behavioural/Social Change

14 Approach to Analysis Alternate Futures Scenarios Scenario 1: Business as Usual Scenario 8a: Do Everything Possible

15 1990 Emissions 591 Mt Electricity 92 Mt 16% Fossil fuel production 57 Mt 10% Fugitive emissions 42 Mt 7% Transport 146 Mt 25% Non-combustion 164 Mt 28% Industrial processes 56 Mt 10% Waste 19 Mt 3% Industrial 58 Mt 10% Residential 43 Mt 7% Agriculture 2 Mt 0% Commercial 26 Mt 4% Agriculture processes 47 Mt 8%

16 1990 Emissions 591 Mt Electricity 92 Mt 16% Fossil fuel production 57 Mt 10% Fugitive emissions 42 Mt 7% Transport 146 Mt 25% Non-combustion 164 Mt 28% Industrial processes 56 Mt 10% Waste 19 Mt 3% Industrial 58 Mt 10% Residential 43 Mt 7% Agriculture 2 Mt 0% Commercial 26 Mt 4% Agriculture processes 47 Mt 8%

17 1990 Emissions 591 Mt Electricity 92 Mt 16% Fossil fuel production 57 Mt 10% Fugitive emissions 42 Mt 7% Transport 146 Mt 25% Non-combustion 164 Mt 28% Industrial processes 56 Mt 10% Waste 19 Mt 3% Industrial 58 Mt 10% Residential 43 Mt 7% Agriculture 2 Mt 0% Commercial 26 Mt 4% Agriculture processes 47 Mt 8%

18 1990 Emissions 591 Mt Electricity 92 Mt 16% Fossil fuel production 57 Mt 10% Fugitive emissions 42 Mt 7% Transport 146 Mt 25% Non-combustion 164 Mt 28% Industrial processes 56 Mt 10% Waste 19 Mt 3% Industrial 58 Mt 10% Residential 43 Mt 7% Agriculture 2 Mt 0% Commercial 26 Mt 4% Agriculture processes 47 Mt 8%

19 1990 Emissions 591 Mt Electricity 92 Mt 16% Fossil fuel production 57 Mt 10% Fugitive emissions 42 Mt 7% Transport 146 Mt 25% Non-combustion 164 Mt 28% Industrial processes 56 Mt 10% Waste 19 Mt 3% Industrial 58 Mt 10% Residential 43 Mt 7% Agriculture 2 Mt 0% Commercial 26 Mt 4% Agriculture processes 47 Mt 8%

20 Reference Scenario 1 Present Policies 1109 Mt in 2050 Electricity 73 Mt 7% Fossil fuel production 213 Mt 19% Industrial processes 119 Mt 11% Fugitive emissions 112 Mt 10% Transport 245 Mt 22% Non-combustion sources 354 Mt 32% Industrial 115 Mt 10% Residential 55 Mt 5% Commercial 37 Mt 3% Agriculture 18 Mt 2% Agriculture processes 89 Mt 8% Waste 35 Mt 3%

21 Reference Scenario 1 Present Policies 1109 Mt in 2050 Electricity 73 Mt 7% Fossil fuel production 213 Mt 19% Industrial processes 119 Mt 11% Fugitive emissions 112 Mt 10% Transport 245 Mt 22% Non-combustion sources 354 Mt 32% Industrial 115 Mt 10% Residential 55 Mt 5% Commercial 37 Mt 3% Agriculture 18 Mt 2% Agriculture processes 89 Mt 8% Waste 35 Mt 3%

22 Reference Scenario 1 Present Policies 1109 Mt in 2050 Electricity 73 Mt 7% Fossil fuel production 213 Mt 19% Industrial processes 119 Mt 11% Fugitive emissions 112 Mt 10% Transport 245 Mt 22% Non-combustion sources 354 Mt 32% Industrial 115 Mt 10% Residential 55 Mt 5% Commercial 37 Mt 3% Agriculture 18 Mt 2% Agriculture processes 89 Mt 8% Waste 35 Mt 3%

23 Reference Scenario 1 Present Policies 1109 Mt in 2050 Electricity 73 Mt 7% Fossil fuel production 213 Mt 19% Industrial processes 119 Mt 11% Fugitive emissions 112 Mt 10% Transport 245 Mt 22% Non-combustion sources 354 Mt 32% Industrial 115 Mt 10% Residential 55 Mt 5% Commercial 37 Mt 3% Agriculture 18 Mt 2% Agriculture processes 89 Mt 8% Waste 35 Mt 3%

24 What We Need to Do? Decarbonize electrical generation Electrify transportation

25 What We Need to Do? Decarbonize electrical generation Electrify transportation Significantly increases electrical demand

26 Scenario 8a 60% Target 394 Mt in 2050 Electricity 1 Mt 0% Fossil fuel production 26 Mt 7% Industrial processes 119 Mt 30% Transport 91 Mt 23% Non-combustion sources 223 Mt 56% Agriculture processes 75 Mt 19% Industrial 37 Mt 10% Residential 5 Mt 1% Commercial 5 Mt 1% Agriculture 6 Mt 2% Waste 17 Mt 4% Fugitive emissions 13 Mt 3%

27 Scenario 8a 60% Target 394 Mt in 2050 Electricity 1 Mt 0% Fossil fuel production 26 Mt 7% Industrial processes 119 Mt 30% Transport 91 Mt 23% Non-combustion sources 223 Mt 56% Agriculture processes 75 Mt 19% Industrial 37 Mt 10% Residential 5 Mt 1% Commercial 5 Mt 1% Agriculture 6 Mt 2% Waste 17 Mt 4% Fugitive emissions 13 Mt 3%

28 Scenario 8a 60% Target 394 Mt in 2050 Electricity 1 Mt 0% Fossil fuel production 26 Mt 7% Industrial processes 119 Mt 30% Transport 91 Mt 23% Non-combustion sources 223 Mt 56% Agriculture processes 75 Mt 19% Industrial 37 Mt 10% Residential 5 Mt 1% Commercial 5 Mt 1% Agriculture 6 Mt 2% Waste 17 Mt 4% Fugitive emissions 13 Mt 3%

29 1990 Emissions 591 Mt Electricity 92 Mt 16% Fossil fuel production 57 Mt 10% Fugitive emissions 42 Mt 7% Transport 146 Mt 25% Non-combustion 164 Mt 28% Industrial processes 56 Mt 10% Waste 19 Mt 3% Industrial 58 Mt 10% Residential 43 Mt 7% Agriculture 2 Mt 0% Commercial 26 Mt 4% Agriculture processes 47 Mt 8%

30 Scenario 8a 60% Target 394 Mt in 2050 Electricity 1 Mt 0% Fossil fuel production 26 Mt 7% Industrial processes 119 Mt 30% Transport 91 Mt 23% Non-combustion sources 223 Mt 56% Agriculture processes 75 Mt 19% Industrial 37 Mt 10% Residential 5 Mt 1% Commercial 5 Mt 1% Agriculture 6 Mt 2% Waste 17 Mt 4% Fugitive emissions 13 Mt 3%

31 S1 S3R60 S3aR60 S8R60 S8aR60 S1 S3R60 S3aR60 S8R60 S8aR60 S1 S3R60 S3aR60 S8R60 S8aR60 PJ Energy Utilization 12,000 10,000 8,000 6,000 4,000 2,000 - Others Hydrogen Biomass Electricity Fossil fuels

32 S1 S3R60 S3aR60 S8R60 S8aR60 S1 S3R60 S3aR60 S8R60 S8aR60 S1 S3R60 S3aR60 S8R60 S8aR60 PJ Energy Utilization 12,000 10,000 8,000 6,000 4,000 2,000 - Others Hydrogen Biomass Electricity Fossil fuels

33 S1 S3R60 S3aR60 S8R60 S8aR60 S1 S3R60 S3aR60 S8R60 S8aR60 S1 S3R60 S3aR60 S8R60 S8aR60 PJ Energy Utilization 12,000 10,000 8,000 6,000 4,000 2,000 - Others Hydrogen Biomass Electricity Fossil fuels

34 S1 S3R60 S3aR60 S8R60 S8aR60 S1 S3R60 S3aR60 S8R60 S8aR60 S1 S3R60 S3aR60 S8R60 S8aR60 PJ Energy Utilization 12,000 10,000 8,000 6,000 4,000 2,000 - Others Hydrogen Biomass Electricity Fossil fuels

35 S1 S3R60 S3aR60 S8R60 S8aR60 S1 S3R60 S3aR60 S8R60 S8aR60 S1 S3R60 S3aR60 S8R60 S8aR60 PJ Energy Utilization 12,000 10,000 8,000 6,000 4,000 2,000 - Others Hydrogen Biomass Electricity Fossil fuels

36 S1 S3R60 S3aR60 S8R60 S8aR60 S1 S3R60 S3aR60 S8R60 S8aR60 S1 S3R60 S3aR60 S8R60 S8aR60 PJ Energy Utilization 12,000 10,000 8,000 6,000 4,000 2,000 - Others Hydrogen Biomass Electricity Fossil fuels

37 What Would Scenario 8a Require if Met by Hydro Electric? Canada has installed hydroelectric capacity of approximately 76,000 MW and a potential total of approximately 160,000 MW.

38 What Would Scenario 8a Require if Met by Hydro Electric? This is the Limestone Generation Station in Manitoba with a capacity of 1350 MW

39 What Would Scenario 8a Require if Met by Hydro Electric? To meet the current Canadian capacity would require 57 Limestone Generation Stations

40 What Would Scenario 8a Require if Met by Hydro Electric? To meet the potential Canadian capacity would require 119 Limestone Generation Stations

41 What Would Scenario 8a Require if Met by Hydro Electric? To meet the electrical needs projected by the TEFP would require an additional 88 Limestone Generation Stations 26 more then the Canadian potential!!

42 What Would Scenario 8a Require if Met by Nuclear?...or approximately 16 nuclear power stations the size of Bruce Power in Ontario

43 What Would Scenario 8a Require if Met by Wind? or approximately 2500 wind farms, the size of the St.Leon installation in Manitoba, that would cover 35% of the area of the province of Manitoba

44 What Would Scenario 8a Require if Met by Solar? or approximately 6300 solar array farms, the size of the Sarnia Photovoltaic Power Plant in Ontario, that would cover half the area of the province of Nova Scotia

45 What Would Scenario 8a Require? and a Trans-Canada power grid to enable and optimize electricity usage

46 Principal Conclusions of the TEFP Formidable challenge to achieve 80% reduction by 2050 Carbon free electrical generation, interjurisdictional transfers of electricity, and access to storage are essential Massive infrastructure investment is needed immediately Non-combustion emissions need attention

47 Immediate Priorities Energy conservation / energy efficiency Electrification of end uses Decarbonizing electricity supply Major growth and changes to electricity supply system

48 The full report and executive summary are available at:

49 The Cost of a Cleaner Future Alicia Macdonald Principal Economist The Conference Board of Canada conferenceboard.ca

50 Our Methodology Aggregate Trottier investment to sector level Use our macro models to evaluate impact of investments Trace government and consumer impacts Explore investments requirements in different pathways Independent analysis of carbon pricing 50

51 Trottier Scenarios No targeted reductions in GHG emissions No new high-voltage interconnections New nuclear power generation added Targeted reductions in urban form added S4 Targeted reductions in GHG emissions added New high-voltage interconnections added S1 S2 S3 Disruptive technologies considered S5 Additional transformation strategies to achieve maximum reductions S8 Increased electricity exports to the US S6 No nuclear power generation added S7 51

52 Investment Spending (Difference from Pathway 1, $2011 millions) Electricity Gen. Other Total Total Annual Average Investment Total Annual Impact on GDP (direct and indirect) Pathway 4 1,938, ,019 2,161,918 63,586 41,357 Pathway 5 1,867,329 1,549,217 3,416, ,487 50,092 Pathway 7 1,946,470 1,274,467 3,220,937 94,733 49,421 Pathway 8 1,737, ,243 1,510,910 44,439 37,003 Sources: The Conference Board of Canada calculations using TEFP data. 52

53 Investment in Context Equivalent spending builds 7.6 Site C s and 23 Confederation Lines every single year. Images from BC Hydro and The Construction Index. 53

54 Economic Feasibility Cost and benefits differ significantly across the scenarios but all pathways share a common element: they are a significant investment. The economy is approaching its potential capacity constraints represent a hurdle in undertaking these investments. Economy responds to sharp increase in demand with a rise in prices, interest rates and the exchange rate. Higher prices and exchange rate lead to lower spending in other business investment and consumption. 54

55 Investment Summary The work done in the TEFP has shown us that it is indeed technically feasible to transition Canada to a low carbon society. The cost of reducing emissions varies significantly depending on assumptions regarding technological and behavioural changes. Canada is unable to leverage the funds, capital and labour resources required to generate these investments without crowding out funds and productive capacity away from other economic activity. 55

56 Economic Impacts of Carbon Pricing 56

57 Economic Impact of Carbon Pricing Price impacts Emissions and carbon revenues ASSUMPTIONS Behavioural response 57

58 Economic Impact of Carbon Pricing We modelled the economic impact of a carbon tax. Begins in 2018 at $10/t CO 2 e. Increases by $10 per year to reach $80/t in Price impacts measured using an input-output approach: Benefit: allows us to quantify how the cost of production will change based on price changes throughout the supply chain thus identifying which industries are most impacted by carbon pricing. Disadvantage: assumed fixed production coefficients no technological change or substitution of inputs. 58

59 Carbon Tax Impact on Fuel Prices CO2e content and carbon tax rate Value of carbon tax per unit Baseline fuel price forecast Increase in wholesale fuel price 59

60 Price Impacts: Carbon Tax Impact on Wholesale Prices (per cent) $10 $20 $30 $40 $50 $60 $70 $80 Light fuel oils Jet fuel Diesel Gasoline NGLs Natural gas

61 Understanding the IO Price Model $16 m in natural gas $38 m in crop products 23 m in electricity $5.6 billion in output from Breweries 61

62 Increase in Household Prices (per cent increase at different levels of carbon tax ($/tonne CO2e) $10 $30 $50 $80 Electricity, gas and other fuels Motor fuels and lubricants Transportation services Other non-durable goods Food and non-alchol beverages Education, health and other services Accommodation, food and beverage services Household semi durable goods Insurance, financial and legal services Communication, recreation and culutre services Furnishings, household applicances and other household Clothing and footwar Vehicles and parts Semi-durable recreation and personal effects Alcohol and tobacco Other durable goods

63 Increase in Industry Product Prices (per cent increase at different levels of carbon tax ($/tonne CO2e) $10 $30 $50 $80 Paper manufacturing Chemical manufacturing Petroleum and coal products manufacturing Primary metal manufacturing Wood product manufacturing Food, beverage and tobacco product manufacturing Other manufacturing Motor vehicle and parts Machinery manufacturing

64 Emission Impacts and Carbon Revenues Emissions are calculated endogenously based on industry output and emission intensity by industry. Carbon tax will generate substantial tax revenues. All revenues are assumed to be recycled into the economy: Tax cuts (personal and business) Infrastructure spending Administrative costs 64

65 Behavioural Response Carbon Tax added to fuel prices Boosts overall inflation Exports are less competitive Government collects additional tax revenues Consumers adjust spending Government increases spending and cuts taxes Businesses cut back on investment 65

66 Carbon Tax Revenues and Emissions (change compared to baseline scenario) Carbon tax $/tonne CO 2 eq Total emissions (Megatonnes, CO 2 eq) Industry emissions Electricity generation Industry Other industry emissions Household emissions Carbon tax revenue (billions $)

67 Economic Impact: Key Indicators (change compared to baseline scenario) GDP at Market Prices (billions $2007) GDP at market prices (billions $) Consumer price index (percentage change) Average weekly wage (percentage change) Employment (thousands) Household primary income (billions) Gross operating surplus Exchange rate day t-bill rate Personal income taxes (billions $) Corporate income taxes (billions $) Taxes on products (billions $) Federal government debt (billions $) Provincial government debt (billions $)

68 Economic Impact: GDP by Expenditures (average change versus baseline from , billions 2007 $) Business investment Household consumption Exports Imports GDP expenditure based Government consumption Government investment

69 Economic Impact: Exports (change compared to baseline scenario, millions $2007, average over 2018 to 2025) Basic and industrial chemical, plastics and rubber products Primary metals Pulp and paper Aircraft, aircraft engines and parts Consumer goods: food, beverage and tobacco products Industrial machinery, equipment and parts Electricity Other manufacturing products Crude metals and minerals Wood products Refined petroleum products Other consumer goods Electronic and electrical equipment and parts Motor vehicles and parts -1,250-1, ,000 69

70 CO 2 eq GHG Emission Reductions (Scenario A of $80/ton CO2eq in 2025 compared to baseline, Mt)

71 conferenceboard.ca