The weather events of 2020 and 2021 made clear that climate change is one of the most pressing issues facing Canada today and that the time for Canada to act on, and invest in, the journey to net-zero is now. The question becomes – how does Canada get there, and what will it cost?
In The $2 Trillion Transition, RBC Economics and Thought Leadership outlines its analysis of the costs and benefits of Canada’s transition to a net-zero economy; the strategies Canada must focus on to meet its 2030 and 2050 emissions targets; and the policies needed to guide Canada on the transition without hobbling any one region, or the whole economy.
“Global economies in the U.S., Europe and Asia are already embarking on economic transformations on the path to net-zero and Canada urgently needs a plan for leading in that effort,” said John Stackhouse, Senior Vice-President, Office of the CEO. “To meet Canada’s 2050 emissions targets, every business will need to invest in new technologies, products and processes to enhance their competitiveness in a world of technological disruption and innovation.”
But while there has never been more Canadian intellectual, political and corporate capital aimed at climate change, Canada still needs a thoughtful action plan for transitioning to net-zero economy. To inform Canada’s journey, The $2 Trillion Transition lays out six pathways – as well as their cost and feasibility – that are the most viable opportunities for Canada in this transformation.
According to the report, Canada will need to invest at least $2 trillion of public and private money over the next 30 years in new energy systems, vehicles and industrial processes. And the pathways that will need to be prioritized include doubling the supply of green electricity to decarbonize the grid; reducing the carbon intensity of Canadian oil and gas; retrofitting and cutting emissions from buildings; accelerating electric vehicle uptake and innovations in battery and biofuel production; reducing emissions in heavy industry; and making agriculture more efficient and less energy intensive.
The report also highlights how there will also be a call on Canadians to take more chances and make more choices to adopt new technologies, help scale new ventures and develop new habits. To do this, the report highlights eight key policy recommendations in the report to drive this transformation forward:
A national policy on electrification. Federal incentives will be needed to develop better links between provincial grids, harmonized regulations and coherent pricing. The goal: double production over the next 30 years.
A national strategy for green skills. A federal Green Skills Grant could retrain existing employees, while provincial programs could support career shifts to the fast-growing fields of carbon capture, hydrogen, renewables, EV production and maintenance, and building retrofits. The goal: train up to 200,000 new workers in green skills, and reskill 100,000 existing workers, by 2030.
Long-term commitment to carbon pricing. Canada’s plan to increase the national carbon price through a measured, decade-long strategy should be reaffirmed by the federal government, provinces and major business groups, to signal it to the world as a shared priority. The federal government should also allocate a significant (and clearly defined) portion of the revenue to technology development and adoption.
Leveraging climate to enhance U.S. trade. Canada should engage the U.S. in bilateral talks around climate policy, with a focus on strategic supply chains, energy products and emissions-reduction technologies. The two governments should also explore a border carbon adjustment to be applied to heavily traded goods, to ensure North American products aren’t put at a disadvantage by explicit or implicit carbon prices.
An industrial strategy for carbon capture, utilization and storage. The federal government and major industrial-emitting provinces should agree to a new framework for CCUS, including research grants, long-term tax credits for carbon stored, regulatory flexibility for rapid construction, and new approaches to public-private-Indigenous investment in infrastructure, with particular and urgent focus on abating oil and gas emissions.
A national action plan for sustainable agriculture. Small farmers will need access to new technologies to measure carbon in their soils and plants, and credit for carbon stored. Government will need to support investment in ag tech, training for new processes, and monitoring systems across the country.
Super-charging electric vehicles. With deposits of many critical minerals needed for batteries, a highly skilled auto workforce, and decades of experience building cars, there’s a good case for Canada to be a lynchpin in regional battery manufacturing. Ottawa’s proposed EV mandate (all passenger vehicles sold by 2035 must be zero-emission) is a step in the right direction. With the right policy, Ottawa could ensure more of those vehicles contain made-in-Canada batteries.
Rapid retrofitting. Canada’s plan to retrofit more homes must be urgently accelerated. A program designed to help owners manage the disruptive deep retrofit process and bring down costs by bundling similar retrofits across homes would be a good start. So too is a Net-Zero building code that avoids the need to retrofit recent builds. The goal: retrofitting 4.5 million homes by 2030, a third of buildings built before 2010.
“Canada’s opportunity to lead in this global transformation is a matter of years, not decades away,” continued Stackhouse. “And even as we address other pressing priorities – caring for an aging population, managing technological disruption and fostering more inclusive economic growth – the right plan on climate will help us move on these priorities, too. But if we do not move with urgency, Canada’s window for gaining access to new markets, and attracting talent and capital in a modern global economy will quickly close.”
To learn more about The $2 Trillion Transition and to join the conversation on climate in Canada, please visit RBC.com/netzero. And to learn more about RBC’s climate commitments, please visit our new Climate Hub RBC.com/climate.