Canada’s climate ambition – an alternative perspective

May 19, 2015

Canada proposed to cut its emissions by 30% on 2005 levels by 2030 in its submission to the UN late last week.  Jonathan Grant and George Gale looked at the numbers.

Contrary to other commentary, our Low Carbon Economy Index model shows that Canada’s target is more ambitious than the EU and US targets.  But only slightly.  This is because it requires a greater shift from its business as usual carbon intensity reductions than the shift required by the EU and US to achieve their targets. 

Our measure of ambition is a calculation of the difference between a country’s business as usual pathway and the decarbonisation rate needed to achieve its target.  Our approach strips out the distortion that arises from how targets are presented (e.g. relative to a particular base year), and focuses on the change in effort required from what a country is doing currently. But we recognise that there are other ways to assess relative ambition.

Canada’s carbon intensity, or emissions per million dollars of GDP, has fallen by 1.6% per year on average since 2000.  Adopting the 30% target (and sticking to it) will require a cut in carbon intensity of 3.9% per year given our GDP growth projections for Canada.  This is close to what France achieved when it switched to nuclear power in the eighties.  The shift in decarbonisation required to meet the EU and US targets is less than 2% compared with Canada’s 2.3% change.  The orange and pink dotted lines in the chart show this difference.

Canada 30% v2

Canada will need a significant shift in effort to tackle emissions if it is to more than double its current decarbonisation rate.  So business can expect a step change in climate policy and regulation in the short term to achieve this goal.

But the targets proposed by countries fall far short of the 6% average decarbonisation rate needed globally to limit warming to two degrees.  So in the longer term, business should anticipate climate impacts on operations, people and markets. Greater policy risk and climate risk is likely to stimulate an increase in investor concern and engagement.

Canada chose a 2005 base year (given the rise in its emissions since 1990) that is not directly comparable to the EU’s target.  The 2030 target date is not directly comparable with the US one either (of 2025).  To aid comparison, Canada’s 30% target on 2005 levels by 2030 is equivalent to a 10% reduction on 1990 levels by 2030 (compared with the EU’s 40%) and a 23% reduction on 2005 levels by 2025 (compared with the US’s 26-28%).

While this comparison may seem to contradict our view that Canada is being slightly more ambitious, it is worth re-iterating that we calculate ambition based on the required change from business as usual.

Our LCEI model uses historic and projected changes in carbon intensity or emissions per million dollars of GDP to compare countries’ emissions targets.  Looking at carbon intensity puts the challenge of reducing emissions in the context of expected, or hoped for, economic growth.  Atmospheric concentrations of greenhouse gases will continue to rise if GDP grows faster than carbon intensity falls.

Earlier in May, we used our Low Carbon Economy Index model to calculate a theoretical 25% reduction target for Canada that was as ambitious as those adopted by the EU and US.  This is shown in the orange dotted line in the chart.