How phasing out fossil fuel subsidies can contribute to Canada’s green recovery

Recovery Through Reform is a new series by the International Institute for Sustainable Development, assessing Canada’s green recovery spending from COVID-19 with a focus on the issue of fossil fuel subsidy reform, and an eye on the upcoming federal Budget 2021 consultations. The first of three Briefs,  Assessing the climate compatibility of Canada’s COVID-19 response in 2020 evaluates energy-related spending in Canada in 2020 – specifically federal government commitments for electric vehicles, public transit, building retrofits, hydrogen, and fossil fuels. Using data from the global Energy Policy Tracker, the Brief quantifies federal government recovery spending, noting that transparency is a problem – especially in the case of the financing provided by Export Development Canada and the Business Development Bank of Canada. Spending trends in Canada are compared to flagship policies France, Germany, and the United Kingdom – including a discussion of the financial support for fossil fuels. The Brief concludes with recommendations – including a call “to apply the  principles from the IISD report Green Strings: Principles and Conditions for a Green Recovery From COVID-19 (2020), including transparency and inclusion of support for just transition for workers and communities.  Other recommendations are to end fossil fuel subsidies, and to measure recovery ambition against international standards rather than “domestic precedence”.

The second Brief in the Recovery through Reform series is Advancing a Hydrogen Economy. This report examines the question of promoting and incentivizing hydrogen, and calls for the government to ensure that any subsidies for hydrogen are in line with the government’s commitments to phase out “inefficient fossil fuel subsidies by 2025” and meet net-zero by 2050.  “Based on IISD’s analysis, subsidies for hydrogen based on natural gas without significant levels of carbon capture and storage (CCS) should not be eligible for government assistance. Subsidies for blue hydrogen should only occur if blue hydrogen can meet the same level of environmental performance (including emission intensity) and is at or below the cost of green hydrogen.”  (a more thorough discussion appears in a January 2021  blog from IISD: Should Governments Subsidize Hydrogen? ). 

The third report in the Recovery through Reform series is Export Development Canada’s role in fossil fuel subsidy reform, which argues that despite EDC’s well-known history as a supporter of the oil and gas industry, it could be an important actor in Canada’s green recovery.   The Brief documents the existing situation of poor transparency and dirty investments, stating: the EDC “provides an average of over CAD 13.2 billion in support for oil and gas every year, representing over 12% of finance committed by the institution.”  It also notes: “So far, EDC has provided over CAD 10 billion in loans for the Trans Mountain Pipeline and expansion via the Canada Development Investment Corporation.” Further, “When it comes to fossil fuel support, EDC is one of the worst-performing export credit agencies in the world, as it has provided more oil and gas finance than any other G20 export credit agency.”  Despite this track record, the Brief calls on the EDC to change its ways by matching the performance of other international financial institutions, phasing out fossil fuel subsidies, and setting clear targets for climate action-related investments.  

Electric vehicle, retrofitting incentives announced by new Nova Scotia government

Nova Scotia’s new government under Premier Iain Rankin was sworn in on February 23, and immediately sent a message that it was committed to climate change action.  A press release titled Province Invests in Climate Change Action, Supports Jobs and Commits to Renewable Future announced a rebate program for new and used electric vehicles, plug-in hybrids and e-bikes, ranging from $3,000 per new vehicle to $500 for electric bikes. An additional $9.5 million will be directed to support energy efficiency improvements through retrofitting for low-income families. Further, the Department of Energy and Mines will release a new Renewable Electricity Standard in March, aiming to achieve 80% renewable energy by 2030. Symbolically, the former Department of the Environment was renamed to the Department of Environment and Climate Change .  Environmental advocacy group Ecology Action expressed optimism in this press release (Feb. 25). The CBC also reported on the new government here .

Natural gas drives GHG emissions increase for Toronto region and Ontario

The Greater Toronto and Hamilton Area (GTHA) is home to 7.4 million people in six municipalities: the City of Toronto, City of Hamilton, Halton, Peel, York and Durham regions. According to a new report released by The Atmospheric Fund (TAF),  the region produces  44 per cent of  total carbon emissions in the province of Ontario.   Top level findings from the report, Reality Check: Carbon Emissions Inventory for the GTHA: “Total carbon emissions in the GTHA increased 5.2% in 2018, reaching 55.5 Mt. . …. showing that since the completion of the coal phase out, emissions are slowly increasing across all regions and nearly all sources.” The report zeroes in on each municipality, and also on sectors, showing that buildings (42.8%), transportation (34.3%), and industry (18.9%) are the most significant sources of emissions in the region.

The key take-away from the report:  “Natural gas is a fossil fuel (methane) and it is the most significant source of emissions in the GTHA and Ontario. In 2018 natural gas increased about 10.6%, or 2Mt CO2 eq. Achieving net zero by 2050 will require phasing out virtually all natural gas from both heating and power production.”  An associated blog , “Toronto has an embarrassing gas problem”  (Feb.18) states: “the City’s latest emissions inventory showed an increase of 68% from natural gas from 2017 to 2018, and plans are afoot to increase gas-fired electricity which will make emissions skyrocket by over 300%. …. Toronto cannot meet its 2030 climate goals or the council-approved TransformTO plan if Ontario’s electricity is increasingly generated with fossil gas.”

Based on this analysis, TAF makes policy recommendations for all three levels of government, calling for near zero emissions standards for new building, acceleration of deeper retrofits for existing buildings, and electrification of heating and transportation while decarbonizing electricity production.  Detailed recommendations regarding retrofitting measures are provided in TAF’s submission to the Federal Budget 2021, and summarized in “Four ways the government should boost the retrofit market” (Feb. 23).  At the municipal level,  TAF is supporting one City of Toronto Councillor’s motion which calls for the provincial government to phaseout all gas-fired electricity generation as soon as possible.  The City of Toronto deferred a vote on that motion, and voted in February on a budget which appears to downgrade the priority for climate initiatives.  “’We can’t afford to lose a year’: Worries abound over Toronto’s plan to reduce climate funding” (CBC, Feb. 18)  provides details.

B.C. offers incentives for charging infrastructure for EV fleets

British Columbia continues to lead Canada in electric vehicle ownership, with more than 36,000 light duty electric vehicles in 2019.  On February 1, the government announced a new program to encourage fleet ownership,  which offers rebates for the purchase and installation of level 2 and direct-current fast-charging stations for fleets of one or more EVs.  “For a limited time, eligible businesses purchasing and installing level 2 charging stations can access a higher rebate of up to $4,000 per station, representing an increase from 50% to 75% of basic rates. Those purchasing EVs for a fleet are eligible for the same $3,000 point-of-purchase vehicle rebates as the general public in B.C.”.  An overview of all the B.C. incentives for EV vehicles is here.  Electric Vehicle Update 2018 and 2019 Calendar Years is the latest statistical report, which includes  that as of 2019,  B.C. counts direct employment of more than 6,000 full-time equivalent positions associated with ZEV-related activities, an increase from 3,850 in 2015.

A  related report released in February by the  American Council for an Energy-Efficient Economy ranks the U.S. states on their policies to encourage the use of EV’s, and identifies the three policies that are likely to be most effective: ZEV mandates and electric vehicle deployment targets, financial incentives for vehicle purchases, and incentives for installing vehicle chargers.  The report ranks California as the national leader as the only state to set deadlines for electrifying transit buses, heavy trucks, and commercial vehicles, and one of few to offer assistance for lower-income drivers to replace high-polluting cars with zero- or near-zero-emissions vehicles.  ACEEE State Transportation Electrification Scorecard is available from this link (free, registration required).

How will electrification of vehicles impact auto workers?

Threats to traditional auto manufacturers are outlined in “The top trends killing the auto industry” in Corporate Knights (Feb. 3), including the climate crisis, the fall of fossil fuels, electrification and autonomous EV fleets, unfunded pension liabilities (US$14.4 billion for G.M., US$10.2 billion for Ford), as well as  shifting government policies, and dampened demand in general. All the more reason to celebrate the good news about investment in EV production in Canada by GM, Ford and Fiat-Chrysler , as well as GM’s January 2021 announcement that it will  sell only zero emissions vehicles by 2035. In February, Ford announced its target to sell EV’s only in Europe.  But the good news is complicated, as described in  “Auto industry peers into an electric future and sees bumps ahead” (Washington Post, Feb. 6)  , and by  “Canada and the U.S. auto sector’s abrupt pivot to electric vehicles” (National Observer, Feb. 15) . For Canada, the challenges include competition for the development of battery technology and the policy challenge of the new “Made in America” Executive Order by President Biden on January 25.  Despite the brief and optimistic overview presented in  “Jerry on the Job: How the president of Canada’s largest union, Jerry Dias, is driving the country’s electric vehicle push” (Corporate Knights, Feb. 4), our highly integrated North American auto industry has a complicated path forward. 

One of the most important issues ahead is how the conversion to electric vehicles will impact the jobs of current auto workers. In late 2020, Germany’s Fraunhofer Institute for Industrial Engineering conducted a detailed study of this issue on behalf of the Sustainability Council of the Volkswagen Group.  Employment 2030 Effects Of Electric Mobility And Digitalisation on the Quality and Quantity of Employment at Volkswagen (Nov. 2020) is an English-language summary of the full, detailed study, which modelled the impacts of digitization and electrification in the industry. Although the study is specific to  VW production in Germany, its findings are instructive, and include that job losses will be less than anticipated, ( a decrease of 12 percent in this decade, mainly due to planned output volumes and higher productivity).  Digitization will result in a need for new skills, “will necessitate a profound change in corporate culture”, and will include higher employee expectations for job flexibility. A summary appearing in Clean Energy Wire   states: “ …. there is no uniform employment trend in the ‘transformation corridor’ over the coming decade. Instead, there will be a complex, interconnected mixture of job creation, job upgrading and job cuts. It argues that it will be vital to ensure that small and medium-sized enterprises (SMEs) do not fall victim to this reorganisation, and warns that Germany’s automotive sector must establish new forms of cooperation so as not to “recklessly surrender the field of mobility to new market players.”  The study is also summarized in a press release by  VW (with links to the full study in German).