By: Anna Hardie
In March 2022, the Government of Canada released its 2030 Emissions Reduction Plan, a report outlining Canada’s next steps for meeting annual emission reduction targets towards 2030. In order to reach 2030 reduction targets, emissions are broken down annually across eight economic sectors including oil and gas, transportation, heavy industry, and buildings. In breaking down the responsibility of emissions by sector, this infers that certain sectors in society are currently emitting too much GHG emissions. However, the problem statement to climate change is not that humans are emitting too much. Rather, the large amount of GHG emissions produced is a consequence of our system dependence on fossil fuels. In 2019, 80.7 per cent of Canada’s GHG emissions came from energy production and the end-use of fossil fuels (see pie chart below). Thus, the real question becomes how can society become less dependent on energy sources that release emissions both during its production process and end-use?
By focusing on specific sectors, the attention is turned away from the fact that most industries release GHG emissions due to their reliance on oil and gas products. For instance, in 2019 the transportation sector emitted GHG emissions mainly due to the end-use of motor oil in heavy-duty and light-duty trucks. As such, trucks represented a total of 64.4 per cent of Canada’s transportation emissions from using oil, while individual cars produced 17.9 per cent. A similar thing can be said for the buildings sector where 85 per cent of its emissions are due to space and water heating from end-use of natural gas.
How would framing emission reduction targets from a system-dependence based view change the types of policies created? First, policies would become less focused on solutions aimed at decreasing emissions produced in the oil and gas sector (i.e., carbon capture technology and clean fuels) and more focused on reducing emissions in sectors that predominantly emit GHG through the end-use of oil and gas products. By focusing on reducing the demand for oil and gas products in sectors such as transportation, this not only lowers emissions from that sector but also simultaneously decreases production and therefore emissions produced by the oil and gas sector. For example, as Canada transitions towards having more fuel-efficient trucks, this not only reduces the transportation sector’s emissions, but it also decreases demand for crude oil, and thereby production and emissions from the oil and gas sector.
Another way in which policies can better highlight the relationship between the interdependence of sectors and emissions, is by incorporating Scope 3 emissions into the definition of GHG emissions. To explain, emissions can be categorized into three groups: Scope 1, Scope 2, and Scope 3 (GHG) emissions. Scope 1 emissions refer to emissions created from owned or controlled sources of the company. Scope 2 emissions are indirect emissions from the company’s purchase of electricity and energy. Finally, Scope 3 emissions are “all other indirect emissions that occur in a company’s value chain.” For instance, for an oil and gas company, Scope 3 would include the emissions released from the usage of the oil in heavy-duty trucks or from heating homes using natural gas. Creating a strategy for a phased-in approach of standardized Scope 3 across Canada can be a step towards reframing the discussion around emission reductions. Measuring Scope 3 emissions also means that companies may be able to improve assessment of climate-related risks across their value chain.
Canada has a lot of room for improvement when it comes to policies surrounding climate-related disclosures. Currently, it is not mandatory for most businesses in Canada to disclose Scope 1 and 2 emissions, let alone Scope 3 emissions. To show, the Canadian Securities Administrators (CSA) outlines that businesses “may disclose [Scope 1 and 2] greenhouse gas emissions or explain why they have not done so.” In many ways, Canada is playing catch-up to the U.S as their Securities and Exchange Commission has already made Scope 1 and 2 emissions disclosures mandatory since March 2022. According to a 2021 study by the CSA, in Canada just 56 per cent of selected issuers disclosed Scope 1 and Scope 2 emissions while 39% disclosed all three. Furthermore, 41% of disclosed Scope 1 emissions were found to be either “boilerplate, vague, or incomplete.” Despite the urgency for companies to align their business practices with Net-Zero commitments, the CSA has also stated that they are “sensitive to concerns related to the regulatory burden and additional cost of mandatory climate-related disclosure.” As a result, disclosures on Scope 1 to 3 emissions in Canada remain voluntary. With that said, there has been some progress in the disclosures of Scope 1 to 3 emissions. One step in the right direction was taken in August 2019, when the CSA updated that The Environmental Reporting Guidance report to align with recommendations made by an international initiative called the Task Force on Climate-Related Financial Disclosures (TCFD).
As Canada moves towards progressing its emissions reductions targets, it is important to adopt a system-based lens on reducing GHG emissions reduction. Although the 2030 Reduction Plan silos emission reduction targets by sector, it is essential to understand that the problem of emissions is due to system-wide dependence on the oil and gas sector. The system-based understanding of emissions helps place less emphasis on short-term solutions such as carbon capture and storage technologies, and rather guides federal policies to target emission reduction in sectors such as transportation, building, and heavy industry.
All in all, the main problem with climate change is not primarily due to excessive human emissions, but rather the overdependence of our systems on fossil fuels. Although Scope 3 emissions are challenging to measure, they are not impossible to calculate and like anything, comes with a learning curve. The future of climate-related disclosures is a bumpy road – but we must start measuring and take Scope 3 emissions seriously now.
Anna Hardie is a second-year student in the Master of Public Policy program. Her policy interests include economic, environmental, and social policy. Anna is working towards pursuing a career in consulting for the public sector and is currently a Design Researcher at the Innovation Hub.