Search

Capital Plan for Clean Prosperity: Electricity

With files from Toby Heaps and Aleena Naseem.

Transitioning to a low-carbon economy is no longer solely an environmental necessity, it’s a substantial but largely untapped economic opportunity. The Global Commission on the Economy and Climate estimates that low-carbon growth fuelled by climate action could present economic opportunities of at least $26 trillion through 2030.[1] There’s no reason for Canada not to aggressively tap into this market to deliver emissions reductions, strengthen national and provincial economies and meet our international climate commitments under the Paris Agreement. An aggressive clean stimulus program could bring Canadians hundreds of thousands of new jobs and increase the national GDP by several hundred billion dollars. The entire program would require investing approximately 2% of GDP over the next six years into decarbonization projects that would bring the aforementioned economic benefits.

To illustrate the economic prospects of various sector-specific climate policies, Corporate Knights worked with industry, government and academic experts to develop The Capital Plan for Clean Prosperity. The Plan has been divided into five sectors that have the biggest carbon and economic footprints in Canada: buildings, transportation, electricity, oil and gas, and heavy industry. Based on our calculations, greening the electricity sector could generate as many as 400,000 new full-time jobs and increase cumulative GDP by up to $264 billion from 2020 to 2025 (inclusive). In 2017, the electricity sector was responsible for approximately 10% of Canada’s total emissions.[2] The figure is higher in other countries such as the United States, where it produces 28% of all emissions.[3] However, there are still significant prospects in Canada to reduce the sector’s emissions, the majority of which come from burning coal or gas.

What are the federal party stances on greening Canada’s electricity sector?

With the federal election just around the corner, political parties are presenting plans on how to green Canada’s electricity sector.

  • The Conservatives want to connect communities that rely on diesel generators to clean power with the help of smart grid implementation, among other measures. They plan to support the strategic interconnection of electricity grids to create a national power corridor to improve access to clear energy sources. [4]
  • The Liberal party has committed to creating a $5 billion Clean Power Fund which would support the electrification of Canadian industry including the resource and manufacturing sectors. The fund would also support transitioning all First Nations and Inuit communities from diesel to renewable energy by 2030. The revenue from the Trans Mountain Pipeline expansion (approx. $500 million annually) will go to natural climate solutions and clean energy projects.
  • The NDP would set a goal for Canada to run on net carbon-free energy by 2030 and move completely to zero-emission energy by 2050. This would be funded by establishing a Canadian Climate Bank, which would boost investment in low-carbon technologies across the country and provide support for provinces for the construction of inter-connected smart power grids to distribute clean power across the country. Community-owned renewable energy projects would also receive federal support, as would weaning First Nations communities off diesel generators. The NDP has also committed to eliminating federal fossil fuel subsidies completely.[5]
  • The Green party has proposed that no new coal, oil, gas or mining projects be approved. All fossil fuel subsidies would be redirected to the Canadian Grid Strategy and renewable energy projects. The Strategy would involve building and upgrading connections between provinces, financed by cancelling the Trans Mountain pipeline. The party promises that Canada would run completely on renewable energy by 2030, including Indigenous and Northern communities. [6]

 

While ambitious, these commitments nevertheless are not backed by sufficient financial firepower to satisfy the large investment requirements of laying down the requisite interprovincial power lines to knit Canada’s renewable electricity generation with the demand centres where it is consumed.

Our Capital Plan for Clean Prosperity on greening electricity

Instead, under the logic of “what gets funded gets done,” we propose a six-year time-bound clean stimulus program to significantly  expand the network of interprovincial high-voltage direct current (HVDC) power lines that would significantly  reduce the cost of decarbonizing the Canadian electricity supply and would bring Canada to the forefront of global smart grid and network markets.

We conducted extensive calculations based on data from sources such as Natural Resources Canada, Statistics Canada, Clean Energy Canada, and the Political Economy Research Institute at the University of Massachusetts Amherst . These calculations demonstrate that by implementing an active clean stimulus program in the electricity sector, between 2020 and 2025 Canada could:

  • raise GDP between $145 billion and $264 billion
  • add 122,000 to 395,500 full-time jobs
  • increase tax revenues by $47 billion to $86 billion
  • and reduce the sector’s emissions from 78 megatonnes (mt) of carbon dioxide equivalent (CO2e)[7] in 2016 to 30 mt of CO2e in 2025 (equivalent to taking 10 million cars off the road for a year).[8]

       The range in the figures is due to the use of different multipliers from different data sources. [9]

 

What policies that would bring us these numbers? Only two would be needed:

  • Moving coal phase-out to 2025 from the current timeline of 2030.
  • Public clean stimulus to finance interprovincial HVDC power lines; total cost: $131.8 billion.

 

Public investment needs

Implementing the aforementioned project would require public financing of $131.8 billion over the next six years. The logic behind the decarbonizing effect of interprovincial power lines is the fact that provinces have different electricity generation profiles. While many provinces such as British Columbia, Quebec and Manitoba rely heavily on hydropower, fossil fuels still power provinces such as Nova Scotia, Alberta and Saskatchewan. Geographically speaking, each fossil fuel powered province is adjacent to a hydropower powered province. This is a significant opportunity to transmit clean electricity to fossil fuel-reliant provinces. As wind power generation takes off in provinces such as Alberta, an interprovincial grid system also offers more attractive market prices to sell excess wind power at non-peak times to be stored through pump hydro with their neighbours.

However, the current infrastructure is limited. Modelling done by Natural Resources Canada has come to the conclusion that there is value in building new interprovincial transmission lines in terms of emissions reductions and cost savings. The Canadian Academy of Engineers has expressed that the main obstacle for the implementation of a project like this is not technological, but instead the lack of political will to commit to such a comprehensive project and the challenge of finding a way to build a successful financial framework that benefits all stakeholders. [10]

The financing of the interprovincial grids would be executed by establishing a federal fund, which could be called the Zero-Carbon Electricity Fund, which would be financed by government-issued green bonds to raise the required $131.8 billion.

 

Economic and environmental benefits

Job creation: 122,000 to 395,500 jobs

The jobs that would be created with the expansion of the power lines would be new, full-time jobs. Based on our calculations, 122,000 to 395,500 new jobs would be created under these policies. Jobs would be created both in the construction and trades industry and in engineering services.

Increase in GDP: $145 billion to $264 billion

The GDP increase between 2020 and 2025 could range from $145 billion to $264 billion. With stronger economic growth through increased GDP, average income levels would go up and unemployment numbers would drop for mostly blue-collar workers in the construction and trades industry.

Increased tax revenues: $47 billion to $86 billion

By implementing the infrastructure project mentioned above, Canadian governments could benefit from additional tax revenues of $47 to $86 billion dollars. These tax revenues could offset nearly half of the cost of the program.

Direct savings: $25.2 billion

According to an analysis by Natural Resources Canada, new interprovincial transmission lines would reduce the cost of decarbonizing Canada’s electricity system by $4.2 billion per year, amounting to $25.2 billion dollars over six years.[11]

Emissions: 61% reduction in the electricity sector

In 2017, electricity generation was responsible for approximately 10% of Canada’s GHG emissions. The aforementioned clean stimulus could reduce the sector’s annual emissions by 48 mt CO2e by 2025, or a 61% reduction from 2016 levels (78 mt). This would be the equivalent of taking 10 million cars off the road.[12] This clean stimulus would achieve a notable 16% of the emissions reductions required from Canada to fulfill Canada’s 2015 Paris Agreement commitments.[13]

These figures show that implementing the policy of extending and expanding interprovincial grids to deliver clean energy across the country could lead Canada forward on its path to a low-carbon economy with both economic and environmental benefits for Canadians.

Several Canadian organisations, including the Government of Canada, Clean Energy Canada, Energy Efficiency Canada, Pembina Institute and Smart Prosperity Institute, have explored the economic implications of investing in the low-carbon economy. Similarly, they found sizeable economic benefits (job creation, GDP growth, energy savings etc.) associated with a similar scale of investment across the sectors included in the Capital Plan for Clean Prosperity

Corporate Knights is committed to providing the public and decision makers with information about the intersection of business, environment and society. Learn more about the rest of our Capital Plan for Clean Prosperity addressing buildingstransportoil and gas , and heavy industry on our website. You can find an overview of the plan here.

 

Clean electricity 2020–2025

 

Building Type Projected

Business-as-Usual Investment

Potential Incremental Clean Investment (ICI)* Benefits Associated with ICI Increased GDP** Jobs Created Tax Revenues Direct savings
Total $154B $132B $145B – $264B 122,000 – 395,500 $47B – $86B $25.2B

 

*Driven by defined decarbonization policies.

**The GDP estimate’s wide range results from the application of multipliers with varying degrees of conservatism.

 

[1] https://newclimateeconomy.report/2018/

[2] https://www.canada.ca/en/environment-climate-change/services/environmental-indicators/greenhouse-gas-emissions.html

[3] https://www.epa.gov/ghgemissions/sources-greenhouse-gas-emissions

[4] https://arealplan.ca/ARealPlan.pdf

[5] https://action.ndp.ca/page/-/2019/Q2/2019-06-19_Commitments-Doc_EN.pdf

[6] https://www.greenparty.ca/sites/default/files/platform_2019_web_update_oct_6.pdf

[7] Carbon dioxide equivalent or CO2e is a term for describing different greenhouse gases in a common unit. For any quantity and type of greenhouse gas, CO2e signifies the amount of CO2 that would have the equivalent global warming impact.

[8] https://www.epa.gov/energy/greenhouse-gas-equivalencies-calculator

[9] These calculations are based on best available models and are meant to be suggestive. The differences between multipliers depend on, for example, the state of the economy, the location of the manufacturing (in Canada or in a foreign country), interaction with demand for other sectors and exchange rates.

[10] https://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/energy/energy-resources/The_Cost_of_Decarbonizing_the_Canadian_Electricity_System_Manuscript_with_images_Sept_25_2017.pdf

[11] https://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/energy/energy-resources/The_Cost_of_Decarbonizing_the_Canadian_Electricity_System_Manuscript_with_images_Sept_25_2017.pdf

[12] https://www.epa.gov/energy/greenhouse-gas-equivalencies-calculator

[13] https://www.pbo-dpb.gc.ca/en/blog/news/closing-gap-carbon-pricing-paris-target

https://www.peri.umass.edu/

Related Articles