Complementary Policies

While carbon pricing is a critical component of any climate policy, it needs to be complemented with other smart policies and regulations. Canada’s climate plan should include smart climate policies that can complement carbon pricing in three ways:

  • Addressing emissions in sectors that do not respond well to carbon pricing, such as buildings and agriculture.
  • Advancing high-potential technologies that need targeted policy support in the early stages of development, like clean hydrogen.
  • Establishing an alternative policy pathway to address harder-to-abate emissions, in case negative emissions technologies (NETs) don’t scale up as quickly as expected.

Clean Prosperity has 10 complimentary policy recommendations.

Recommendation: Map Canada’s path to decarbonizing, sector-by-sector, with an associated capital plan.

This is the first recommendation of the Expert Panel on Sustainable Finance and could inform the government about how to mobilize the public and private capital needed to decarbonize the economy. We recommend prioritizing roadmaps for industry, especially sectors where significant emissions remain even under carbon pricing, such as manufacturing, mining, and chemicals.

Recommendation: Provide targeted packages of support to high-potential decarbonization opportunities.

This could be undertaken by a special arms-length agency, as recommended by the Task Force for a Resilient Recovery, to provide the right package of financial incentives, including direct investments, to a range of technologies from geothermal to carbon fiber that hold particular promise for decarbonization.

Recommendation: Accelerate investments in clean, robust power grids.

The government should enable power grids to receive more renewable power. The federal government is already studying opportunities to expand transmission with a special focus on interconnections between hydropower-rich provinces and their neighbours. Several promising projects have been identified and should now be accelerated.

Investment will also be needed to enable the grid to handle significant growth of electrification in transport, heating, and industry, and to enable the type of demand response that will make the grid more resilient.

Recommendation: Invest in clean hydrogen.

The federal government will soon publish a national hydrogen strategy. It will be critical to fund that strategy and make targeted investments to help the industry take off. The Task Force for a Resilient Recovery suggested investments should be on the order of $1 billion.

Recommendation: Embark on an ambitious retrofit program that covers up to 60% of Canada’s residential and commercial building stock by 2030.

Retrofitting our residential and commercial building stock is a massive undertaking, but it will create millions of jobs and produce large energy savings. Corporate Knights found that retrofitting 60% of commercial and residential buildings by 2030 would cost $21 billion over 10 years but would create three million jobs across the country, reduce building emissions by over 50 Mt, and save households $12.5 billion annually by 2030.

This could be combined with investments in skills training. The Canada Green Building Council has called for $500 million to train a low-carbon workforce to complete the needed construction and retrofits.

Recommendation: Develop a national “net zero energy ready” building code.

The federal government should develop a “net zero energy ready” building code, as committed to in the Pan-Canadian Framework on Clean Growth and Climate Change, and encourage the provinces to adopt it, so that all buildings in Canada built after 2030 can be ultra-efficient and potentially net zero.

Recommendation: Incentivize the use of cleaner fuels and evaluate the Clean Fuel Standard.

Our modelling suggests that in 2050 there will still be a significant number of internal-combustion vehicles on the roads. This highlights the importance of incentivizing cleaner fuels for these vehicles. One approach is to strengthen the Clean Fuel Standard, which should also be re-evaluated to ensure it is achieving its intended results and not overlapping with other policies.

Recommendation: Invest in research and development to address emissions from enteric fermentation.

Enteric fermentation is a digestive process that occurs in ruminants like cattle, sheep, and goats, which causes them to release methane. It is the largest contributor to agricultural emissions.

Measures like reducing meat consumption and increasing farm productivity can help reduce these emissions, but won’t fully solve the problem. New solutions are emerging, such as compounds that inhibit enteric methane production. The government of Canada should, in coordination with international partners, fund research and demonstration projects to advance these solutions.

Recommendation: Reduce fertilizer emissions with RD&D and pricing incentives.

Education and assistance to farms to help them be more efficient with fertilizer use can play a role. But a key source of reductions will likely come from new technology including nitrification inhibitors. The federal government could fund research and development into this and other technologies. It might also consider enhancing the pricing incentives to reduce fertilizer emissions, over and above what is currently undertaken through the output-based pricing system.

Recommendation: Address fugitive emissions through both regulation and pricing.

Our modelling shows that 52 Mt of fugitive emissions will remain in 2050, with nearly all coming from the oil and gas industry—including leaks, venting, and flaring.

We recommend regulations to require better monitoring and reporting of fugitive emissions, and to eliminate leaks. The remaining fugitive emissions, from venting and flaring, should be incorporated into the carbon pricing system.