May 18, 2022

Economic Malaise? Technology Changes? What’s Driving Canada’s GHG Reductions?

On April 14th, Canada submitted its annual greenhouse gas (GHG) emissions data to the United Nations, detailing the country’s official accounting of national emissions as of 2020.

Canada is only 7.5 years away from its Paris Agreement target to reduce emissions by 40-45% below 2005 levels. While data from 2020 indicates that the country took a significant step towards that target, a deeper look into the drivers of Canada’s emissions since 1990—and especially the year-over-year GHG reductions between 2019 and 2020—tells a more complicated story of the push and pull factors that drive emissions trends across the country.

This Quick Read digs into some of Canada’s high-level emissions trends, highlights the global context within which they occurred, and analyses how Canada’s emissions drivers are likely to impact future GHG trends.

Canada’s emissions on the decline in 2020

Canada’s overall GHG emissions fell by 66 megatonnes (MT) in 2020, a decline of 8.9% compared to the previous year. This represents the largest single-year decrease in emissions since data was first collected in 1990, far and away eclipsing the 5.5% drop in 2009.

What happened to drive emissions lower in 2020 is obvious. The COVID-19 pandemic and corresponding public health measures stopped Canadians in their tracks. For much of the year, many Canadians entered long periods of social isolation; stopped commuting to the office; saw unemployment skyrocket; deferred travel plans; stopped visiting restaurants, concerts, and sporting events; and saw dramatically reduced tourism visitation.

To put 2020’s 8.9% reduction in perspective, if Canada were to maintain that rate of decline until 2030, emissions would end up 64% below 2005 levels, blowing away our Paris goal of a 40-45% reduction.

GHG reduction drivers

While we intuitively know that the economic shutdown was the main cause of lower emissions in 2020, Canada’s Kaya Identity provides a glimpse into the extent that GDP and other factors influenced emissions trends that year, as well as for the last several decades.

The Kaya Identity breaks down a region’s total human-made GHG emissions into four economy-wide driving factors:

  1. Population: More people generally mean more emissions.
  2. Economic Performance (gross domestic product (GDP) per capita): Historically, wealthier economies tend to emit more due to increased access to, and consumption of, fossil fuels.
  3. Energy Intensity (total energy consumed per unit of GDP): The less energy consumption required to generate a given amount of wealth, the lower emissions will be.
  4. Emissions Intensity (GHG emissions produced per unit of energy consumed): The fewer emissions produced per unit of energy consumed, the lower emissions will be.

The Kaya Identity shows that population growth and GDP per capita have been the major drivers behind emissions growth in Canada since 1990. Meanwhile, energy intensity and emissions intensity—which are, effectively, measures of technology change, substitution, or efficiency improvements—have prevented overall emissions from rising further.

The primary driver behind Canada’s emissions reduction between 2019-2020 is clear: our GDP per capita fell by 6.3%—the largest year-over-year decline since 1990. But it wasn’t the only factor decreasing emissions. Canada’s energy intensity fell by 3.9%, adding to emissions declines. Together, these two factors dwarfed the offsetting impact that population growth (+1.2%) and emissions intensity (+0.0%) had on our total net emissions, leading to the aforementioned 8.9% reduction in 2020.

How, and how not, to achieve our GHG reduction goals

It should go without saying that we do not want to rely on the devastating impacts of a persistent decline in economic activity to drive ongoing emissions reductions. Rather, Canada should continue to aim for growing prosperity while decreasing emissions. We want to see substantial improvements to emissions and energy intensity factors driven by technology changes and improvements, but not at the expense of Canadians’ prosperity. Our climate policies should reflect this aim.

But to see GHGs decline at the pace and scale needed to reach our Paris targets, entire energy systems, consumption patterns, and production patterns would need to transition almost overnight. Given that Canada’s economic performance continues to be the main driver of year-to-year emissions fluctuations, and the amount of time it takes to transform existing energy systems and production/consumption patterns, it is far more likely that emissions will rebound in 2021 and in the short-term due to improving economic activity coming out of the pandemic—even if moderate improvements to emissions and energy intensity continue.

In our next Quick Read, we will be taking a deeper look into sectors and regions responsible for Canada’s emissions, including what makes Alberta’s economic structure so distinct and the implications this has on decarbonization efforts.

Dylan Kelso, Policy Analyst

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