On December 12, 2015, Canada and 194 other countries reached the Paris Agreement, an ambitious agreement to fight climate change. Five years later, almost to the day, Prime Minister Justin Trudeau released the government's strategy to reduce greenhouse gas (GHG) emissions to 30% below 2005 levels by 2030 (CBC News, 2021). The primary driver to deliver these carbon emission reductions is a steep hike in the federal carbon tax to $170 a tonne by 2030.
The tax is expected to have a profound impact on consumers, business, and industry in Canada, and companies like Thermal Energy International are perfectly positioned to help large energy users reduce their emissions in response to the proposed tax increases.
Who will these measures impact?
As of March 2021, the Supreme Court ruled in a 6-3 decision, that the federal government can impose nationwide pricing standards, allowing Canada to push ahead with its plan to ensure every province and territory has a price on carbon to curb greenhouse gas emissions (CBC News, 2021). The federal carbon tax, set under the federal Greenhouse Gas Pollution Pricing Act (GGPPA), has two main parts:
Putting a price on carbon
Canada’s current goal of reducing GHG emissions to 30% below 2005 levels by 2030 means lowering levels from 732 megatonnes to 503 – surpassing Canada’s Paris Agreement goal of 513 megatonnes. It follows multiple studies that claim the Paris targets were not sufficient (The Economist, 2021). According to the Minister of Environment and Climate Change, Jonathan Wilkinson, if all of the Paris targets were reached, we would see a global average temperature increase of more than 3 degrees - and that countries, like Canada, need to strive for closer to 1.5 degrees (CBC News, 2021).
"The evidence clearly shows that establishing minimum national standards of GHG price stringency to reduce GHG emissions is of concern for Canada as a whole. This matter is critical to our response to an existential threat to human life." Chief Justice Richard Wagner wrote (CBC News, 2021).
Federal carbon tax impact on industry
A sizable portion of global emissions is produced by the industrial sector. For Canada, industry is the largest consumer of energy after transportation, and latest figures show the sector contributed 69 megatonnes of carbon emissions last year - well ahead of residential’s 43 megatonnes and the commercial sector’s 33 megatonnes (IEA, 2020). As a result, the expected 30% increase on carbon tax represents a huge impact on natural gas costs for companies operating in Canada.
In real terms, at an average base cost of natural gas of $3/GJ, the 2030 carbon tax target represents a 313% incremental increase for industrial natural gas users. That means the pay backs and return on investment on the energy efficiency projects Thermal Energy does for its customers will be three times better.
Energy efficiency - fastest, easiest and cheapest way to reduce carbon emissions
With carbon prices set to triple over the next decade, more and more companies are looking for ways to reduce fuel use and carbon emissions quickly and economically.
Thermal Energy has been helping customers reduce their energy usage and carbon emissions for years.
We design, engineer, and deliver proprietary thermal energy efficiency solutions, that are built to last (~20-40 years) and pay for themselves in 2–5-years. As such, in most cases, the installation can pay for itself well before the full tax measures come into effect in 2030 at which point the cost of carbon will be three times higher.
Most Canadian energy is still supplied through oil and natural gas. This means using fuel as efficiently and effectively as possible is industry’s first response when seeking to reduce energy usage and carbon emissions. As a result, Thermal Energy is perfectly positioned to support companies as carbon pricing measures come into force in Canada and around the world.
A sign of things to come
Carbon emissions in relation to energy usage is a global issue. According to the Lawrence Livermore National Laboratory roughly two thirds of all energy used is lost due to inefficiency. In the industrial sector alone, over 50% of the energy used is wasted (*Estimated U.S. Energy Consumption in 2020: 92.9 Quads, 2020). This data for the US is representative for many countries industrialized and advanced economies. As a result, we are seeing carbon taxes and other carbon pricing initiatives designed to reduce emissions being proposed and introduced in many counties around the world.
To date, Thermal Energy’s installations have delivered over $400B in energy savings and reduced over 4M tonnes of global GHG remissions. With the UK recently announcing plans to cut GHG emissions by 68% (CNBC, 2021), European leaders agreeing to reduce GHG emissions by 55% (Globe and Mail, 2021), the U.S. President targeting 50% GHG reductions by 2030 (Washington Post, 2021), and other countries expected to announce more aggressive targets at COP26 in Glasgow we look forward to supporting even more businesses reduce energy usage and carbon emissions.