Research

Modeling Energy Transition Scenarios for Canada

May, 2023

Summary

This analysis, conducted for the Public Policy Forum, examines two net zero visions for Canada – one where Canada pursues the least costly pathway to achieve net zero emissions without prescribing the industrial composition of the economy (aggressive decarbonization) and another where oil and gas production is purposely reduced regardless of demand (accelerated phaseout). Both lead to a shared outcome of net zero emissions by 2050 but are likely to have different impacts on the Canadian economy. Using Navius’ energy-economy model, gTech, the economic impacts of these two net zero scenarios were examined, accounting for a range of uncertainty in Canada’s future energy economy.

Highlights:

  • A net zero future with an explicit phaseout of oil and gas production makes it marginally (9%) less costly for the rest of the economy to achieve net zero emissions by 2050 but imposes significant additional compliance costs on the oil (4 times) and gas (50 times) sectors.
  • A net zero future where oil and gas production is explicitly phased out lowers Canada’s GDP by an additional $6 billion in 2035 and $100 billion in 2050 relative to a net zero scenario without an explicit oil and gas phaseout.
  • Under net zero policy, GDP in the oil and gas sector ranges from an 82% decline to a 226% increase from 2020 to 2050. When an oil and gas production phaseout is implemented, this range is much smaller – a 52-83% decline in GDP from 2020 levels. This suggests that explicitly phasing out oil and gas production guarantees a negative economic outcome for the oil and gas sector, which is not guaranteed by net zero policy on its own.
  • The economic impacts of net zero policy and an oil and gas production phaseout depend on the future price of oil, DAC availability and the extent to which CCS costs decline over time. Economic impacts are also more significant in oil and gas-producing regions.

Click above to download our technical report.

Click above to view an article on the Public Policy Forum website, featuring the report.

Download our technical report or visit the Public Policy Forum’s report webpage.

This study was commissioned and funded by the Public Policy Forum.

To learn more about this research, please contact Brianne Riehl.

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