Our process helps Canada achieve sustainable development solutions that integrate environmental and economic considerations to ensure the lasting prosperity and well-being of our nation.


We rigorously research and conduct high quality analysis on issues of sustainable development. Our thinking is original and thought provoking.


We convene opinion leaders and experts from across Canada around our table to share their knowledge and diverse perspectives. We stimulate debate and integrate polarities. We create a context for possibilities to emerge.


We generate ideas and provide realistic solutions to advise governments, Parliament and Canadians. We proceed with resolve and optimism to bring Canada’s economy and environment closer together.

1.1 Why Low Carbon?

Framing the Future: Embracing the Low-Carbon Economy

low-Carbon Economy cover

The world is transitioning to a low-carbon economy. Canada’s public and private sectors need to act now to exploit the opportunities and mitigate the risks that this transition creates.

THE FUTURE IS LOW CARBON. A global transition toward a low-carbon economy is well underway. Climate change, rising energy costs, security concerns, global population growth, and rapidly expanding economic activity are combining with a growing understanding of limitations to ecosystem health to create increasingly favourable conditions for countries and companies across the world to invest in and develop markets for “clean” or “green” technologies. This investment has the potential to transform energy and transportation systems around the world. In order to remain competitive, Canada’s economy will also need to transition to a greener, less carbon-intensive state.a The manner in which this is done, the timing, pace, and scale at which this is accomplished, will have significant implications for the Canadian economy and for individual regions, sectors, and firms.

THE GLOBAL GROWTH POTENTIAL FOR LOW-CARBON GOODS AND SERVICES IS SUBSTANTIAL. A study for the U.K. government estimated the 2008 global market for the renewable energy and emerging low-carbon sectors in the range of $4.4 trillion.b,1,2 This same study forecasted global market growth of 45% from 2007/08 to 2014/15. The International Energy Agency (IEA) estimates that achieving a low-carbon energy sector will require total global investments of $136 trillion from 2012 to 2050.3 Markets for low-carbon goods and services are expanding quickly as nations look to reduce the carbon intensity of their energy systems.

CARBON IS INCREASINGLY CENTRAL TO TRADE. Low-carbon and clean energy have increasingly been cited as factors or motivations in global trade discussions and bilateral relations. As an example, the UK-China Low Carbon Co-operation agreement, signed in January 2011, is a memorandum of understanding demonstrating a commitment to collaboration on energy markets and low-carbon technology.4 And in the context of a climate change policy vacuum at the multilateral level, there is increasing use of unilateral trade measures to achieve climate goals. France has mandated carbon labelling under its La Grenelle 2 Act,c potentially introducing non-tariff trade barriers to imported products. Low-carbon fuel standards are under discussion in numerous jurisdictions, and the relative carbon content of oil from Canada’s oil sands has been a subject of much discussion south of the border and in the context of bilateral free trade discussions with Europe. Border carbon adjustment (BCA) has cropped up as a proposed measure in many pieces of U.S. climate legislation, and is being heavily promoted by France within the EU. The EU’s use of unilateral aviation levies is an example of this measure in practice.d Given Canada’s heavily resource-oriented economy with expectations of continued strong growth in carbon-intensive oil and gas production and energy-intensive mining operations, this focus presents obvious trade risks; however, given Canada’s fast-growing low-carbon goods and services (LCGS) sectors that are disproportionately oriented toward international markets, the focus on carbon also presents opportunities.

LOW CARBON DOES NOT MEAN NO OIL. Low carbon is explicitly not about sacrificing the economic benefit Canada is currently deriving from oil sands development and energy-intensive resource extraction more broadly. In our modelling,e despite uncertainties, we assume significant growth in crude exports. It should be clearly understood that growth in crude production is already heavily targeted toward exports with Canadian demand for refined petroleum products growing more slowly than Canada’s population.f World oil prices and world oil consumption are factors fully outside Canada’s control. International forecasts suggest continued strong growth in global oil demand,g and in its 2011 energy market assessment, the National Energy Board also projects significant growth in the production of Canadian crude with output doubling 2010 levels by 2035.5 Canada is an energy-producing nation, and the global transition to a low-carbon economy will impose costs on fossil energy producers. However, these costs do not necessarily preclude a profitable energy sector. The advent of product carbon-footprinting will add a new dimension to competition; however, smart investments today to reduce the carbon intensity of the sector (e.g., through carbon capture and storage [CCS]) will position it to compete well into the future. By making strategic investments today, Canada can continue to benefit from its natural resource endowment while transitioning to a lowcarbon economy. There is also precedent for such a model in Norway, which despite continued development of its significant oil interests has made marked progress on the path toward carbon neutrality.h Suffice it to say that low-carbon and oil sands production are not mutually exclusive in the time frames considered.

LOW-CARBON PLANNING IS GAINING MOMENTUM. Canada’s competitors and trading partners are actively planning for and initiating resource-efficient growth, and 2011 was a banner year: the European Commission published its 2050 low-carbon growth roadmap in March 2011, UNEP published its Green Economy Report in early May, and the OECD released its series Towards Green Growth in May.6 Emerging economies are also forging ahead: China released its twelfth five-year plan (its primary economic planning document) in March 2011, highlighting climate change as a priority issue and the reduction of the carbon intensity of the Chinese economy as an area for action.7 This is notable as being the first of China’s economic plans to focus on the environment. South Korea, a pioneer among emerging economies, has been positioning itself for low-carbon growth since launching its long-term “green growth” strategy in 2008. In June 2011, South Korea also co-hosted the 2011 Green Growth Summit with the OECD.8

SIGNIFICANT INVESTMENTS ARE BEING MADE BY BOTH PUBLIC AND PRIVATE SECTORS. Worldwide annual private and public investment in “clean energy” (excluding R&D) has grown over 600% to $242 billion since 2004, growing in excess of 30% over the last two years as the world economy emerged from recession.9 Following the financial crisis of 2008, the world’s major economies committed $191 billion in clean energy stimulus funds.10 Most OECD countries devoted significant shares of their economic stimulus packages to fostering a “green recovery” with the EU at 64%, Norway at 30% and the U.S. at 12%.11 Despite successive cuts in its recent federal budgets and a downward spending trajectory, the United States continues to invest in low-carbon energy as part of its economic recovery and job creation strategyi and ranked first globally in 2011 in terms of attracting clean energy venture capital and equity investments.12 In 2010, the Australian government announced a $664 million Renewable Energy Future Fund as part of its $5 billion Clean Energy Initiative.13,14 Investors in the EU, led by Germany (ranked third globally in attracting clean energy investment), are allocating significant capital to clean energy systems. In 2010, for the first time, renewable energy investment in developing economies exceeded that in developed economies ($71 billion vs. $69 billion).15 China was ranked second only to the U.S. in terms of attracting renewable energy investment in 2011 and currently leads the world in wind energy investment. China is also a leader in solar and wind manufacturing, and in the deployment of wind power generation.16

CANADA HAS LOW-CARBON OPPORTUNITIES NOW, NATIONALLY AND REGIONALLY. They are significant, diverse, and regionally specific. Canada has substantial low-carbon electricity resources across the country. These include vast hydropower capacity and potential in many provinces, significant on- and off-shore wind resources across the country, high-quality tidal and wave regimes on both east and west coasts, a solar regime that is better than Germany’s with particularly strong resources in the Prairie Provinces,17 sizeable deep geothermal resources concentrated in western and northern Canada, and the second largest uranium production globally coming from Saskatchewan.18 Canada has national strengths in its highly educated workforce, significant R&D capacity, and solid institutional support. There is advanced manufacturing capacity present across the country, but concentrated in Ontario and Québec. The country has a history of innovating and both depth and breadth in energy sector experience — Canada has the potential to be a significant global player in low-carbon energy. Canada is also faced with significant challenges in which lie opportunities: the country relies heavily on transportation to connect both people and goods across this vast country, and transportation is the single largest source of GHG emissions; the buildings in which Canadians live, work, and play have the potential to be far more efficient; industries, while improving in their efficiency, have considerable remaining room for improvement; and remote communities need alternatives to expensive, polluting, and GHG-intensive diesel-generated electricity. There is both potential and reason to be motivated.

GOVERNMENT ACTION IS CRITICAL. Canada’s low-carbon future will require vision and it will demand commitment, resources, and effort. Canada needs to actively position itself to most effectively manage the risks and harness the opportunities inherent in the global low-carbon transition. While it is not necessarily a matter of “being left behind,” Canada does need to position itself to compete in those areas where it has economic advantage. If Canada doesn’t occupy the space, someone else will. Existing windows of opportunity will close if Canada is not prepared and positioned to take advantage of them. Canadians will not be leaders in all areas related to “low carbon.” As recognized recently by the Council of the Federation, Canada will need to focus and build on its strengths as it transitions.19 If Canada approaches this inevitable global transition in an ad hoc or delayed manner, it will unlikely be able to realize the full potential opportunity and will incur higher costs. Planning and investing now provide opportunities to shape possibilities and secure prosperity for the future.

PRIVATE SECTOR ACTION IS CENTRAL. While governments set the policy context — the environment within which business operates — the private sector ultimately delivers. The innovation required, the scale of investment, and the scope and magnitude of the change speak to the centrality of the private sector in effecting the lowcarbon transition. This requires leadership, collaboration, and proactive dialogue with government with respect to both what the sector needs and what constitutes effective policy so that signals can be appropriately aligned. It will also demand increased proactive involvement in Canada’s national low-carbon dialogue and the exercising of market leadership in promoting low-carbon approaches. In particular, Canada’s financial sector, energy sector, and energy-intensive and trade-exposed (EITE) industries are heavily implicated. Small- and medium-sized enterprises are expected to continue to be core to Canada’s low-carbon innovation.

[a] a In this report we refer to carbon intensity and emissions intensity interchangeably to mean the average quantity (mass) of carbon dioxide equivalent (CO2e) associated with the generation of one dollar of gross domestic product (GDP). The inverse of this metric — carbon productivity, or how much income the economy generates per unit carbon expended — is also useful.

[b] All dollar figures in $2010 Cdn unless otherwise indicated.

[c] The La Grenelle 2 Act provides a framework for a national Environmental Product Declaration (EPD) program. France completed a one-year trial period of an EPD program in July 2012 focused on carbon labelling. France will be evaluating the program before making the determination as to whether or not it should be more broadly implemented (Le Grenelle Environnement 2011).

[d] The EU aviation levy was implemented at the beginning of 2012 as a result of the extension of the EU emissions market into aviation. It requires airlines to monitor and report their emissions on all flights in and out of Europe, and to purchase carbon permits for these emissions. Countries that have equivalent measures on aviation emissions may be exempt from the EU levy. A block of countries are fighting EU’s aviation levy, with China refusing to comply. For additional information, please see: Sundaram 2012; The Economist 2012.

[e] NRT commissioned Navius Research Inc. to undertake original modelling and analysis to assess the implications of greenhouse gas abatement timing on Canada’s emission profile and the capital investment required to meet abatement targets.

[f] In our modelling, the reduction in oil consumption occurs most substantially in its use as a transportation fuel.

[g] According to the International Energy Agency (IEA) under the Current Policies scenario (i.e., business-as-usual conditions) annual growth in oil consumption will be 0.8% / year from now to 2035 leading to demand for 107 million barrels per day (25% over 2010 demand). Under their New Policies scenario which takes account of policy commitments and cautious implementation of published targets, the IEA projects a 15% increase over 2010 levels (99 mb/d) by 2035 (International Energy Agency 2011a).

[h] While Norway’s plan to achieve carbon-neutrality by 2030 relies measurably (roughly 1/3 of planned GHG reductions) on offsets generated through investment in “clean” projects internationally and trading of emissions quotas (Economist 2008), it is strongly positioned in terms of its carbon-productivity and other lowcarbon benchmarking metrics (National Round Table on the Environment and the Economy 2010).

[i] For details on breakdown and timing of expected investments see Jenkins et al. 2012.

[1]Innovas Solutions Ltd. 2009

[2] Innovas Solutions Ltd. 2009

[3] International Energy Agency 2012

[4] Department of Energy and Climate Change 2011

[5] National Energy Board 2011b

[6] European Commission 2011; OECD 2011c; United Nations Environment Programme 2011

[7] KPMG 2012

[8] Green Growth Korea ND

[9] The Pew Charitable Trust 2011

[10] Bloomberg New Energy Finance 2011

[11] Robins, Clover, and Singh 2009

[12] The Pew Charitable Trust 2011

[13] Australian Government 2010b

[14] Australian Government 2010a

[15] United Nations Environment Programme and Bloomberg New Energy Finance 2011

[16] The Pew Charitable Trust 2011

[17] Canadian Solar Energy Industries Association 2010

[18] Natural Resources Canada 2011b

[19] The Council of the Federation 2012