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Heavy emitters must decarbonize value chains

cleantech economic CanadaCanada’s work to reduce its emissions to 40-45% of 2005 levels by 2030 means that heavy emitters like the oil and gas industry, responsible for 27% of national emissions in 2020, must decarbonize their value chains for there to be any chance of Canada hitting these targets. While carbon pricing systems are one solution to try and reduce emissions from heavy emitters, Canada’s developing clean technology industry presents a home-grown opportunity for the oil and gas sector to decarbonize while simultaneously promoting Canadian innovation.

GHG emissions Canada 2020

Leading up to the pandemic, Canada’s clean technology sector saw steady growth – as of 2019 it was three percent of the Canadian GDP and employed 341,000 people, 1.8 per cent of all jobs in the Canadian economy. Provincially, Ontario was and is at the centre of the cleantech industry at large (approximately $10 billion (B) in GDP contributions in 2020).

Source of graphic at right: Environment and Climate Change Canada

But Alberta’s cleantech sector is growing, and of those companies surveyed in the 2021 Foresight Canada Report, 71% of cleantech companies in the province are in the oil and gas industry and 58% put emissions reduction as their cleantech’s primary benefit. Methods for building up this sector include provinces and the federal government engaging networks and the private sector in order to promote development.

Clean technology is the future, but adoption and commercialization are necessities

In 2019, Canada’s clean technology industry grew at twice the pace of the economy at large, and will likely continue to see growth in the post COVID-19 era. This growth, however, requires commercialization and adoption of new technologies, both concepts that Canada has struggled with, and where failure to do so poses a threat to post-pandemic recovery.

Low levels of government funding and angel investments, policies that favour small businesses over medium size, and the export of Canadian research without Canadian IP are all hallmarks of this fight to develop Canadian innovation sectors, and while the federal government has set up multiple funds to try and address its investment in the sector, engaging the private sector in adoption is a necessity to increase current overall investment from $15 B-$25 B/year to the $125 B-$140 B/year necessary for Canada to hit net zero. This is a golden opportunity for oil and gas to engage with clean tech to decarbonize and diversify their portfolios in preparation for the likely 62% reduction in demand for petroleum by 2050 if Canada and the world continue their current rate of emissions reduction.

Source of graph at right: A graph from the National Angel Capital Organisation’s (NACO) 2021 Report reveals the low concentration of angel investments in cleantech and energy. While the 2022 Report has saw increases to angel investment overall, the energy sector still received more limited support in comparison to ICT and Health

Encouraging the adoption of clean technology must occur at every level of the oil and gas industry value chain. First, because it offers more opportunities to support and grow different areas of the cleantech sector, and second, because emissions occur at every level, with methane from upstream producers making up nearly one third of methane emissions from human activity (and 84 times more potent than CO2) and midstream and downstream activities producing CO2 from activities like transportation.

Clean technologies that address emissions at every link of the value chain already exist, they just need to be adopted. Not just as a part of planning new oil and gas projects, but also through updating older oil and gas developments by emphasizing the benefits of renovation, such as the opportunity for product diversification by redirecting methane to natural gas projects and keeping petroleum projects open longer even as the price of carbon production rises.

The urgency of the energy transition cannot be underestimated. The rapid pace of climate change and the environmental disasters we have already experienced this year are just the tip of the iceberg. While oil and gas are only part of the emissions problem, the sector represents a substantial part. The quick decarbonization of this sector can only be a net benefit for Canada’s environmental goals. Transitioning to green solutions will not become easier as global climate change accelerates, and the oil and gas industry would do well to adopt as many clean technology solutions as it can, as early as it can.

Read more about Global Advantage Consulting Group’s analysis of the 2022 Federal Budget’s investments in climate change adaptation

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