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Canada's New Energy Economy: Energy Industry towards Net-Zero 2050
Kenryo MizutaniSenior ResearcherVancouver Office
Japan Oil, Gas and Metals National Corporation(JOGMEC)
Email: mizutani-kenryo(at)jogmec.go.jp

Gregory Whiteside
LawyerEnvironmental & Regulatory
Bennett Jones LLP
Email: whitesideg(at)bennettjones.com

Abstract: Canada is a major global energy exporter of oil and natural gas. However, recent developments in
Canadian policies and laws will encourage new developments in alternative energy sources, adding to this energy
mix. These new sources will provide support for Canada's commitments for achieving net-zero greenhouse gas
emissions by 2050. This article will provide an overview of key Canadian greenhouse gas emission reduction
initiatives and how they support new energy developments related to existing and proposed industries, such ascarbon capture, storage, and utilization, hydrogen, geothermal, and ammonia.
INTRODUCTION
Canada is one of the world’s largest energy producers. For example, Canada is the fourth largest producer andthird largest exporter of crude oil in the world.1 On an international scale, Canada's proven crude oil reserves rank
third, after Venezuela and Saudi Arabia. 2 97% of Canada's crude oil is bitumen from oil sands, mostly from
Alberta in Western Canada.3 With respect to natural gas, Canada is the fourth largest producer and sixth largest
exporter and ranks 17th in the world for its proven natural gas reserves.4 In addition to its rich natural resources,
Canada has well-developed regulatory regimes and energy infrastructures. Over 840,000 kilometres of varioustransmission, gathering, and distribution pipelines exist in Canada, of which over 117,000 kilometres are largediameter transmission lines.5
More recently, Canada has implemented several policies to transition to a low-carbon future, which will
increasingly diversify its energy mix. These new policies will encourage further development in alternative energy
sources, adding to the existing energy mix. This trajectory means that Canada will remain an important player inthe global energy market, while becoming increasingly competitive in the new energy economy in the comingyears.
This article provides an overview of these emerging trends in the Canadian energy industry. In Part I, wecontextualize Canadian climate change policy in the international framework. We also outline the legislative
initiatives for climate change introduced in Canada. These initiatives are directly related to Canada's commitment
to realizing carbon neutrality by 2050. In Part II, we discuss some of the recent developments in Canada, linking
the global climate change initiatives to the oil and gas industry. In particular, we discuss Canada's leading role incarbon capture, utilization, and storage ("CCUS") and emerging forms of energy markets developing alongside oiland gas, such as hydrogen, geothermal, and ammonia. Finally, in Part III, we consider the possible future
developments.
I. CANADA AND CLIMATE CHANGE
Canada in the International Climate Change Regime

1

Natural Resources Canada, "Crude Oil Facts" (October 6, 2020), online: Government of Canada <https://www.nrcan.gc.ca/sciencedata/data-analysis/energy-data-analysis/energy-facts/crude-oil-facts/20064>.
2
Ibid.
3
Ibid.
4
Natural Resources Canada, "Natural Gas Facts" (October 6, 2020), online: Government of Canada <https://www.nrcan.gc.ca/sciencedata/data-analysis/energy-data-analysis/energy-facts/natural-gas-facts/20067>.
5
Natural Resources Canada, "Pipelines across Canada" (September 14, 2020), online: Government of Canada <https://www.nrcan.gc.ca/ournatural-resources/energy-sources-distribution/clean-fossil-fuels/pipelines/pipelines-across-canada/18856>.

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Canada has been an active member in the international climate change regime, and it is a party to the Paris
Agreement that was concluded in 2015. The Paris Agreement strengthens the international efforts to limit theglobal average temperature rise to well below 2 degrees Celsius and pursue efforts to limit the increase to 1.5
degrees Celsius. Under the Paris Agreement, Canada has committed to reducing its share of greenhouse gas("GHG") emissions through its nationally determined contributions. Canada has also been an active member of
the United Nations Climate Change Conference ("COP") and the Intergovernmental Panel on Climate Change("IPCC").
Federal-Provincial Cooperation in Canada
Through these international efforts to coordinate mitigation and adaptation measures to climate change, Canada
has made a framework that seeks to implement these international commitments on the domestic level. Unlike
Japan that is a unitary state, Canada is a federation. Therefore, in Canada, while the federal government isresponsible for international affairs including negotiations of international environmental matters, the actualimplementation will typically occur through individual efforts by each provincial government.
To coordinate the policies of each provincial government, the federal and provincial governments agreed to thePan-Canadian Framework on Clean Growth and Climate Change ("Pan-Canadian Framework), released in2017. To date, most Canadian provinces have adopted the Pan-Canadian Framework, and it remains a key
national document. The Pan-Canadian Framework has four main pillars: (1) carbon pricing; (2) complementary
climate actions across the Canadian provinces; (3) implementation of climate change adaptation measures; and(4) acceleration of innovation, support of clean technology, and creation of jobs related to clean energy transition.
Recent Developments in Canadian Policy and Law
In an effort to foster proactive change in energy development and begin a transition to a lower carbon economy,
the Canadian federal government has pursued several policy and legislative actions. These actions include aspectrum of developments that incentivize energy transition in both the short and long terms. Immediate actions
have come in the form of carbon pricing regimes and surcharges on liquid hydrocarbon fuels. Specifically, theCanadian federal government has enacted legislation requiring that each province design its own regime toappropriately price carbon. Where a province cannot meet a certain benchmark status, federal legislation will act
as a backstop to ensure that carbon emissions are appropriately priced to incentivize reduction.
Furthermore, additional legislation has been implemented that will set a standard on the carbon intensity ofcertain liquid fuels imported and used in Canada.6 Under the draft Clean Fuel Standard, which will be a federal
regulation once in force, credits can be created by using less liquid fossil fuels. Mechanisms for generating credits
include: 1) increasing the volume of low carbon intensity fuels such as ethanol and biodiesel, and 2) switching toless carbon intensive means of energy use including electrification. Various activities that reduce GHG emissions
generate credits under this proposed Clean Fuel Standard, and as these credits can be traded, it is expected tocreate a nation-wide carbon credits market. After the draft Clean Fuel Standard enters into force in December
2022, it is expected that activities related to the oil and gas industry, such as CCUS, enhanced oil recovery("EOR"), and electrification processes may qualify as credit-generating activities under this regime.
In the long-term, the Canadian federal government has also implemented legislative requirements to ensure
consistent planning mechanism in order to meet its emission targets. For instance, the Canadian Net ZeroEmissions Accountability Act, currently a bill in the federal Parliament, requires the Canadian federal government
to regularly develop climate targets in line with meeting its overall 2050 goals and accountability criteria forprogress in achieving these climate goals. These developments in Canadian law will continue to encourage
energy transition in coming years, spurring significant investment opportunities in alternative energies andemission reduction technology.
II. LINKING LOW-CARBON FUTURES TO OIL AND GAS INDUSTRY AND ALTERNATVE ENERGIES
6

Environmental and Climate Change Canada, "Clean Fuel Standard" (December 18, 2020), online: Government of Canada<https://www.canada.ca/en/environment-climate-change/services/managing-pollution/energy-production/fuel-regulations/clean-fuelstandard.html>.

2Alberta's Initiatives as a Leading Canadian Energy Province
Alberta, as the centre of the energy industry in Canada, is at the forefront of these trends in GHG emission
reduction and alternative energy development. Many of ongoing initiatives merit attention. Alberta, located inWestern Canada, is the leading producer of crude oil and natural gas. In fact, the majority of Canada's provencrude oil reserves are located in Alberta. With 165.4 billion barrels of proven crude oil reserves, Alberta ranks
third after Venezuela and Saudi Arabia. 7 Alberta also has natural gas and coal, and its abundant natural
resourcesandwell-developedenergyinfrastructure
haveattracted
Japanese
investments.
While oil and gas remains Alberta's primary industry, changes are occurring quickly. Given Alberta's mature
regulatory regime, well-developed energy infrastructure, and expertise from the oil and gas industry, Alberta hasaccelerated adoption of emission reduction technologies and embraced alternative energy opportunities.
CCUS Projects linked to Oil and Gas Industry
Canada is home to several leading CCUS projects in the world. According to the federal energy regulatory body,the Canadian Energy Regulator, Canada has seven CCUS projects, all of which are located in Alberta and its
neighboring province of Saskatchewan.8 Given that there are 18 large-scale CCUS projects in operation aroundthe globe, Canada is a leader in innovation linked to CCUS projects using existing expertise of subsurface
knowledge.
As an example, Saskatchewan's Boundary Dam Project is a CCUS project that captures CO2 from a coal-fired
power plant in Estevan, Saskatchewan to be used for an EOR project by Cenovus at its Weyburn oil field. Further,Alberta is home to two leading CCUS projects, which are both fully operational: Quest and Alberta Carbon TrunkLine ("ACTL"). Shell has operated Quest since 2015, which captures 1.2 million tonnes of CO2 annually from oilsands upgrading processes and stores CO2 in deep saline aquifers. ACTL is another example of a CCUS project
linked to the oil and gas industry. ACTL became fully operational in 2020, and it is operated by multiple partners
to capture industrial CO2, transport it via pipeline, and inject it into mature oil and gas reservoirs. ACTL has acapacity to transport up to 14.6 million tonnes of CO2 per year.
Western Canada’s experiences in CCUS projects demonstrate that the subsurface technical expertise from the oiland gas industry can be applied to realize innovative projects that contribute to climate change actions, and otherjurisdictions seeking to explore opportunities for low-carbon futures are focusing on Canada’s experiences.
Emerging Alternative Energy IndustriesWhile Canada, and in particular Alberta, has a proven track record of successful and operational CCUS projects,
in the recent months, there have been additional developments in alternative energies.
HydrogenHydrogen came to the forefront of clean energy after Canada hosted the 10 th Clean Energy Ministerial (“CEM10”)
meeting in Vancouver, British Columbia, in May 2019. During the meeting, the ministers from Japan, Canada, theUnited States, the Netherlands, and the European Commission led a new international hydrogen partnership withthe support of other participating CEM 10 member states. Since then, these countries have unveiled their nationalhydrogen strategies.
Subsequently, in December 2020, the Canadian federal government unveiled the Hydrogen Strategy for Canada.9
According to this national hydrogen strategy, Canada aims to create domestic regional hydrogen hubs, by using
7

Government of Alberta, "Oil sands facts and statistics", online: <https://www.alberta.ca/oil-sands-facts-and-statistics.aspx>.
Canadian Energy Regulator, "Market Snapshot: Carbon Capture, Utilization, and Storage Market Developments" (January 29, 2021), online:<https://www.cer-rec.gc.ca/en/data-analysis/energy-markets/market-snapshots/2019/market-snapshot-carbon-capture-utilization-storagemarket-developments.html>.
9Natural Resources Canada, Hydrogen Strategy for Canada: Seizing the Opportunities for Hydrogen (2020), online: Government of Canada<https://www.nrcan.gc.ca/climate-change/the-hydrogen-strategy/23080>.
83the different strengths of each province, some of which are considering "blue hydrogen", while others areconsidering "green hydrogen." The Canadian national hydrogen strategy estimates that hydrogen could deliver up
to 30% of Canada's end-use energy by 2050 and could reduce up to 190 megatonnes of CO2 equivalent per year.
In addition, Canada is aiming to be one of the top three global exporters of hydrogen by 2050. Canada aims todevelop regional and provincial hydrogen plans in the next five years, and between 2025 and 2030, aims tocreate a national hydrogen network, which will be further scaled up between 2030 and 2050 to enable nationaland international transportation of hydrogen.
In addition, various Canadian provinces have unveiled provincial hydrogen strategies. British Columbia conducteda government-sponsored hydrogen study in 2019, in which it discusses potential hydrogen exports to Asianmarkets including Japan.10 British Columbia is expected to release its provincial hydrogen strategy sometime in
2021. Further, Alberta has released its hydrogen strategy as part of its new natural gas policy and aims toestablish a concrete hydrogen roadmap in the coming years. 11 Industry associations in Alberta have also
advocated the use of existing natural gas pipelines in Alberta to transport hydrogen, 12 and there are various
proposed projects in Canada to transported hydrogen by using existing natural gas pipelines. It is likely thatdifferent provinces will engage in different opportunities, and Canada's future hydrogen strategy is likely to be a
mix of both "green hydrogen" and "blue hydrogen."
Geothermal
While Canada may not give the impression that it is a country with geothermal potential, Geological Survey
Canada notes that parts of Western Canada - such as northwestern Alberta, northeastern British Columbia,
southwestern Northwest Territories, and southern Yukon - have potential for geothermal energy.13
Currently, Canada does not produce any electricity from geothermal, yet there are several projects underway, inparticular in British Columbia and Alberta. Geothermal projects can be combined with various other existing or
emerging technologies to provide innovative solutions. Given that both Alberta and British Columbia now havestand-alone geothermal legislation, the establishment of clear legal structures in Western Canada may further
encourage this industry. In addition, where heat or electricity is needed for mining operations in remote areas,
geothermal provides a potential way to provide clean power or heat to these operations.
Until 2020, British Columbia was the only Canadian jurisdiction with a stand-alone geothermal act. In 2020,
Alberta implemented the Geothermal Resources Act to provide regulatory clarity and became the second
Canadian province to have a stand-alone geothermal act. Under this act, Alberta Energy Regulator ("AER"),
which has a long and rich experience in Alberta's oil and gas industry, will regulate geothermal projects. Alberta'sgeothermal industry may develop in the coming years, since Alberta's geology is well known and there is existing
expertise.
Ammonia
Ammonia fuel is a topic that has suddenly gained attention in Japan after the announcement in October 2020 thatJapan will achieve carbon neutrality by 2050. As part of this net-zero 2050 policy, Japan aims to replace fossil
fuels for its power plants with ammonia fuel. As part of this plan, Japan aims to increase its demand for ammonia
fuel to 3 million tonnes by 2030, ultimately to 30 million tonnes by 2050. 14 Japan also set up the Public-Private
Council for Ammonia Fuel to promote the use of ammonia fuel instead of conventional fossil fuels such as coal.
10Government of British Columbia, British Columbia Hydrogen Study (2019), online: Government of British Columbia<https://www2.gov.bc.ca/assets/gov/government/ministries-organizations/ministries/zen-bcbn-hydrogen-study-finalv5_executivesummary.pdf>.
11
GovernmentofAlberta,
NaturalGas
VisionandStrategy(2020),
online:GovernmentofAlberta<https://www.alberta.ca/release.cfm?xID=73409F78B78DF-F073-FF1A-3153D455F03F9BE1>.
12
Alberta Industrial Heartland and Transition Accelerator, Building a Transition Pathway to a Vibrant Hydrogen Economy in the Alberta
Industrial Heartland (2020), online: Transition Accelerator <https://transitionaccelerator.ca/building-a-transition-pathway-to-a-vibrant-hydrogeneconomy/>.
13
Grasby, S.E., et al., Geothermal energy resource potential of Canada (Geological Survey of Canada: 2012), online: Natural Resources
Canada <https://geoscan.nrcan.gc.ca/starweb/geoscan/servlet.starweb?path=geoscan/fulle.web&search1=R=291488>.
14
Reuters, "Japan aims to boost ammonia fuel demand to 3 million tonnes a year by 2030" (February 8, 2021), online: Reuters<https://www.reuters.com/article/japan-energy-ammonia-idCNL4N2KE2HE>.

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Japan also sees ammonia as a potential hydrogen carrier. In fact, Japanese companies have initiated ammonia
fuel projects in Australia,15 Saudi Arabia,16 and most recently in Russia.17 While this is still an emerging area inCanada, Canada is well situated to attract international investment in ammonia fuel, given its existing ammonia
industry, availability of hydrocarbons and clean energy sources, and existing energy infrastructure.
Climate Change Policy & Law in Canada•Pan-Canadian Framework on Clean Growth and Climate Change: federal and provincialcoordination.
•Clean Fuel Standard: market incentives to reduce carbon intensity of liquid fossil fuels; futurenational credit trading market.
•Canadian Net Zero Emissions Accoundability Act: implementation of concrete plans to achieve
climate change targets.
Oil & Gas Industry Kowledge for Low-Carbon Futures•CCUS: major CCUS projects in Western Canada (Alberta and Saskatchewan).
•Geothermal: emerging legal framework and industry in Western Canada (Alberta and BritishColumbia).
•Hydrogen & Ammonia: use of existing oil and gas industry knowledge and energy infrastructure
for project development and transportation.
Hydrogen & Ammonia•Hydrogen: "blue hydrogen" and "green hydrogen"; Canada aims to become one of the top 3 globalhydrogen exporters by 2050.
•Ammonia: future potential, given Canada's rich natural resources and energy infrastructure.

Diagram 1: Summary of Canada's New Energy Economy
III: CONCLUSION
For many years, Japanese investors have engaged with the Canadian oil and gas industry. The recentdevelopments in both law and policy have shifted the landscape for new projects, and these developments will
provide new opportunities to utilize existing investments, technologies, and expertise in the oil and gas industry tocreate a further value-add as the global initiatives towards low-carbon futures accelerate. As we noted in thisarticle, Canada has developed legislative initiatives related to climate change, while also strengthening its current
advantages in the oil and gas industry. These initiatives will continue create new opportunities for combining
existing oil and gas infrastructure and expertise with emergent technologies to create innovative projects in thecoming years.
This article was co-authored with a lawyer from Bennett Jones LLP, an internationally recognized Canadian law
firm. The authors can be reached at their indicated email addresses.

15

Australian Trade and Investment Commission, "Australian green hydrogen attracts major investment from Japanese giants" (December 8,2020), online: Government of Australia <https://www.austrade.gov.au/international/invest/investor-updates/2020/australian-green-hydrogenattracts-major-investment-from-japanese-giants>.
16
Verity Ratcliffe, "Saudi Arabia Sends Blue Ammonia to Japan in World-First Shipment" (September 27, 2020), online: Bloomberg<https://www.bloomberg.com/news/articles/2020-09-27/saudi-arabia-sends-blue-ammonia-to-japan-in-world-first-shipment>.
17
Tom Whipple, "Japanese, Russian companies partner on feasibility study of blue ammonia value chain between eastern Siberia and Japan"(January 1, 2021), online: The Energy Bulletin <https://daily.energybulletin.org/2021/01/japanese-russian-companies-partner-on-feasibilitystudy-of-blue-ammonia-value-chain-between-eastern-siberia-japan/>.

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