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Canada has shared its new Nationally Determined Contributions (NDC) target that aims to reduce its greenhouse gas (GHG) emissions by 45-50 per cent by 2035, compared to its 2005 levels.
It means the country’s absolute emissions will be 380.5-418.5 megatonnes carbon dioxide-equivalent (MtCO2eq) in 2035. Similar to the United Kingdom, they have also just announced a headline target which will be followed by a detailed plan before the February 2025 deadline.
In 2023, Canada was responsible for 1.5 per cent of total GHG emissions in the world and has been one of the biggest historical polluters, responsible for 1.96 per cent of the total CO2 emissions since 1870. Additionally, its per capita GHG emissions have continuously ranked among the highest in the world, being three times more than the world average.
This context is essential to analyse the country’s NDC through the principles of equity and common but differentiated responsibilities (CBDR) that are enshrined in Article 2 of the Paris Agreement.
Thus, Canada’s 2030 NDC against its fair share has been rated as insufficient by Climate Action Tracker and the country’s climate action policies fall substantially short in contributing towards keeping global warming below 1.5°C.
The transportation sector, one of the largest sources of CO2 emissions of the country, constituted 31 per cent of the total energy-related CO2 emissions in 2022. In December 2023, it came out with specific timebound sales targets of zero electric vehicles, with at least 20 per cent sales by 2026, increasing it up to 60 per cent by 2030 and 100 per cent by 2035.
Although this is a positive development, its heavy reliance on fossil fuels that accounted for 76 per cent of the total energy supply in 2023 is a big question for the country to address.
Canada ranked fourth and fifth for being the largest oil and natural gas producer, respectively, in 2023. Its production of crude oil has seen an increase of 129 per cent during 2000-2023 and in 2023, it accounted for 51 per cent in the country’s total energy mix.
The Royal Bank of Canada (RBC), Canada's largest bank by market capitalisation, has been the seventh-largest fossil fuel funder in the world since the Paris Agreement, according to the Banking on Climate Chaos report. Four other Canadian banks rank among the top 20 to finance fossil fuel developments, it added.
RBC and others have also been leading the support for the expansion of the Transmountain Pipeline project that is expected to almost triple the current capacity of producing crude oil; the project has cost $30 billion until now.
The country needs to reduce its GHG emissions by 80 per cent by 2035 compared to its 2005 levels, according to the Climate Action Network Canada’s analysis. It also suggested that the country’s contribution to mitigation through climate finance should be $43 billion per year on average during 2025-2035 as part of its international portion of fair share.
Canada is on track to be the world’s second-largest oil and gas producer between 2023 and 2050, according to a report by Oil Change International. The country continues to invest heavily in oil and gas fields such as Bay du Nord, a $12 billion offshore oil extraction project approved by the government, the report added.
Additionally, another project called LNG Canada is being developed that plans to establish a 670-kilometre regulated natural gas pipeline and it is the country’s largest private sector project with an estimated cost of $40 billion.
While Canada has yet to outline a detailed plan for its NDC and the strategies to achieve emission reductions, a document on the country’s 2035 emission reduction target discussed certain aspects of the goal. It highlighted the intention to “support international mitigation actions” by exploring the use of Internationally Transferred Mitigation Outcomes or emission offsets as a tool to “generate incentives for further emission reductions.”
This approach is not new — some countries already incorporated carbon markets into their first round of NDCs. To this end, nations like Switzerland, Singapore, South Korea, Japan, Sweden and others have signed nearly 100 bilateral agreements with developing countries to obtain mitigation credits, which would be used to meet their NDC commitments.
For the first NDC period, the combined demand generated by these instruments has been relatively low, totalling roughly 200 million tonnes of CO2e.
However, with the recent agreement on UN-based carbon markets and increasing pressure on countries to commit to more mitigation ambitions, it is likely that reliance on market mechanisms will substantially grow in the next round of NDCs.
In Canada’s case, although the current plan does not explicitly state whether carbon markets will be used to meet part of its NDCs or will be above and beyond its obligations, it is expected that such considerations will form a part of the discussions as Canada lays out its climate targets for the coming decade.
Given that the carbon market framework agreed upon at COP29 falls short on accountability and that the Article 6-based market has yet to prove its effectiveness as a tool for international cooperation, this reliance carries significant risks. If countries deviate from their commitments, the consequences are minimal, if any.