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Perspectives

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The future of Canadian energy: A review of 2023's top energy issues and what to expect in 2024

In 2023, energy transition policy, carbon pricing uncertainty, evolving technologies, and jurisdictional disputes continued to provoke change in the Canadian energy industry. BLG's Energy lawyers continuously review the policies, issues, cases and developments affecting the Canadian energy industry. The following is our list of the most compelling energy issues of 2023 that will influence trends, business decisions and the future growth of Canada's energy industry in 2024 and beyond.

Key takeways

The Canadian energy industry continues to encounter structural change, heavily influenced by provincial and federal government policies and regulations. The major themes and energy issues in 2023 that BLG noted include additional clarity, but nevertheless continuing uncertainty, regarding carbon pricing and tax incentives, which are delaying progress on energy transition projects; broad commitments to green energy transition, and carbon reduction goals but with many ideological and practical disputes about how, when and the effect of achieving such goals; and the consolidation and fortification of the traditional oil and gas industry amidst the energy transition. As 2023 ends, the path, pace and direction of the energy industry evolution remains unsettled.

Canada's energy transition: How carbon price uncertainty is delaying key energy projects

Canada’s “polluter pay” carbon pricing system is an important tool that the federal government uses to incent investment in energy transition projects. Yes, there are some other tools – the “carrots” – like new investment tax credits on capital investment in things like clean electricity, hydrogen, and carbon capture, utilization, and storage (CCUS) projects, some strategic concessional financing available from federal institutions like the Canada Infrastructure Bank and the new Canada Growth Fund, and a smattering of targeted federal grant-like funding available in specific areas, but it is Canada’s carbon pricing system – our “stick” – that underpins it all. If project proponents and their financiers have concerns about the long-term survival of carbon pricing in Canada, they will be hesitant to make final investment decisions to proceed with their projects – the “carrots” are likely not enough on their own to incent investment without our “stick”. Unfortunately, that is exactly the position we find ourselves in as 2023 comes to an end.

Hydrogen opportunities in Canada

Introduction

2023 saw a continued focus on advancing the transition to green energy and a low carbon future, with a particular emphasis on hydrogen. In line with their respective, previously announced strategic plans on hydrogen, the Federal and provincial governments introduced several initiatives to support the development of hydrogen production, or the use of hydrogen-powered equipment. This includes a new clean hydrogen investment tax credit and steps to ease the regulatory burden faced by project proponents.

Jurisdictional disputes and administrative overreach

Impact Assessment Act (IAA): Significance for the energy industry in Canada

On Oct. 13, 2023, the Supreme Court of Canada issued its highly anticipated opinion in Reference re Impact Assessment Act, 2023 SCC 23 (the IAA Reference). At issue in the IAA Reference was the constitutionality of the Impact Assessment Act (the IAA), which is a significant piece of federal environmental legislation that purports to govern when, and on what basis, certain projects are subject to federal oversight and regulation.

Carbon capture, utilization and storage (CCUS) in Canada

Reducing CO2 as part of Canada’s efforts to address climate change and meet climate target commitments (i.e. Paris Agreement targets by 2030, net zero by 2050) remains a top policy focus. For certain critical industrial processes, however, such as oil and gas production, cement and steel manufacturing, and thermal generation of electricity, materially reducing or eliminating emissions is technically difficult or prohibitively expensive. Canada, along with other nations, is looking to Carbon Capture and Sequestration (CCS) and Carbon Capture Use and Storage (CCUS) as a primary means of reducing CO2 emissions. CCS/CCUS systems prevent CO2 from entering the atmosphere by capturing it at its source, using the captured CO2 if possible (in the case of CCUS), and then, importantly, permanently injecting and storing the remaining CO2 deep in the underground pore space.

In 2023, CCUS/CCS dominated the headlines in Canada due to significant regulatory, policy and project announcements, and due to the controversy over whether CCUS/CCS is a panacea for reducing CO2 emissions, or a dangerous distraction from achieving global emissions reductions targets.

Canada's new clean economy investment tax credits

Over the past 18 months, the Canadian government has announced five investment tax credits (ITCs) to incentivize businesses to make capital investments that support Canada’s transition to a cleaner and greener economy. These new “Clean Economy ITCs,” along with over $20 billion of related public sector financing commitments from the Canada Infrastructure Bank, constitute Canada’s response to the massive U.S. subsidies for clean energy included in the Inflation Reduction Act in the U.S.

Status of Alberta's renewable energy pause and the impact on the future of Alberta energy

As noted in a previous post, the significant recent growth of Alberta’s renewable energy sector and the resultant historically high volume of facilities applications to the Alberta Utilities Commission (the AUC) prompted the Government of Alberta to order the AUC to pause approvals of renewable energy projects larger than 1 MW until Feb. 29, 2024. Heeding to concerns raised by the AUC, landowners, and municipalities regarding responsible land use and the rapid pace of development, the government initiated a related public inquiry led by the AUC itself. This inquiry will culminate with recommendations submitted to the Minister of Affordability and Utilities (the Minister) by March 29, 2024.

Canada's net zero commitments and the impact on the Alberta energy industry

Introduction

Canada has committed to achieving net-zero emissions. As part of this, Canada is putting in place a system to cap and cut oil and gas sector emissions to meet Canada’s 2030 climate goals and achieve net-zero emissions by 2050. Canada’s path to net-zero has had a significant impact on the Alberta energy industry and it will continue to do so going forward.

Key Contacts