Decarbonizing Industry in Canada and the G7

Heavy industry is directly responsible for around a quarter of global energy system emissions.

When indirect emissions (from electricity use and imported heat) are included, the total rises to 45%. The steel, cement, and chemicals sectors account for 70% of these emissions (Canadian heavy industry emissions were 72 megatonnes in 2020). Net zero cannot be attained without dramatic emissions reductions from heavy industries.

But there are unique challenges in the decarbonization of heavy industry (which is separate from Canada’s oil and gas sector) that market forces will struggle to overcome on their own. Reducing emissions from steel, cement, and chemicals is challenging for both economic and technological reasons, and the sector is still at an early stage in its trajectory. Unlike the oil and gas sector, demand for these products is likely to grow in a clean economy, with steel, cement, and chemicals each having roles in the manufacturing and construction of products like wind farms, transmission lines, and batteries.

This is a space in which public sector involvement will be required for success. Ambitious and well- designed policy is going to be key.

Accordingly, when G7 members (Canada, France, Germany, Italy, Japan, the United Kingdom, the United States, and the European Union) met in 2021, they put a clear focus on building their joint understanding of and commitment to addressing industrial decarbonization. In May 2022, they jointly agreed to 10 key recommendations that would transform the sector, categorized into five themes that frame the research and findings of this paper. Given the economic power of the G7 group of countries and their disproportionate contribution to global emissions, reducing G7 heavy industry emissions would be a game changer in the global race to net zero.

On the eve of the 2023 G7 meeting, this white paper assesses if Canada has met these recommendations, how it stacks up to other G7 countries, and if there are ideas from other jurisdictions that Canada should consider adopting. It also identifies recommendations for Canada to move smarter and faster on this important issue.