Greenhouse Gas Technologies: Industry Expenditures and Business Opportunities

By Rowena Orok, Environment Accounts and Statistics Division, Statistics Canada

Introduction
Canada's Kyoto target

Introduction

The ratification of the Kyoto Protocol made greenhouse gas (GHG) reduction technologies more prominent on Canada's public policy agenda. The government has made a commitment to stimulate the development, commercialization and adoption of GHG reduction technologies as part of the strategy to meet Canada's Kyoto target. This paper evaluates the state of GHG reduction technology adoption and availability in Canada by addressing these questions:

• How heavily have Canadian businesses invested in GHG reduction technologies to reduce their emissions?

• How successful are Canadian suppliers of GHG reduction technologies? Have they been able to access both domestic and international markets?

• How extensive are business activities in research and development and innovation related to GHG reduction technology development?

Canada’s Kyoto target

The “greenhouse effect” is the name given to a complex system involving a number of gases in the atmosphere that regulates the Earth’s temperature at a level that makes it a liveable planet. Enhanced GHG concentrations could increase temperatures and have far-reaching and unpredictable environmental, social and economic consequences.

In 1992, the United Nations Framework Convention on Climate Change set out a framework for action aimed at stabilizing global GHG emissions at a level to prevent human-induced actions from leading to “dangerous interference” in the climate system. The 1997 Kyoto Protocol addresses the human impact on climate change by committing developed countries to collectively reduce GHG emissions to 5.2% below 1990 levels by the period 2008−2012. There are essentially two ways to achieve this goal: emit fewer greenhouse gases into the atmosphere or sequester more GHG from the atmosphere. Global and national policy responses have, so far, focused primarily on reducing GHG emissions from anthropogenic sources such as automobiles and coal-fired power plants¹. Anthropogenic sources of GHG emissions (mainly CO₂ emissions) are easier to identify, verify and control than some of the natural processes that cause GHG emissions.

Upon the ratification of the Kyoto Protocol, Canada has committed to a 6% reduction in GHG emissions below the 1990 levels within the 2008-2012 commitment period. In order to achieve the Kyoto target, part of the strategy is to make Canada a less carbon-intensive economy. In this regard, GHG emissions reduction strategies are closely tied with government energy policies such as policies aimed at developing alternative energy sources and improving energy efficiency. At the same time, the targeted sectors for emissions reduction clearly include the most energy-intensive sectors of the economy. The Climate Change Plan for Canada, for example, targets the largest industrial emitters including upstream and downstream oil and gas sectors, electricity generation, and mining and manufacturing such as cement plants and iron and steel mills.

The role of technology

There is international consensus that technology plays a key role in reducing GHG emissions and addressing climate change. In Canada, the 2004 Speech from the Throne laid out the government’s plan to turn Canada into “a world leader in developing and applying path-breaking technologies of the 21st century.”² Environmental technologies are featured prominently in various policy agendas, along with biotechnology, information and communications technologies, health technologies and nanotechnology. GHG technologies, a subset of environmental technologies, are essential to Canada’s implementation strategy to reduce GHG emissions.³ This strategy includes the refinement of existing GHG technologies and the development and commercialization of new GHG technology solutions.

Technological solutions are attractive for two reasons: first, technology offers promise to key industries or sectors of the economy which are required to reduce their GHG emissions because of the potential impact on costs and the ease of technology adoption. For example, the electricity and transportation sectors plan their GHG reductions based on evaluation of existing and emerging technologies. These include renewable energy alternatives for the electricity sector and alternative fuel systems or low-emissions hybrid vehicles for the transportation sector.

Second, technology improves market opportunities for businesses and suppliers that sell the so-called “GHG technology solutions.” For these firms, continued technology development is critical to maintaining competitiveness. Technology also supports the development of niche markets and facilitates access to domestic and international markets.