Climate Crunch

➔ AI gets all the attention, but the AC is also a major power drag, too

➔ Canada’s ghost emissions

➔ David Suzuki and Chris Wright’s starkly different world views

Hot takes

➔ Ghost emissions are climate change’s untold story. Globally, emissions from Land Use, Land-Use Change and Forestry (LULUCF) are tracked but not included in a country’s emissions inventory. While emissions from managed lands are included, emissions from unmanaged lands are excluded as they are triggered by events beyond human control-such as wildfires. But they are formidable: Wildfire on just managed lands had emissions in 2023 that surpassed Canada’s total accounted emissions-by a lot. This year’s LULUCF emissions could rack up, too. By June 2nd, total estimated wildfire emissions for Canada were second only to 2023, with approximately 56 megatonnes of carbon (or 8% of Canada’s GHG emissions in 2023), according to the EU CAMS Global Fire Assimilation System. That’s years of painstaking climate action wiped out in weeks. This highlights a fundamental tension in Canada’s climate policy: most of the attention has been on emissions mitigation; less attention has been paid to climate adaptation. And we are all paying the price.

➔ Is it time for a $100-billion Pathway + pipeline package? Alberta and Ottawa are making progress on a big energy package that could include a West Coast oil pipeline, the long-contemplated Pathways project to capture carbon emissions, and room for expanded oil production, writes John Stackhouse from Calgary. But Mark Carney’s team may need to finesse its way out of the previous Liberal government’s oil and gas emissions cap. That could involve a new target, or delayed timeline, or a refined approach to measuring abated emissions. The package’s headline costs could also be sobering—up to $100 billion.

➔ The Texas tragedy underscores the frequency, and intensity, of floods. More than 80% of Canadians live in urban areas, and around 8 out of 10 major Canadian cities are located in proximity to flood zones, according to the federal government. Floods are already Canada’s costliest natural hazard in terms of property damage, causing $2 billion in destruction annually, as climate change supercharges weather conditions. As part of a greater National Adaptation Strategy, Ottawa is spending  $164.2 million to update Canada’s flood mapping program by 2028. Will it be enough?

➔ David Suzuki and Chris Wright’s recent comments highlight the tension between environmentalists and some energy proponents. Canada’s veteran environmentalist told iPolitics recently that its “too late” to reverse climate change as policymakers are focused on economic growth, not nature. Meanwhile, U.S. Energy Secretary Christ Wright sees the climate crisis as a byproduct of progress, not an existential threat. “I am willing to take the modest negative trade-off for this legacy of human advancement,” he wrote in The Economist. Policy is often driven by political cycles, with energy proponents winning this round. However, the next political cycle is around the corner.

The Big Cool

Power-hungry data centres get all the attention, but the humble air conditioner is also a major strain on grids. As summers get more oppressive in Canada and around the world, the International Energy Agency expects air conditioners to be a top driver of global electricity demand, with air-conditioner ownership worldwide rising from 37% to 45% by 2030.

Here’s why cooling is emerging as a critical climate issue:

➔ Cooling generated just over 1 gigatonne of carbon emissions globally in 2022 (1.9% of total). Space cooling could also lead to leakage of refrigerants, which have a global warming potential of around 1,000 times higher than CO2.

➔ 2Energy demand for space cooling globally is growing at 4% annually, twice as fast as water heating. This is putting pressure on power capacity, especially as countries like Canada strain to keep their grids clean.

➔ In Canada, the percentage of households with an air conditioner hit 64% in 2021, compared to 55% in 2013. That’s even more impressive given the surge in households over the past decade.

➔ Buildings account for 18% of Canada’s total emissions. Of these, space heating and cooling represent more than 67% of building energy use.

➔ One in 10 Canadian households had a heat pump (which, of course, double up as air-conditioners) in 2021, from virtually zero a few years prior. Heat pumps are 4.5 times more efficient than conventional air conditioners, making them a key pillar of climate action.

➔ Residential heat pump imports jumped 71% in Canada in Q1, compared to the same period last year, the Heating, Refrigeration and Air Conditioning Institute of Canada (HRAI) data shows.

➔ Federal and provincial Canadian policymakers are considering building codes that would stipulate at least one room with an air conditioner in a home.

➔ Access to cooling is emerging as a human rights issues, especially after nearly 600 people died in a Vancouver heat dome event in 2021.

➔ “An important driver of activity is climate-change mitigation, driven mostly by policy, rebate programs, incentive,” says Martin Luymes, Vice President, Government & Stakeholder Relations at HRAI. For instance, federal rebates led to record heat pump sales, which then dropped off when the programs ended. Several provinces including Ontario, B.C., and Nova Scotia continue to offer rebates, helping sustain interest.

➔ The Canadian HVAC industry sees the possible termination of the Energy Star program in the U.S. as a “major mistake,” says Luymes, noting that the program, which promotes energy-efficient products including air conditioners, as valuable, low-cost consumer guidance tools. Experts say scrapping or weakening Energy Star could harm climate progress.

The good and the ugly in the One Big, Beautiful Bill Act

Donald Trump’s signature 2025-26 budget bill is now law. The legislation changes several clean energy tax incentives that were managed under the Inflation Reduction Act (IRA), tightens domestic content requirements, imposes new qualification deadlines and sunsets other tax credits that could impact Canadian cleantech firms eyeing opportunities across the border.

Here’s the good, the bad and the ugly of the OBBBA:

Carbon capture: The bill maintains credits for carbon capture, but also provides incentives for captured CO2 for oil production, underscoring the administration’s commitment to the fossil fuels industry.

Nuclear: The bill maintains credits for both existing nuclear facilities and new advanced energy technologies. However, new foreign entity provisions could inject uncertainty in the sector’s growth. The legislation is supported by an earlier executive order that targets a quadrupling of U.S. nuclear capacity from 100GW to 400 GW by 2050.

EVs: Electric vehicle manufacturing and competitiveness will be “hard hit,” according to the Center on Global Energy Policy, noting that the law could reduce domestic demand for EVs, jeopardize battery investment and allow China and other foreign competitors to gain greater market share.

Clean grid: Solar and wind power was particularly hard hit as historic investment and production tax credits sunset earlier than before. The law would reduce the build-out of new clean power generating capacity by 53-59% through to 2035, according to the Rhodium Group. An executive order following the OBBBA directs the U.S. Treasury Secretary to eliminate subsidies for “unreliable green sources like wind and solar,” that it believes is threatening national security. A separate executive order directs the Treasury Secretary to end “market-distorting subsidies for unreliable, foreign controlled energy sources.”

Critical minerals: Metallurgical coal is nowdeemed a “critical mineral,” allowing it to qualify for a production tax credit. The law also broadly reduced 45X Production Tax Credits for critical minerals to 2033 (compared to no limits before), which would pose a challenge as most critical minerals projects require long timelines. The Center for Strategic & International says the “amended tax credit disincentivizes investment in newly discovered greenfield projects with longer timelines to production in favour of brownfield legacy mines that may be closer to production but have lower grade reserves.”

Trends, tech and science

China is the world’s energy transition workhorse. Around 74%, or 1.3 terawatt, of the world’s new wind and solar capacity is being built in the country, with the U.S. a distant second with 5.9% of all new projects, and India third at 5.1%, according to Global Energy Monitor. The 590GW of new Chinese wind capacity proposed or underway could power nearly all U.S. households. China’s inevitable cleantech dominance poses a conundrum for the West, as suggested by EU President Ursula von der Leyen earlier this month: “Beijing is at once a staunch competitor in the clean tech race, and a vital partner for global decarbonization.” A fractured G7 can’t keep Chinese tech out for too long.

Straddling cleantech and AI. Founded by veteran tech investor Nicholas Parker, CleanAI recently launched a networking and financing ecosystem for entrepreneurs and businesses intersecting AI and clean-tech. CleanAI research shows that the artificial intelligence-enabled cleantech solution space would require US$138 billion over the next five years and could mitigate up to 10% of global greenhouse gas emissions.

RBC Briefings

• Trade Zone: The Great Canadian Stampede to find new trading partners

• Supply Management Explained

• Climate Crunch: Canada’s other green superpower

• U.S. and Canada outlooks intact amid reorienting trade flows

• Five-minute charging: How grids can manage power spikes

The Institute In Action

• Last week, John Stackhouse visited Limberlost Place, Ontario’s first mass timber, net-zero carbon emissions building, to participate in a documentary about the project. The George Brown College building is set to open this fall in Toronto.

• On July 15th, Nathan Janzen and Lisa Ashton gave a keynote presentation at the Dairy Farmers of Canada Annual General Meeting in Toronto.

Books on the team’s reading list:

• Genesis, Henry Kissinger, Craig Mundie and Eric Schmidt, on AI’s transformative powers, in politics, security, prosperity and science. Read John’s review here.

• The Explorer’s Gene: Why We Seek Big Challenges, New Flavors, and the Blank Spots on the Map, by Alex Hutchinson.