Industry expenditures on GHG technologies

Canada’s economic structure is energy-intensive.⁴ It is characterized by energy-intensive industries, significant production and refining of natural resources, and reliance on export markets.⁵ Given the correlation between energy use and levels of GHG emissions, it is not surprising that Canada’s total domestic GHG emission levels are higher than those of European countries that have less energy-intensive economies, such as the United Kingdom, Germany, France and Italy.⁶

Industry response to reducing GHG emissions is closely tied to energy conservation and energy efficiency strategies, including investments in systems and equipment to reduce GHG emissions. Canadian businesses in primary and manufacturing industries spent $1.1 billion on GHG technologies in 2002 (Table 1). The bulk of GHG technology expenditures were made by three energy-intensive industries—oil and gas extraction ($244.9 million), pulp, paper and paperboard mills ($241.8 million), and electric power generation, transmission and distribution ($203.7 million). Identified in the list of large industrial emitters and therefore targeted for GHG emission reductions, these industries clearly benefit from investing in GHG technologies. They improve energy efficiency in their production processes, and reduce their overall energy intensity.⁷

Table 1. Operating, capital and total expenditures on GHG technologies, by industry, 2002

Just over one-half of the total GHG technology expenditures, $583.3 million, went to capital, mostly imported systems and equipment. This amount made up only 1.1% of the $55 billion in total capital expenditures by these industries in that year.⁸ The oil and gas extraction industry accounted for close to 40% of these GHG technology capital expenditures. This industry installed $230.9 million worth of GHG technologies in 2002 for the following applications: solar energy, cogeneration, alternative fuel and waste-to-energy (Table 2).

Table 2. Energy conservation processes and technologies, by industry, 2002

GHG technology operating expenditures—spending on labour, energy use and water use—reached $523.0 million in 2002. The pulp, paper and paperboard mills industry reported the highest GHG-related operating expenditures, $175.9 million. The main GHG-related spending of this industry was for operating, repairing and maintaining three technologies: cogeneration, waste-to-energy and fuel substitution. The electric power generation, transmission and distribution industry also had significant GHG-related operating expenditures, $104.9 million, mostly for small-scale hydro-electric systems.⁹ Like pulp and paper mills, electric power generation firms also spent money on operating costs for cogeneration, waste-to-energy and fuel substitution technologies.

The GHG technology investments made in 2002 may not have substantial effect in reducing an industry’s energy consumption in the short term: the impacts may be spread over several years. However, Canada’s commitment under the Kyoto Protocol is to reduce, by 2012, absolute annual GHG emissions, by an average of 6% below emission levels in 1990.¹⁰ Therefore, continued investment in GHG technologies is crucial if Canada is to meet its Kyoto target. Given the growth in energy consumption and in GHG emissions since 1990, the challenge to reduce GHG emissions is still considerable.

From 1990 to 2000, Canadian industries consumed more energy and increased their GHG emissions. Among all Canadian industries during that period, the average annual growth rate¹¹ of energy consumption was 2.4%, and of GHG emissions, 1.7% (Figure 1). In some energy-intensive industries, energy consumption and GHG emissions grew more rapidly than the average growth rates for all industries. Such was the case in oil and gas extraction and electric power generation, transmission and distribution, where the growth rates in energy consumption and GHG emissions were higher than the all-industry average. In contrast, the manufacturing sector, despite the 0.5% average annual increase in energy consumption, reduced its GHG emissions by an annual average of 0.8% throughout the period.

Figure 1. Average annual growth rate of gross domestic product, energy consumption and GHG emissions, selected industries, 1990 to 2000

Measuring an industry’s emissions alone is not a complete analysis, because different industries have different output levels. Calculating energy intensity and emission intensity takes into account the level of industry output. Energy intensity is the ratio between energy consumption and output, whereas emission intensity represents the ratio of emissions per unit of output. For the Canadian industry as a whole, there were only slight decreases in both types of intensities due to increases seen in industries such as mining and oil and gas extraction. However, the manufacturing sector saw a notable improvement: it cut both its energy intensity and emission intensity from 1990 to 2000 (Figures 2 and 3) by adopting integrated process systems and equipment.

	Figure 2. Energy intensity of selected industries, 1990 to 2000
	Figure 3. Emission intensity of selected industries, 1990 to 2000