Taking action in support of our vital natural resource sector

Key Points

• Canada's ranking on the Climate Change Performance Index (CCPI) 2021 does not reflect its true performance on taking climate action

• For 3 out of 4 categories, the methodology used to rank nations on the CCPI 2021 isn't very understandable or intuitive

• Canada is already a global leader on several Environmental, Social, and Governance indexes

Canada already enjoys a world-leading record on Environmental, Social, and Governance (ESG) performance. Over a dozen lists like the Environmental Performance Index, Green Future Index, and Sustainable Development Report all find Canada to rank quite well among its international peers. Hence, when the Climate Change Performance Index 2021 (CCPI) ranked Canada 58^th out of 61 nations on taking climate action, we were taken aback and decided to take a deeper look.

Given what we already know about Canada’s natural resource industries and their global leadership on environmental initiatives like carbon capture utilization and storage (CCUS), greenhouse gas (GHG) emission intensity reductions, and world-class gas flaring regulations, we were surprised that the CCPI ranked us at the bottom of the barrel – 58^th out of 61 nations to be precise.

Why Methodology Matters

Fact: When oil stays in the ground in #Canada , it is simply sourced from less environmentally-friendly jurisdictions. #CanadianEnergy https://t.co/k5fSEVbhw2

— Oil Sands Action (@OilsandsAction) April 26, 2021

The CCPI’s methodology ranks 61 global nations on their “climate change performance” using scores allocated across four indicators:

1."GHG Emissions" (40% of overall score)

2."Renewable Energy" (20% of overall score)

3."Energy Use" (20% of overall score)

4."Climate Policy" (20% of overall score)

We dug deeper into these metrics to determine why Canada scored so “poorly” on all the above categories except for climate policy where we ranked in the middle of the pack, at 29^th out of 61 nations. Our sneaking suspicion led us to discover some important context regarding the CCPI’s methodology which is discussed below.

GHG Emissions Per Capita

To begin, in the CCPI’s “GHG emissions” category, Canada is ranked 54^th out of 61 nations. The CCPI’s use of a GHG emissions per capita methodology automatically – and unfairly – puts Canada at a disadvantage right from the start.

The CCPI’s writers, in more words or less, seem to acknowledge that using a per capita measurement isn’t favourable for nations like Canada under the Emissions Accounting and Trading section, stating that:

“… [our methodology] encompasses all emissions emerging from domestic production using a territorial system boundary while excluding international trade. In this sense, the nation producing the emissions is also the one held accountable, no matter if those emissions are closely connected to an outflow of the produced goods to other countries.”

Home to a vast wealth of natural resources, Canada is a top global producer and exporter of many raw materials and goods. We are:

• The 4^th largest producer and exporter of crude oil (~4% of world production)
• The 4^th largest producer and 6^th largest exporter of natural gas
• A top 10 producer and exporter of several agricultural products
• A top 10 producer and exporter of several forestry products
• A top 5 producer of more than a dozen critical minerals and metals
• A top 5 exporter of several essential minerals and metals like potash, uranium, nickel, cobalt, and gold

To put it in the CCPI’s own words, Canada’s GHG emissions are very “…closely connected to an outflow of produced goods to other countries.” We provide the building blocks that fuel modern society and economies around the world.

The CCPI also doesn’t consider the major GHG emission intensity reductions made by various Canadian industries over the past several years. For example:

• From 2000-2017, Canada’s total electricity GHG emissions decreased by 42 per cent
• From 2000-2018, the emission intensity of Canada’s oil sands operations decreased by 36 per cent
• From 2007-2017, Canada’s forestry sector reduced its total fossil GHG emissions by 40 per cent

Is this a fair depiction of Canada’s climate change performance?

Renewable Energy

Another important discussion we must have in light of Canada’s “poor” ranking on the CCPI 2021 is how the index incorporates hydro and renewables into its methodology.

You would think that being the world’s fourth-largest producer of hydropower and seventh-largest producer of renewable energy would count for something. Yet, Canada was ranked 54^th out of 61 nations in the CCPI's “Renewable Energy” category.

Canada got 16.3 per cent of its energy supply from renewable sources in 2018, higher than the world average of 13.4 per cent and OECD average of 10.5 per cent. And somehow, the CCPI ranks Canada as the second-lowest performing OECD nation, ahead of only Iran (59^th), Saudi Arabia (60^th), and the U.S. (61^st).

Canada’s CCPI 2021 ranking seems counter-intuitive given that we are a global leader in renewable energy production and our capacity is growing rapidly. For example:

• Canada currently gets about 67 per cent of its electricity needs from renewable sources such as wind, solar, hydro, and biofuels
• In 2017, six Canadian provinces and territories got more than 94 per cent of their electricity supply from renewable sources
• Between 2010 and 2018, Canada’s renewable electricity generation increased 16 per cent, with wind and solar experiencing the largest growth

Hydro Doesn’t Count?

Canada is home to a massive network of lakes and rivers. In fact, you’ll find about 20 per cent of the world’s freshwater resources in Canada. According to Canadian Geographic, our nation has the ability to more than double our already massive amount of hydropower generation, which could help further reduce emissions both here at home and in the U.S.

The CCPI’s methodology under Hydropower and Human Rights Violation explains that it does not deem large hydropower to be sustainable:

“… many large hydropower projects are considered to be not sustainable. Large hydropower projects often have profound negative impacts on local communities, wildlife and vegetation in the river basins and sometimes even produce additional greenhouse gas emissions where water catchments are particularly shallow… Secondly, if the CCPI fully included large hydropower, it would reward to some degree the development of unsustainable dam projects when an increase in renewable energy supply is solely driven by such projects. Such an approach is not regarded as adequate climate protection by the authors of the CCPI… In its attempt to balance the extent of rewarding countries for expanding large-scale hydropower, the CCPI excludes all hydropower from two of four indicators in the “Renewable Energy” category.”

We’re not the only one who finds this methodology confusing. Sarah Keyes, principal at ESG Global Advisors, says that the CCPI report is particularly questionable when it comes to the criteria used in the “Energy Efficiency” and “Renewable Energy” categories.

“In Canada’s case, the ‘very low’ rating on renewables while the country has one of the greenest grids in the G20 is not easy to understand or intuitive,” she said.

Keyes is also curious as to why several ongoing initiatives in Canada were not reflected in the CCPI’s rankings, “including revision of nationally determined contributions (NDCs) and establishing a national roadmap to net zero, that are underway but have not yet published their results and revised plans.”

Hydro’s Impact on Communities

Is it fair to say that Canada’s hydropower projects have “…profound negative impacts on local communities,” as the CCPI states above? Given that hundreds of thousands of Canadian families rely on the hydro sector to put food on the table and sustain a living, we’re not so sure.

According to the Canadian Hydropower Association (CHA), the hydro sector added $37 billion to our economy and supported 135,000 direct and indirect jobs across the country in 2013. The CHA also says that 6 out of every 10 Canadian homes and businesses are powered by hydro.

Canadian hydro is anything but a detriment to our communities.

The hydro industry has also created partnerships with multiple Indigenous communities that create new and long-term economic opportunities from coast to coast while helping reduce reliance on fossil fuels in remote areas of the country.

Helping Indigenous communities become economically independent while promoting sustainable energy sources amid the vast wilderness of our nation is something all Canadians can and should be proud of.

Energy Use Per Capita

It’s no surprise that the CCPI 2021 also ranked Canada poorly in its “Energy Use” category with a per capita metric in place. Actually, we came in dead last, at 61^st out of 61 nations evaluated on the CCPI.

Once again, Canada’s role as a major source of natural resources places us at an immediate disadvantage in this category. Energy-intensive processes are typically used to extract and produce oil, natural gas, minerals, metals, forestry, and agricultural products, and we are a top 10 global producer and exporter of all of the above.

We also are a vast nation with a relatively small population density and freezing winters. We typically use larger amounts of energy to travel between points A and B and keep ourselves warm during the colder seasons.

Energy Use - Natural Resources Canada

But the per capita metric isn’t the only questionable part of the CCPI’s “Energy Use” methodology. The report itself states that any improvements made in energy efficiency are not taken into account in its rankings. Instead, energy use per capita is solely used to determine a nation’s relative success or failure in the category.

Perhaps the most confusing aspect of it all is that the CCPI itself says that energy efficiency improvements are instrumental in reaching net-zero and fighting “…the global climate crisis...” but then retracts to per capita energy use as the sole measure of a nation’s progress in the “Energy Use” category. From section 1.3 of the CCPI 2021 methodology paper:

“Besides an expansion of renewable energies, a vast increase in energy efficiency is crucial to achieving global decarbonisation and overall greenhouse gas neutrality by mid-century. The more efficient energy can be used, the faster and easier countries can reach net-zero emissions. Therefore, one major step in combatting the global climate crisis is to reduce the energy needed to provide for products and services. Increases in energy efficiency in its strict sense are complex to measure and would require a sector-by-sector approach, for which there are no comparable data sources available across all countries at the present time. The CCPI therefore assesses the per capita energy use of a country and measures progress in this category.”

Here’s another example of where Canada’s ranking on the CCPI isn’t “… straightforward to understand or intuitive,” as per in the words of Sarah Keyes.

Canada’s Record on Energy Efficiency

Canada has done a great job in improving its energy efficiency over the past several years, as exemplified by the following facts:

• Energy efficiency in Canada improved by 31% between 1990 and 2017
• Energy use grew by 31% between 1990 and 2017. Without energy efficiency improvements, energy use would have grown by 60%
• Per capita energy consumption was 8% lower in 2017 than in 2000
• Canada used 20% less energy per dollar of GDP in 2017 than in 2000

These examples of energy efficiency improvements in Canada are just the tip of the iceberg. Given that changes in energy efficiency in the past and those slated for the future are not taken into account by the CCPI, we say that Canada’s ranking doesn’t accurately reflect its true performance in this category.

Climate Policy

With the world’s largest capacity for this type of system, the ACTL is capable of transporting 14.6 million tonnes of CO2 / year from emission sources to mature oil fields for enhanced oil recovery before being stored permanently. #ClimateActionCanada https://t.co/pSuStNfsKF

— Canada Action (@CanadaAction) April 24, 2021

To be fair, the CCPI’s “Climate Policy” category uses a much clearer and understandable methodology. Ratings for each country are determined by a conglomerate of climate and energy policy experts from non-governmental organizations, universities, and think tanks within the evaluated countries.

Canada faired 29^th out of 61 nations in this category, above the median but still not as high as we see on other ESG indexes.

Canada’s CCPI 2021 Ranking Misses the Mark

Given our discussion above, it’s easy to see why Canada’s Climate Change Performance Index 2021 ranking misses the mark. We find that, for the most part, the methodologies used aren’t very understandable or intuitive and don’t give Canada credit where it’s due.

Now, of course, Canada can always do better on its climate action initiatives - don’t get us wrong. But it remains imperative that we continue to raise valid questions and engage in balanced and informed discussions around our existing world-class record on Environmental, Social, and Governance metrics when indexes like the CCPI 2021 suggest otherwise.

As a closing note, here are several examples of Canada’s ranking on other ESG-related indexes we encourage you to look at. Canada…

• ranked 2^nd on the Global Cleantech Innovation Index 2021
• ranked 5^th on the Democracy Index 2020
• ranked 6^th on the Global Peace Index 2020
• ranked 7^th on the Social Progress Index 2020
• ranked 9^th on the Rule of Law Index 2020
• ranked 11^th on the Corruptions Perception Index 2020 (to clarify, the lower score, the less corrupt a nation is)
• ranked 11^th on the Women, Peace, Security Index 2019/20
• placed 14^th on the Green Future Index 2021
• ranked 16^th on the Global Press Freedom Index 2020
• tied for 20^th place on the Environmental Performance Index 2020
• ranked 21^st on the Sustainable Development Index 2020

Join Us Today!

Learn more about why the world needs more Canadian natural resources by joining us on Twitter, Instagram, and Facebook today. Hope to see you there!

Back to Environmental, Social, Governance (ESG)