The federal government will on Monday release draft regulations to cap greenhouse gas emissions from Canada’s oil and gas sector to 35 per cent below 2019 levels.
The proposed new rules are at the lowest end of a policy framework the federal Liberal government released in December. That plan outlined a cut of between 35 and 38 per cent, which was itself a softer target than many had expected. It drew the ire of environmental groups, which said the cap should be tougher, and the oil and gas sector, which is roundly opposed to any such policy at all.
The new rules will be executed via a cap-and-trade system, according to a press release. Facilities covered by the system will be allocated emissions allowances, and at the end of each year will need to remit to the government one allowance for each tonne of carbon pollution it has emitted. Over time, the government will give out fewer allowances corresponding to the declining emissions cap.
Alberta’s United Conservative Premier Danielle Smith has argued a production cut would be necessary to meet targets imposed by an emissions cap. But the federal government has disputed that, saying the new rules reflect what is technically feasible between now and 2030.
Profits in the oil and gas sector increased tenfold from $6.6-billion in 2019 to $66.6-billion in 2022, according to Statistics Canada, but much of that has been returned to shareholders rather than invested in emissions-reduction activities.
Ottawa has been keen to see more progress on climate initiatives in the sector, including a $16.5-billion carbon capture project in Alberta’s oil sands that would transport carbon via a 400-kilometre-long pipeline to an underground hub near Cold Lake, Alta., reducing oil sands emissions by 22 megatonnes a year.
It is spearheaded by the Pathways Alliance, which has pledged to bring greenhouse gas emissions created during oil-sands production to net zero by 2050. The group’s six members – Cenovus Energy Inc. Suncor Energy Inc., Imperial Oil, Canadian Natural Resources Ltd., MEG Energy Corp. and ConocoPhillips Canada – collectively represent approximately 95 per cent of oil-sands production.
Pathways members have reached out to pipe manufacturers, setting the stage for movement on the project, and C-suite leaders have voiced optimism they will soon reach an agreement with a federal financing body on terms to fund the plan.
The Alberta government and the oil and gas industry insist an emissions cap will inhibit investment and growth in the oil and gas sector.
They point to various reports that have reached similar conclusions, and forecasted wide job losses under a cap. Those include an analysis by Deloitte, which was commissioned by the province, and a report by S&P Global Commodity Insights, paid for by the Canadian Association of Petroleum Producers, an oil lobby.
The provincial government in February released a formal response to the proposed federal cap, saying it was “not realistic or effective, will not achieve its grandiose emissions targets and will not be tolerated in Alberta,” and recently started a public campaign opposing the cap.
