An initial proposal for an oil and gas emissions cap that is a cornerstone of Canada’s 2030 climate strategy is generating glimmers of hope but early skepticism on all sides, after Environment and Climate Minister Steven Guilbeault opened public consultations on the plan earlier this week.
Guilbeault released a discussion paper Monday that offers up two options for hitting Ottawa’s target of a 31% reduction in fossil industry emissions from 2005 levels, or 42% from the industry’s 2019 output, by 2030: a cap-and-trade system that would set regulated limited on the sector’s emissions, or a new carbon pricing system for heavy emitters.
Public consultations on the plan close September 30.
The 29-page discussion paper cites oil and gas as Canada’s biggest carbon polluter, accounting for 27% of the country’s greenhouse gas (GHG) emissions. That’s a reality that “we simply cannot ignore,” Guilbeault told a House of Commons committee in April.
The paper says oil and gas emissions increased 5% between 2005 and 2020, a period in which fossil production grew 26%, driven by nearly a tripling in tar sands/oil sands production and more than doubling of emissions, from 35 to 81 million tonnes. Despite the drop in emissions per barrel produced, “the GHG emission intensity of Canadian oil production is among the highest in the world, driven by combustion-intensive oil sands production processes.”
Some petroleum refineries are also among the country’s biggest industrial emitters, the paper says, and the industry as a whole is Canada’s largest source of methane emissions.
But the federal discussion paper, backgrounder, and news release all put a lot more emphasis on the fossil industry’s present-day footprint in the Canadian economy, casting emission reductions as the way to keep the industry in operation. The discussion paper identifies a half-dozen “key decarbonization options” for the industry, none of them involving any effort to scale back production.
It explicitly rules out applying the emissions cap to the “Scope 3” or downstream emissions that account for 80% or more of the carbon pollution in a barrel of oil. It allows for “time-limited compliance flexibilities” to make it easier and less costly for fossils to invest in decarbonization measures and includes different forms of carbon offsets among the options available to the industry.
“To remain competitive in a tighter future market, Canadian production will have to reduce its carbon intensity while the sector also explores opportunities to transition to non-emitting products and services,” states the release from the federal environment department.
The fossil industry responded that the plan would make it pay more for greenhouse gas emissions than other heavy industries, with Alberta, federal Conservatives, and some elements of the fossil lobby claiming the cap would become a “de facto production cut if emissions can’t be met by technology changes,” the Globe and Mail writes.
“Ottawa has repeatedly said that is not its aim, and has acknowledged that reducing oil and gas production before demand would hurt Canada’s economy,” the Globe adds. “However, an internal analysis obtained by The Globe and Mail shows a substantial gap between the ambition the government has set for the industry and what is technically feasible by 2030.”
Mark Cameron of the Oil Sands Pathways to Net Zero Alliance, which brings together six fossils that account for about 95% of Alberta’s bitumen output, told the Globe the federal plan could leave the industry with “higher carbon prices and fewer compliance options” than other industries, the Globe says. The new CEO of the Canadian Association of Petroleum Producers, Lisa Baiton, said both options in the discussion paper could limit production “by adding regulatory burden and eliminating options for economy-wide cooperation on emissions reductions.”
Alberta Energy Minister and former pipeline executive Sonya Savage, along with provincial Environment Minister Whitney Issik, said the province wouldn’t allow Ottawa to interfere with natural resource development. “The federal government cannot act unilaterally to meet their emissions targets,” they said in a joint statement Monday.
But Dan Wicklum, co-chair of the federal Net-Zero Advisory Body, told the Globe the cap was needed after 30 years of voluntary action failed to reduce emissions far enough.
In a Monday afternoon release, Climate Action Network-Canada said the emissions cap “could be a game-changer for climate action in Canada—if implemented with sufficient rigour and ambition.” National Policy Manager Caroline Brouillette said the cap “offers Prime Minister Trudeau his best shot at finally tackling Canada’s emissions problem and positioning this country as a strong player in the global clean energy economy. He must put communities and the climate first, and stand strong against any pressure from fossil fuel lobbyists to water down or delay this critical policy.”
Julia Levin, national climate program manager at Environmental Defence Canada, agreed the cap “will be a critical test for the federal government—and a defining moment for the Prime Minister’s legacy on climate change. After decades of climate promises that have fallen short, the Prime Minister has a chance to put the health and safety of families across Canada above the narrow interests of oil and gas companies.”
Levin warned that “oil and gas companies will be lobbying hard for delay, weak rules, and loopholes to undermine the effectiveness of the cap—just as they have done for every single other climate policy. The result has been decades of unbridled carbon pollution.”
But even as that lobby effort ramps up, Marc Lee, senior economist at the Canadian Centre for Policy Alternatives, warned that the discussion paper as it stands is already a recipe for delay.
“It’s taken a really long time to get to this point,” he told The Energy Mix. And now, with comments due September 30, the next step will be a set of draft regulations that will also have to go out for comment. “Industry is going to be tripping them up all along the way,” he said. “So maybe, if the government stays on course, we’ll get something that starts to take place by 2025,” when the regulations are supposed to achieve their stated purpose by 2030.
“The government also seems to be broadly moving ahead with this idea that we can reduce emissions while simultaneously growing the sector, and in a number of respects that’s just crazily problematic,” Lee added. “We’ve been struggling with this issue since 2015,” ever since the Trudeau government took office with a promise to combine climate action with continuing fossil fuel production and exports.
So “it’s a positive move that the feds are talking about emissions caps at all, but they’re not talking about production,” he said. While that’s an area where the federal government lacks jurisdiction, “we still need to talk about it. Or it just becomes magical thinking, and instead of the industry reducing its emissions we get a whole lot of offset schemes or international credits that don’t address the root of the problem.”
Of the two options in the discussion paper, Lee said a cap-and-trade system is the only realistic pathway. “I can’t see industry agreeing to some random carbon price every year based on random targets,” so “basically there’s really only one option that is consistent with the cap, and that’s a cap and trade model. And when it comes to cap and trade, the devil is in the details.”