The federal government should introduce an oil and gas emissions cap that aligns with a 1.5°C limit on average global warming and creates incentives for innovation without favouring any specific technology, the Commons Natural Resources Committee concludes in a report issued last week.
The all-party committee calls on Ottawa to avoid the “carbon leakage” the industry says will occur if Canadian oil and gas exports are replaced by more (or rather, even more) carbon-intensive alternatives, toughen up its existing carbon pricing system for industry, address the impacts of an emissions cap on Indigenous peoples and employment, and ensure that the system accounts for the fossil industry’s wider environmental impacts.
The report, based on committee hearings that ran from February 7 to April 6 this year, captures continuing discussions on the form the emissions cap should take, and whether or how Ottawa could also move to cap oil and gas production. The crux of that debate is that the federal government has constitutional authority over pollution, but the provinces have jurisdiction for natural resources, raising concerns that a federal production cap would ultimately fail after months or years of litigation.
The committee notes that oil and gas emissions in Canada rose 98% from 1990 to 2019, while oil sands and natural gas production showed explosive growth. “The average barrel of Canadian oil has become more emissions intense over the past 30 years, driven by the growing role of the oil sands, which is more emissions intense than conventional oil,” the report states.
Those numbers underscored Trottier Energy Institute research associate Simon Langlois-Bertrand’s testimony that the country’s 2030 emission reduction target “cannot be achieved without a deep transformation in the oil and gas sector.”
A submission by Climate Action Network-Canada (CAN-Rac) and six other organizations said Canadian fossil companies are “on track by 2030 to increase oil and gas production in Canada by nearly 30% above 2020 levels”. West Coast Environmental Law staff lawyer Andrew Gage added that “the countries that are emitting less now than they did in 1990 made different choices and constrained the production of oil and gas and fossil fuels.”
The report summarizes testimony on the potential scope of an emissions cap, whether it should cover the downstream or “Scope 3” emissions that occur after Canadian fossil products reach their end users, and whether oil and gas should be singled out for an emissions cap.
The committee heard a wider range of views on a direct production cap. University of Alberta professor Laurie Adkin said a planned phaseout of unconventional oil and gas production would bring the country “real security and well-being” and “real potential for reconciliation with Indigenous people”. Kevin Anderson of the UK’s Tyndall Centre for Climate Change Research advised that “Canada is financially in a very favourable position, compared with the other oil and gas producers, to shift away from oil and gas production,” but “is demonstrating no meaningful leadership. It has one of the highest levels of emissions per capita, at around 16 tonnes per person.”
A succession of other voices, from the Canadian Climate Institute to the Canadian Association of Petroleum Producers (CAPP), said the federal cap should only apply to emissions, not production. Simon Fraser University energy economist Mark Jaccard warned that a production cap “would be unnecessarily harmful to fossil fuel-endowed regions in our country and probably would be unconstitutional as a federal policy anyway.”
But Climate Emergency Unit team lead Seth Klein said Ottawa has the tools to limit some aspects of oil and gas production. “Exports are under federal jurisdiction, and if the federal government can ban coal exports, so, too, can it begin to limit oil and gas exports,” he told the committee. Interprovincial transport, including pipelines, “is under federal jurisdiction. Offshore production comes under federal jurisdiction.”
During last month’s COP 27 climate summit in Egypt, Environment and Climate Minister Steven Guilbeault explained the government’s caution about that kind of strategy, suggesting that oil and gas phaseout language would prompt pushback from the provinces.
“Everything we do is challenged in the court,” he told CAN-Rac national policy director Caroline Brouillette. “(Carbon) pricing was challenged, our plastic pollution regulations were challenged, our environmental impact assessment is being challenged—either by provinces or companies, or both. And if we’re not on very solid legal ground, we will lose in front of the tribunals and that doesn’t help anyone.”
Guilbeault acknowledged that Canada hasn’t been challenged over plans to phase out coal, but faces legal action on almost everything it does on the oil and gas side. “We have to be super careful in terms of what we do—that what we do will hold in court,” he said. “Otherwise we’re wasting time, and precious time, to fight climate change.”
The committee heard testimony on whether oil and gas should face a tougher emissions cap than other sectors. “We should not single out a particular sector for more ambitious emission reductions, which is a costly way to achieve our environmental goals, but instead seek to generate more emission reductions from across all sectors,” said University of Ottawa associate professor Nicolas Rivers.
“Differential treatment of a specific sector reallocates capital and labour throughout the economy, moving these production inputs away from their most productive use,” said Jennifer Winter, a scientific director at the University of Calgary’s School of Public Policy. “This artificially expands some sectors, shrinks others, and lowers Canada’s productivity.”
But CAN-Rac “pointed out that the oil and gas sector accounts for the largest share of Canada’s emissions and that ‘the cap must avoid unfairly shifting the burden of mitigation from oil and gas to other sectors, other workers, and other consumers’,” the committee report says. The Trottier Institute’s Langlois-Bertrand estimated that oil and gas will have to reduce emissions more than 60% from today’s levels for Canada to hit its 2030 targets, even with other sectors doing their part.
Martin Olszynski, an associate law professor at the University of Calgary, said there would “appear to be no problem with prioritizing a given sector or sectors” under the Canadian Environmental Protection Act, “on the basis that they represent the highest proportion of emissions.”
The committee says it heard “varying analyses” of whether future oil and gas demand is on track to rise or fall, with CAPP citing the one remaining International Energy Agency scenario in 2021 that showed oil production rising by 4.5% and fossil gas by 24.3% between 2019 and 2050. Those numbers were cherry-picked from a blockbuster IEA report that called for no new oil, gas, or coal production to match up with a 1.5°C scenario.
“Meeting these substantial growing needs will not be easy, and doing it in an environmentally responsible way will take ongoing technology development, smart policy from government, and hard work in every nation on Earth,” a CAPP representative told the House committee, based on the IEA’s now nearly two-year-old projection.
“However, these are not the only projections,” the committee report says, citing IEA projections in 2021 that show oil demand falling by 24.8 to 70.7% and gas consumption by 6.4 to 40.4% through mid-century.
The IEA has since concluded that the shift off fossil fuels is speeding up due to Russia’s war in Ukraine. In the last three weeks, the Paris-based agency has published a series of optimistic analyses on heat pumps, energy efficiency, and the rise of renewable energy.
The report briefly touches on Guilbeault’s controversial decision to approve the Bay du Nord offshore oil development in early April. It says any emissions from the project, which is meant to hit a net-zero target by 2050, would be subject to a federal emissions cap.