An independent federal advisory panel has declared Canada “unlikely to attain its 2030 emission target” without an oil and gas emissions cap, just days after senior oil sands executives insisted they can’t invest any faster in decarbonization.
In its annual report released Friday, the Net-Zero Advisory Body (NZAB) puts forward 25 recommendations to support Canada’s wider shift to a net-zero economy. But in an opening message [pdf] to Environment and Climate Minister Steven Guilbeault, NZAB co-chairs Dan Wicklum and Marie-Pierre Ippersiel single out the fossil sector for early action.
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“Unlike other heavy industry sectors like steel and cement, emissions from the oil and gas sectors are still rising, and the track record of the oil and gas sector suggests self-regulation will be difficult,” they write. “Despite some improvements in emissions intensity of oil and gas production, emissions from the oil and gas sector rose by 18.8% between 2005 and 2019 while emissions from the rest of the economy declined by 6.1%. Without an oil and gas emissions cap, Canada is unlikely to attain its 2030 emission target.”
On that basis, they say NZAB extends its “full support in favour of adopting a rigorous but fair cap on oil and gas emissions.”
Earlier last week, Cenovus Energy CEO Alex Pourbaix and Pathways Alliance President Kendall Dilling told The Canadian Press they’re all-in on what they consider green technology investments. However, at a moment when other investors around the world have found US$1.1 trillion in projects to get behind, the two oil sands execs “maintain there isn’t a place to invest that money yet,” CP writes.
While the companies are moving “as aggressively as (they) can,” Pourbaix said, “we’re not yet at the point where we can invest billions in these projects.”
CP says that was a reference to the C$24.1 billion the six Pathways Alliance members, representing 95% of Canada’s oil sands production, want to pour into a carbon capture and storage facility and pipeline along with other emissions reduction projects. When the companies announced that conditional investment in mid-October, they made it clear their final decision would depend on more generous taxpayer subsidies—despite a year of record profits in which they’d already received $15 billion in federal largesse.
“Over the life of the project, probably two-thirds of your costs are operating costs. And so the (tax credit) helps enormously on the construction side, on the capital side, but we’re still working with governments on ways to shore up some support on that operating cost side,” Dilling said at the time.
CP says the funding issue is still a point of contention.
“The industry is hoping to see the federal government do more to match the funding being offered by the U.S. government to incentivize the development of clean energy in that country,” the news agency writes. “The Liberal government has argued it has already created incentives for the industry, including an investment tax credit for carbon capture and storage projects, and that it’s now time for the industry to step up.”
In September, the Pembina Institute projected that Canada’s oil and gas sector would take home $152 billion in profits in 2022 due to the war in Ukraine and the resulting fossil price boom. The report criticized Pathways members for not moving faster to meet its climate commitments in light of its windfall profits.
“If they don’t make those investments while they’re making record-level profits, then when would it be a good time for them to make those investments?” Guilbeault asked CP at the time. “If not now, then I don’t know when.”
But despite the urgency the Net-Zero Advisory Body attaches to Ottawa’s 2030 emissions target, the Pathways Alliance admitted late last month that it won’t meet expectations for a 42% emissions cut by 2030 until at least 2035 without “slashing” oil production.
The NZAB recommendations go far beyond the emissions cap. “With 27 years left until 2050, it is not enough to accelerate the decline of emissions—success must be about the construction of a prosperous net-zero future for all Canadians,” the report says. “Canada must remain at the forefront of the net-zero movement to ensure competitiveness in the global economy, sustain well-being, create good jobs, and attract investments to leverage competitive advantages.”
With recommendations dealing with governance, industrial policy, and net-zero energy systems, the report stresses that “no single entity can, on its own, permanently decarbonize the Canadian economy.” That means success will depend on coordinated action by “all orders of government, industry, and civil society,” and on “joining emerging initiatives” under the U.S. Inflation Reduction Act and the European Union’s Green Deal.
“A net-zero industrial policy would facilitate the building of domestic industries that both secure Canada’s competitive position in the global economy and contribute to driving Canada to net-zero by 2050,” NZAB states. The recommendations on net-zero energy go beyond the federal Clean Electricity Regulations, which the report says will be important but not sufficient on their own to hit a 2050 net-zero target. It calls for better interconnections between provincial and territorial grids to speed up emission reductions, deliver greater economic benefits, and increase Indigenous self-determination.
“The panel calls for launching a power grid council to find ways to create a nationwide net-zero electricity system by 2035, with interties between provincial networks,” writes Globe and Mail columnist Jeffrey Jones. “It recommends expediting regulatory approvals, as well as rejigging government investment pools, such as the Strategic Innovation Fund and the Canada Growth Fund, to focus on projects that are aligned with net-zero industrial policy.”
On Friday, a conversation with Wicklum had Jones focusing on NZAB’s call for independent experts to bridge the political divide between federal and provincial governments.
“If the federal government takes on a consultation about what the future needs to look like in a certain sector, and that sector is very important to a province, that whole piece of work is immediately politicized,” Wicklum said. “What other countries have done is they have counted on these independent intermediaries to bring different interests to the table, supported them with independent, transparent techno-economic analysis and other types of analysis, and that has led in other jurisdictions to quicker progress and meaningful progress to develop and implement plans.”
Wicklum added that Canada should build on its own industrial strengths and climate targets, rather than trying to imitate policies in the United States.
“It behooves us to have more of a sophisticated view than try to compete with the largest economy in the world on the same sectors using the exact same policy instruments,” he told Jones. “We should get a really diligent analysis to make sure that we’re developing a strategy that is Canada’s rather than a ‘U.S.-lite.’”
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