With the federal government’s new Emissions Reduction Plan (ERP) due for release any day, news commentary is focusing on the central role of oil and gas in hitting the 2030 target—and what it’ll cost taxpayers to secure the industry’s cooperation.
The Trudeau government is promising a 40 to 45% emissions reduction from 2005 levels by 2030. And if the country is to fulfill that national and international commitment, “there is little room for error in decarbonizing oil and gas production—the largest sectoral contributor, responsible for more than a quarter of the current emissions total,” Globe and Mail climate columnist Adam Radwanski writes from Calgary. That means fossil emission reductions have to hit somewhere around 40%, he adds—“if not from 2005 levels, from which they have grown significantly, then from their current levels. Otherwise, the entire national target will collapse.”
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Which 40% Cut Will It Be?
In fact, that statistical sleight-of-hand isn’t available if the government intends to hit the threshold enshrined in its Nationally Determined Contribution (NDC) under the Paris climate agreement. In an analysis released last week, the Calgary-based Pembina Institute calculated that the 2030 target will depend on fossils reducing their annual emissions by 103 million tonnes, from the most recently-reported high of 191 Mt in 2019. That’s because:
• Canada’s 2030 target measures the 40 to 45% reduction from the 2005 level.
• The country’s fossil sector emitted 160 million tonnes in that year, so a 45% reduction would bring the total down to 88 Mt.
• But while focusing all their attention, lobbying, and relentless PR on their emissions intensity—their emissions per barrel of oil produced—fossils increased extraction enough to drive their emissions up to 191 megatonnes in 2019.
• That means they’ll have a steeper hill to climb—a 54% reduction, rather than 45%–to fulfill their responsibilities in a crucial decade for climate action.
If industry officials are touting a 40% reduction from their current emissions, as Radwanski’s column implies, that brings them to a total of 114.6 Mt—which would leave the rest of the economy to pick up the additional carbon savings that should be the fossil industry’s responsibility.
While scaling back oil and gas production would be the easiest way to reduce the industry’s emissions from a purely environmental perspective, Radwanski doesn’t foresee much effort to force the issue before 2030, partly because mandated production cuts “may not be within Ottawa’s constitutional powers”. If oil and gas output remains constant—which would still be an improvement over the industry’s stated plans, the Canada Energy Regulator’s latest projections, and Norwegian state fossil Equinor’s intentions with the Bay du Nord offshore oil megaproject—Radwanski points to aggressive methane cuts as an obvious first step that could cover one-third to half of the industry’s 2030 target.
But “after that, it gets iffier”, with fossils touting carbon capture, utilization and storage (CCUS) technologies that won’t deliver significant results until 2028 or 2029 at the earliest. Fossil executives like Cenovus Energy CEO Alex Pourbaix opened bidding last summer with demands for taxpayers to cover 75% of the development cost for CCUS, or more than C$50 billion through 2050, but Radwanski says industry officials seem inclined to accept 50%.
“The general line now is that the credit will kick-start investment, but other direct government subsidies will also be needed,” he writes.
The Canadian industry’s plans also range into electrification of tar sands/oil sands operations, which in turn points toward faster development of small modular nuclear reactors (SMRs), “technology still in development, but which Ottawa is under pressure to build more detailed strategy around.”
Fossils Won’t Pay Their Own Way
Radwanski adds that industry officials can see why Canadians would expect fossils to pay their own way on CCUS, at a moment when oil and gas prices are high and their profits are soaring. But “the reality, they say, is this is no ordinary boom. Skepticism among investors about how long it will last, and concern about the industry still facing long-term decline, has contributed to shareholder demand for immediate returns. Even if they want to, companies can’t put much of their own funds toward new production, let alone cleaning up existing operations.”
Toronto Star business columnist David Olive agrees that fossil executives are looking at today’s high prices as a temporary blip, not a shift in long-term pressures to reduce emissions and adapt to falling demand for fossil fuels.
“The two recent factors that have driven up oil demand and the oil price to a 14-year high in the short space of five months are both temporary,” Olive writes. “The first is the rapid reopening of the global economy after the deep pandemic recession. The result has been a spike in oil demand and resulting shortages and price hikes.
“And the second, of course, is Russia’s war on Ukraine. The war has spooked commodities traders into thinking that existing constraints on the oil supply will further tighten.”
However, knowing that those influences won’t last, “the biggest producers in the Alberta oilpatch are planning only minimal increases in production this year,” he says. “And other major global producers, looking at the same estimates of lower demand growth this decade, aren’t raising their production levels either.”
Which raises a whole other question for federal policy-makers and industry strategy: If they’ve accepted that the price spike is temporary and future fossil demand is questionable, why gamble national policy and taxpayers’ money on exotic, new technologies that may or may not be available in time to backstop an industry on the verge of a rapid decline?
Limited Pushback on Emissions Caps
The government’s promise of an “enforceable”, “workable” cap on oil and gas emissions now dates back four months, and a poll released late last year showed nearly 70% of Canadians supporting the move. Earlier this month, Environment and Climate Minister Steven Guilbeault said details of the cap won’t be ready for release this week, and Radwanski writes that fossils are working hard to shape the final plan.
“On the oil and gas cap, there are still a lot of discussions in terms of how do we do it from a structural point of view, what kind of vehicle do we use,” Guilbeault told Reuters in mid-March. “The ERP will not say how we’ll do the oil and gas cap, because we’re consulting and we don’t know how we will do it.”
“When it comes to oil and gas, the federal government keeps showing up with bagfuls of carrots,” Dale Marshall, former national climate program manager at Environmental Defence Canada, responded at the time. “But a regulatory stick always seems hard to find.”
“If we don’t do something to address oil and gas, then growth will continue and that would negate any chance of meeting 2030 targets,” agreed climate scientist Simon Donner, a member of the federal government’s Net-Zero Advisory Body.
So far, Radwanski says he’s seeing “limited pushback against the notion of ambitiously capping emissions, possibly because government is calling companies’ bluff on committing to move toward net-zero emissions by mid-century. But the operative word is flexibility, with the industry preferring to avoid new, hard caps that the government could try to impose under the Canadian Environmental Protection Act.”
“Where possible, you want to use a market-based system,” Tristan Goodman, president of the Explorers and Producers Association of Canada, told the columnist. “Especially in the oil and gas sector, they tend to find ways to do things, provided they’re not driven to a specific technology and that the market is allowed to work.”
That, of course, would be the same oil and gas sector that saw its total emissions increase between 2000 and 2019—all the while touting its efforts to reduce its emissions per barrel of (fast-rising) production, lobbying aggressively to delay climate action, and saying not a word about the 80% or more of the emissions in a barrel of oil that are released after the product reaches its final destination.
Radwanski’s column landed less than a month after a 3,675-page science report from the Intergovernmental Panel on Climate Change detailed the “atlas of human suffering”, some of it now unavoidable, to be expected as a result of rapidly-increasing emissions of greenhouse gases.
Time to Sink or Swim
Another take on the industry agenda showed up in Friday’s Globe and Mail, in a column by Public Policy Forum President and CEO Ed Greenspon and McCarthy Tetrault LLP policy advisor Wayne Wouters, on behalf of the PPF’s Energy Future Forum. Wouters is a former clerk of the Privy Council, Greenspon a former editor-in-chief of the Globe.
The two authors contrast two competing visions for the next round of national climate policy—titled “accelerated phaseout” and “aggressive decarbonization”—in a narrative that briefly (and incorrectly) tags renewable energy and energy efficiency as tickets to higher energy costs, before attaching the “aggressive decarbonization” label to the fossil industry.
“The message to the oil and gas industries is that it’s sink or swim time,” Greenspon and Wouters write. “Should they swim, Canada can hang onto its largest source of export revenues for as long as global demand persists, buttressing the value of the dollar and providing the means to finance the import of wind turbines, solar panels, and battery storage, none of which Canada currently produces in quantity.”
But “the test will be whether Canada can continue to compete for this global demand—even at reduced volumes—by offering the best barrels in terms of cost and carbon emissions,” they add, contrary to recent data flagging Canada as one of the most expensive and highest-carbon sources of oil.
For the fossil industry to deliver on their “aggressive decarbonization” strategy, the two authors say the country will need an “all-in public-private partnership” in the tens of billions of dollars, on the scale of the effort that went into building the St. Lawrence Seaway. And they point to carbon capture as a “key component” of the strategy.
Neither Radwanski’s account of the state of play in Calgary nor the Energy Future Forum op ed gets into the path that might emerge if the government has been looking into the fastest, deepest emission reductions a multi-billion-dollar investment can deliver. Nor has there been much commentary on how Canada will meet its climate commitments if those lavish subsidies still leave carbon capture as expensive and unreliable as it has been to date, and if SMRs turn out to be the “dirty, dangerous distraction” its critics believe it to be.
If those questions aren’t addressed out loud in this week’s Emissions Reduction Plan, they’re sure to figure prominently in the public analysis, debate, and advocacy that follow.
