A new report commissioned by Canada’s apex oil and gas lobby, the Canadian Association of Petroleum Producers (CAPP), is stirring up strong reactions after attaching a C$75-billion price tag to the federal cap on oil and gas emissions, using what its own consultant terms a “hypothetical” scenario concocted by CAPP itself.
A federal spokesperson said the “non-existent scenario” is “so deeply flawed, it amounts to disinformation.”
CAPP commissioned the 12 pages of presentation slides by S&P Global Commodity Insights to examine the impact of various proposed emissions-reducing policies on Canada’s conventional oil and gas producers, those operating outside the oilsands, The Canadian Press reports.
The report [pdf], consisting of 10 pages of actual slides plus a title page and full-page disclaimer, presents three future production scenarios for the industry “under parameters requested by CAPP,” the association said in a release.
It contains no reference to independent scenarios produced by the International Energy Agency and the Canada Energy Regulator that show significant declines in global oil and gas demand, with the IEA declaring the “beginning of the end for oil and gas” and projecting demand peaks for both commodities before 2030. Nor does it refer to urgent calls for immediate, drastic emission reductions from the Intergovernmental Panel on Climate Change.
Its “reference case” or business as usual scenario shows conventional oil production peaking in 2027, while gas extraction ramps up through 2030. Its “high case” adds new liquefied natural gas exports, despite a flurry of analysis showing LNG markets on the verge of a global glut.
S&P Global’s conclusions Monday were used to support the industry argument that legislating an emissions ceiling will inhibit investment and growth, even as opponents argued the report’s methodology was flawed.
The commissioned report concludes that if oil and gas drillers were required to cut greenhouse gas emissions by 40% by 2030, then by 55% by 2035, industry could see $75 billion less capital investment over the next nine years compared with current policy conditions. A fine-print footnote on one of the presentation slides attributes those emission reduction targets to “hypothetical CAPP defined scenarios—Stress Case assumptions include assumption that every dollar spent on decarbonization efforts is a dollar lost on oil & gas production effort, and that shareholder returns are stable.”
S&P adds that “economic impact assessment of oil & gas emissions and other environmental impact has not been completed as part of this analysis.”
The study says CAPP’s made-up scenario would translate to a million barrels of oil equivalent less of production per day by 2030 compared with current forecasts, and 51,000 fewer jobs by 2030 than under existing government policies.
Ottawa has said all along that the oil and gas emission cap will be designed to limit emissions, not oil and gas production.
But on Monday, CAPP President Lisa Baiton said the new report is proof that a federally mandated emissions cap “should not proceed.”
“Declines in production forced on the industry by a stringent emissions cap will result in significant job losses for Canadians, severe impacts on the economy and our GDP, and have the potential to compromise Canada’s energy security and prosperity,” Baiton said.
The government has said the design of the emissions cap will take into account other regulations, such as Canada’s commitment to reduce oil and gas methane emissions by at least 75% by 2030, as well as complementary climate policies by federal and provincial governments.
The hypothetical scenarios in the CAPP-commissioned report do not use the same targets the federal government actually proposes in its draft emissions framework, released last December, CP says.
Under the proposed framework, the sector would have to cut greenhouse gas emissions by 35 to 38% from 2019 levels by 2030. The industry would also have the option of buying (deeply controversial) carbon offset credits or contributing to a decarbonization fund that would lower its required emissions cut to just 20 to 23%.
“CAPP has commissioned an analysis of a non-existent scenario. Everything in it flows from false assumptions that make it so deeply flawed, it amounts to disinformation,” said Oliver Anderson, spokesman for Environment and Climate Minister Steven Guilbeault, told CP an email.
CAPP said its sponsored study factors in the projected impact of the draft methane regulations, which would require at least a 75% reduction of oil and gas methane emissions below 2012 levels by 2030, along with other policies have not been finalized and remain uncertain.
Environmental groups were quick to criticize the report’s methodology.
CAPP “has once again resorted to using disinformation and stoking fear to avoid taking any responsibility for its climate pollution,” Aly Hyder Ali, oil and gas program manager at Environmental Defence Canada, said in a release. “CAPP continues to ignore the overwhelming economic impacts of the oil and gas industry’s greenhouse gas (GHG) emissions that are driving climate change,” even though the proposed emissions cap only “enshrines into regulation what oil and gas companies have already promised they will do, nothing more.”
The Pembina Institute said the CAPP report includes only conventional oil and gas drillers and leaves out oilsands production, which accounts for the vast majority of the industry’s emissions profile.
Pembina added that when it comes to methane, which is where the bulk of conventional drillers’ emissions come from, significant reductions can be made using already existing, cost-effective technologies.
“Pembina Institute research demonstrates that the proposed 2030 emissions cap can be feasibly met by the oil and gas industry, almost entirely through a combination of methane reductions (which would mostly come from the conventional sector) and the Pathways Alliance’s 2030 emissions reduction plan (for the oilsands),” the Calgary-based think tank said in a release.
“Unclear assumptions regarding future demand for oil and gas, as well as feasibility of methane reductions, create misleading conclusions about cap’s impact,” Pembina headlined in its response to the CAPP release.
“Today’s report is another example of economic modelling that assumes the industry takes very little meaningful action in its current operations to reduce emissions and therefore has no choice but to limit production, which is misleading for Canadians,” said MC Bouchard, Pembina’s director of oil and gas. “Oil and gas production now accounts for almost a third of Canada’s overall emissions, again underscoring the need for further regulation of emissions from this sector.”
CAPP’s “deeply flawed methodology” disregards “the many benefits of regulating and reducing emissions and the fact that surging renewables are eroding global demand for oil and gas,” the David Suzuki Foundation added. “The most recent national greenhouse gas inventory shows oil and gas pollution has increased and remains Canada’s largest source of emissions. There are currently no limits on how much the oil and gas sector can pollute.”
While the oil and gas sector is Canada’s heaviest-emitting industry, the bulk of those emissions come from the oilsands sector—where rising production is driving up total emissions, CP says. Emissions from the conventional sector, on which the CAPP reports focuses, have been declining since 2014.
Alberta Premier Danielle Smith also waded in Monday, issuing a joint statement with the province’s environment and energy ministers in which she referred to the proposed cap as a “reckless gamble that will devastate Canadian families and do nothing to reduce global emissions.”
The main body of this report was first published by The Canadian Press on May 27, 2024.
