Oil and gas producers in Canada will be required to cut greenhouse gas emissions by about one-third under new regulations published Monday—but not for another six to eight years.
The government is also going to establish a cap-and-trade system that Environment Minister Steven Guilbeault said will reward lower-emitting producers and incentivize higher-polluting ones to do more, The Canadian Press reports.
But the regulations, which are still only in draft form and about two years behind schedule, won’t take effect until 2030, prompting climate groups to warn that the emissions cap will be “meaningless” without an accelerated timeline.
“Leaving compliance until 2030 is like waiting until the second period of a hockey game to start keeping score,” Caroline Brouillette, executive director of Climate Action Network Canada (CAN-Rac), said in a release.
With “clear and predictable” timelines for industry, the CAN-Rac release says the new regulations “will help spur decarbonization projects, thereby supporting innovation and employment in the sector.” But “the first compliance period does not begin until 2030—meaning that there is no guarantee the cap will drive emissions reductions during this critical decade, or that Canada will be able to achieve its 2030 climate target,” which calls for a 40 to 45% emissions reduction from 2005 levels.
Nor is there any guarantee that the cap will survive the next federal election, with the Liberal government running far behind the opposition Conservative in opinion polls.
“Despite net-zero commitments, emissions from the oil and gas sector continue to rise,” Phillip Meintzer, conservation specialist at the Alberta Wilderness Association, said in the CAN-Rac release. “The evidence shows that the oil and gas industry refuses to cut its emissions willingly and this is why a pollution cap is necessary to hold industry accountable to its promises.”
“Oil and gas pollution isn’t just fueling climate change—it’s also raising Canadians’ cost of living,” said Aly Hyder Ali, oil and gas program manager at Environmental Defence Canada. “While companies post record profits, Canadians are paying more for essentials like groceries, insurance, and health care as a result of both the climate crisis as well as the affordability crisis driven in part by fossil fuel profits.”
“The fossil fuel industry is largely responsible for driving the climate crisis and we can’t expect to solve it if the sector’s emissions remain unchecked,” said Thomas Green, climate policy adviser at the David Suzuki Foundation. “The world is turning to renewable energy sources and Canada should, too. These regulations will help create a healthier, safer environment for current and future generations and finally ensure that all sectors do their share of the climate effort.”
[Energy Mix Productions is a member of Climate Action Network Canada.]
Industry Must ‘Do Its Share’: Guilbeault
The federal announcement was met with predictable dismay from the industry and its allies in the Alberta government.
Alberta Premier Danielle Smith called the measures “unrealistic targets” and said her government would act quickly to challenge the regulations in court. She accused Guilbeault of having a vendetta against Alberta.
For the Liberals, the regulations fulfill a 2021 election promise to force the energy sector to pull its weight in the fight against climate change.
“We’re asking the oil and gas sector to invest their record profits into pollution-cutting projects. Projects that can create and keep good jobs,” Guilbeault told a news conference in Ottawa.
He said the oil and gas industry is a leading source of emissions, but it has done less than most other sectors to reduce them.
“I think most Canadians—even those that aren’t my biggest fans—would agree that it’s not OK for a sector to not be doing its share, and that’s mostly what this regulation is about,” Guilbeault told CP in an interview ahead of the announcement.
Upstream oil and gas operations, including production and refining, contributed about 31% of Canada’s total emissions in 2022.
The regulations would force upstream oil and gas operations to reduce emissions to 35% less than they were in 2019, by sometime between 2030 and 2032.
CP says emissions from the sector as a whole fell 7% between 2019 and 2022—the most recent year for which statistics are available—with similar levels of production.
“But there is one part of the oil and gas industry that warrants particular attention,” Janetta McKenzie, oil and gas program manager at the Calgary-based Pembina Institute, said in a release. “Annual emissions from the oil sands—where six companies account for almost all production—have grown by over 50 million tonnes, an increase of 142%, since 2005.”
While “other economic sectors, and everyday Canadians, have taken steps to reduce their emissions in recent years, emissions from oil and gas production have continued to grow,” McKenzie added.
Focus on Methane, Carbon Capture
The cap does not dictate what companies must do to meet the target, CP writes, but Guilbeault said the government’s modelling suggests about half the cuts will come from reducing methane emissions. Those cuts are already happening as oil producers install equipment to prevent the leaks of methane that have been a major source of emissions.
The rest will be divided between various technologies, including carbon capture and storage. Ottawa is expected to spend about C$12.5 billion on a tax credit to encourage and assist companies to invest in systems meant to trap carbon dioxide and store it underground. But since that measure was introduced, major oil sands producers have insisted the lavish subsidy is insufficient to get them to invest their own funds in the technology.
Opponents have argued against further taxpayer support for a strategy that will likely drive up future emissions, after 10 of the world’s 13 “flagship” carbon capture projects failed to meet their targets and the industry itself admitted that CCS won’t be ready to deliver at scale by 2035, much less 2030.
Under the proposed cap-and-trade system, each company will be given an emissions allowance equating to one unit per tonne of carbon pollution, CP explains.
Companies that pollute less will be able to sell their leftover allowance units for profit, while companies that don’t reduce their emissions enough will have to buy allowance units from other companies to stay in compliance.
The idea is to get companies to invest in carbon reduction technologies in order to curb their emissions without having to reduce their production.
Industry stakeholders warned Monday that the measure would harm the sector. The Canadian Association of Petroleum Producers said the proposed regulations would deter investment and have a negative impact on jobs in the sector.
“Our members believe the draft emissions cap regulations, if implemented, are likely to deter investment into Canadian oil and natural gas projects,” said CAPP President Lisa Baiton.
“The result would be lower production, lower exports, fewer jobs, lower GDP, and less revenues to governments to fund critical infrastructure and social programs on which Canadians rely.”
But the Pembina Institute’s McKenzie said that would depend on the industry’s willingness to invest in emission reduction efforts.
“Although the Government of Alberta and industry groups have in the last few weeks repeatedly cited third-party studies modelling the hypothetical impacts of the emissions cap on the province’s economy,” she said, “these studies hinge on the assumption that the industry chooses to take very little meaningful action to reduce emissions, and therefore has no choice but to limit production in the future when the cap actually comes into effect.”
But that’s “misleading for Canadians,” McKenzie added, when the industry “has options available to it to futureproof its operations and continue to make an important contribution to Canada’s future economy”—as long as it invests in “long-promised corporate emissions reduction projects without delay.”
Natural Resources Minister Jonathan Wilkinson told CP the government’s modelling shows the plan would hit federal emission targets and be viable for the sector.
“When we brought in the initial methane regulations, the industry also said, ‘This isn’t very good’, and what it did was it actually created a lot of jobs in technology development and deployment,” Wilkinson said.
“Alberta now exports that technology to other countries around the world that are following in Alberta’s footsteps.”
Oil and Gas Production Still Rises
Guilbeault said federal modelling shows oil and gas production rising 16% by 2032, compared with 2019, even with the regulations. He said the government landed on the cap’s amount based on extensive discussions about what was possible to regulate without forcing down production.
He added reducing emissions from Canada’s oilpatch is the only way Canadian oil will remain competitive in a world that is increasingly looking for the greenest option available.
“In a carbon-constrained world, people who will still be demanding oil will be demanding low-emitting oil,” he said. “And if our companies and our oil and gas sector isn’t making the investments necessary to do that, they won’t be able to compete in this world.”
Conservative Leader Pierre Poilievre has vowed to scrap the emissions cap regulations. In a statement Monday, the Conservative Party said the measures would “raise the cost of energy and send billions of dollars to dictators overseas.”
Senior government staff, however, emphasized oil prices are subject to global markets and insisted the measures will increase demand for Canadian oil as markets seek cleaner products.
The regulations won’t be finalized for months and are scheduled to come into force in 2026—after the next federal election.
The main body of this report were first published by The Canadian Press on Nov. 4, 2024.
