Canada’s Bold Balancing Act: Capping Oil & Gas Emissions at 38% to Tackle Climate Goals and Industry Concerns

"Canadian Government Implements New Regulation to Curb Greenhouse Gas Emissions in Oil and Gas Sector"

Canadian Government Sets New Rules to Limit Greenhouse Gas Emissions from Oil and Gas Companies

The Canadian government has introduced a new regulation aimed at curbing greenhouse gas (GHG) emissions from the country’s oil and gas sector. The rule, announced by federal ministers, aims to cap emissions between 35% to 38% of the levels seen in 2019 by the year 2030. According to Environment and Climate Change Canada (ECCC), this draft regulation will likely allow emissions totaling around 106 to 112 megatons of carbon dioxide equivalent (CO2e). The oil and gas sector is currently the largest emitter in Canada, and while emissions in other sectors are decreasing, the sector continues to pollute more.

This new regulation comes on the heels of Canada’s recent announcement of regulations seeking to reduce methane emissions from the oil and gas sector. The goal is to cut at least 75% of methane emissions over 2012 levels by 2030, which will be a crucial part of the overall emissions cap. Methane is responsible for about 30% of the oil and gas sector’s total GHG emissions.

The draft framework sets a limit on the amount of pollution the oil and gas industry can produce, while still keeping Canada competitive in the global market. However, it does not restrict how much the companies can produce. The regulation was developed after discussions with industry, Indigenous groups, provinces, territories, and other stakeholders. It also allows some flexibility, allowing the sector to emit up to about 20% to 23% below 2019 levels. This emissions cap is a significant step toward helping Canada reduce emissions and move toward its goal of achieving net-zero emissions by 2050.

In 2020, Canada’s greenhouse gas emissions reached 672 megatons of CO2e, with the oil and gas sector contributing 178 megatons, accounting for 26% of the total emissions. Transportation followed closely, accounting for 159 megatons or 25% of the emissions. The oil and gas sector emitted 201 million metric tons in 2019, making it responsible for 28% of Canada’s pollution in 2021, a 20% increase compared to 2005 levels.

Environment Minister Steven Guilbeault stressed the need for immediate action in order to achieve the collective goal of carbon neutrality by 2050. He stated, “We look forward to industry talks to get this draft framework right. This is a challenge of our time and also a great opportunity.” The federal government is also considering implementing a national cap-and-trade system to further limit GHG emissions. Proposed regulations will establish reporting and verification processes, with a gradual phase-in of the system planned from 2026 to 2030. Interested parties, including the industry and stakeholders, have until February 5, 2024, to submit comments and input regarding the draft. The finalized regulations are expected to be issued by early 2025.

Federal Natural Resources Minister Jonathan Wilkinson emphasized the importance of considering the competitiveness of oil and gas producers in Alberta, British Columbia, Saskatchewan, and Newfoundland and Labrador. However, specific details regarding the role of competitiveness in shaping the regulations were not elaborated upon during the webcast.

Opposition to the emissions cap has emerged, despite its aim to reduce harmful emissions from the most polluting sector. The Canadian Association of Energy Contractors opposes the move, expressing concerns about the potential impact on workers and small to medium-sized businesses. Alberta Premier Danielle Smith has criticized the federal government, calling the emissions cap an “intentional attack on Alberta’s economy.” She has even invoked an act allowing the province to override federal clean-electricity regulations in opposition. The Alberta government implemented a regulation in 2016 that places a cap of 100 million metric tons for the province’s oil sands producers. Currently, Alberta’s total GHG emissions stand at about 70 million metric tons.

The cap-and-trade system being considered will regulate direct GHG emissions, including those indirectly related to oil and gas production and carbon storage. This would cover various facilities such as offshore operations and liquefied natural gas (LNG) plants. Minister Guilbeault emphasized that companies making substantial profits should invest in Canadian jobs and communities. However, no new government funding was announced, despite Canada’s previous pledge of $9.1 billion in tax credits for carbon capture systems.

Canada’s proposed regulations to cap emissions in the oil and gas sector represent a significant step toward addressing climate change. The draft rule aims to reduce pollution without hindering production. Despite debates and concerns from industry leaders about potential economic impacts, the government is emphasizing the urgency of climate action and inviting feedback until early 2024.

Matt Lyons

Matt Lyons

Matt Lyons is the founder of Forestry & Carbon. Matt has over 25 years as a forestry consultant and is invoilved in numerous carbon credit offset projects.

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