Environment and Climate Change Minister Steven Guilbeault stands up during question period in the House of Commons on Parliament Hill in Ottawa on Tuesday, June 7, 2022. THE CANADIAN PRESS/ Patrick Doyle The federal government is proposing to use an industry-specific cap-and-trade system, or a modified carbon pricing system, to cap emissions from the oil and gas sector and reduce them by nearly 40 percent by end of this decade. The two options are included in a discussion paper to be published on Monday by Environment Minister Stephen Guilbeau. It’s the first look Canadians are getting at how the Liberals expect to implement the oil and gas emissions cap they promised in last year’s election. The oil and gas industry accounts for more than a quarter of Canada’s total emissions — 179 million tonnes in 2020, or about what an average car would emit by driving the equator more than 17 million times. “We can’t just ignore the fact that the oil and gas sector is Canada’s largest polluter,” Guilbeau said in April during a House of Commons committee meeting studying the proposed oil emissions cap. and natural gas. What Guilbeault didn’t say then, and what the discussion paper doesn’t say now, is what the specific emissions cap would be. It is supposed to start at “current levels” – which based on the data available when that pledge was made would mean 2019 levels, or 203.5 million tonnes. Historical documents and government sources suggest the 2030 cap will be very close to what was proposed in the new national emissions reduction plan in March — 110 million tonnes. This is down 46 percent from 2019 levels and 32 percent from 2005. Canada aims to reduce emissions across all sectors by 40 to 45 percent from 2005 levels by 2030. The oil and gas sector hasn’t seen emissions this low since 1992. Over the past three decades, as natural gas, conventional oil and oil sands production soared, emissions from the sector rose 83 percent. Total emissions in Canada are about 23 percent higher over the same time period. Input on cap management options will be accepted until Sept. 21, with Guilbeault aiming to unveil the final plan in early 2023. The first proposed option includes a new cap-and-trade system for oil and gas individually. The total permitted emissions will be divided into individual allowances which will be allocated to specific companies mainly through an auction. Companies that don’t buy enough allowances to cover their emissions will have to buy allowance credits from other oil and gas companies that bought more than they need. Funds raised from the auction will be recycled into programs that help the industry reduce emissions. The second option would modify the industrial carbon price already applied to the oil and gas sector, potentially increasing the price itself if necessary, but with the aim of ensuring that emissions from the oil and gas industry itself are reduced by limiting the trading of carbon credits in the sector. Companies can currently reduce the carbon price they pay by buying credits from others that produce less than their emissions limit. The amended plan would only allow them to buy credits from other oil and gas companies, not from other industries. Most of Canada’s oil and gas producers are already cutting emissions because of other regulations and a desire to become a cleaner, more competitive choice for global customers. This has been the Conservative Party’s position on industry for years – using cleaner Canadian fossil fuels to replace dirtier ones produced elsewhere. The industry has work to do, particularly on the oil side, where Canada’s heavier oils require more energy to get out of the ground than in places like Saudi Arabia. While oil emissions and emissions per barrel of oil, known as emissions intensity, are down about 30 percent since 1990, they are still higher than many global competitors. The Oil Sands Pathway Alliance, with six of the largest oil companies, aims to net emissions by 2050, primarily through carbon capture and storage projects that trap greenhouse gases before they enter the atmosphere and then store them back in the ground. . The alliance, whose member companies account for 95 percent of oil sands production, released a plan this spring aimed at cutting 22 million tons of emissions from 2019 levels by 2030. Company leaders have said they are not opposed to a cap, but insist it must be realistic and based on consultation with industry about what is feasible. Anything more than that would likely lead to production cuts and job losses, they argued. But the Alliance and the government remain far apart on some fundamental issues, such as determining where current emissions levels actually are. The most recent national inventory report says emissions from oil production and processing were 83 million tonnes in 2019, but the Alliance pegs the number at 68 million. A government official, speaking on the record because he was not authorized to speak publicly, said that if the emissions cap for the oil and gas sector is higher than the emissions reduction plan, it will force other industries to cut more than their share or Canada will not meet its 2030 targets.
