The oil and gas sector is Canada’s largest source of greenhouse gas (GHG) pollution, and emissions from part of the sector continue to grow. As a critical part of the Canadian economy supporting 400,000 jobs, the oil and gas sector is well positioned to reinvest record profits into projects that drive cleaner production that will help create and sustain good jobs for generations.
In light of this, the Government of Canada introduced draft regulations to put a clear limit on greenhouse gas pollution from oil and gas production. The proposed regulations work by setting a cap on GHG pollution within the sector, equivalent to 35 per cent below 2019 levels. They are meant to create a cap-and-trade system designed to recognize better-performing companies and incentivize those that are higher polluting to invest in making their production processes cleaner.
The proposed regulations put a limit on pollution, not production, and have been informed by engagement with industry, Indigenous groups, provinces and territories, and other stakeholders. The proposed regulations are designed around what is technically achievable within the sector, while allowing continued production growth. Many oil and gas producers share the federal commitment to a strong, low-carbon economy, and some have already committed to significant methane emissions reductions and the implementation of carbon capture technology to reduce GHGs.
Canada is the world’s fourth-largest producer of oil and the fifth-largest producer of gas. As demand for oil and gas peaks in the coming decade and begins to decline, the fuels extracted with the least amount of pollution will be in highest demand. The oil and gas GHG pollution cap will help the sector remain competitive as the global economy continues to decarbonize and allow Canada to quickly and effectively respond to shifting global demand.
The Government will continue to consult to inform the final regulations, which will be published in 2025.
“Every sector of the economy in Canada should be doing its fair share when it comes to limiting our country’s greenhouse gas pollution, and that includes the oil and gas sector. We are asking oil and gas companies who have made record profits in recent years to reinvest some of that money into technology that will reduce pollution in the oil and gas sector and create jobs for Canadian workers and businesses,” said Steven Guilbeault, federal Minister of Environment and Climate Change. “The science is clear—greenhouse gas pollution must be reduced significantly and urgently to avoid the most severe impacts of climate change.”
Some provincial ministers are on board, while others are not.
“Newfoundlanders and Labradorians are proud of our energy sector and our workers, and we agree that we need to cut pollution to stay competitive in the global economy. The offshore industry in Newfoundland and Labrador has found innovative ways of producing the energy the world needs while creating less pollution. That is a win-win,” said Gudie Hutchings, Newfoundland and Labrador’s Minister of Rural Economic Development and Minister responsible for the Atlantic Canada Opportunities Agency.
Meanwhile, on the flip side, Alberta Premier Danielle Smith expressed in a news conference on Monday that she is opposed to the regulations: “I’m pissed. I’m absolutely angry because we’ve been working with these guys for two years, because we have a plan that would reduce emissions responsibly by 2050.”
Smith, along with Alberta’s Minister of Environment and Protected Areas Rebecca Schulz and Minister of Energy and Minerals Brian Jean issued the following statement:
“Make no mistake, this cap violates Canada’s constitution. Section 92A clearly gives provinces exclusive jurisdiction over non-renewable natural resource development yet this cap will require a one million barrel a day production cut by 2030.”
Industry stats and reactions
According to Statistics Canada’s latest figures, operating profits in the oil and gas sector increased tenfold after the pandemic, from $6.6 billion in 2019 to $66.6 billion in 2022. Profits have remained strong with consecutive record years, and capital expenditures have been targeting new production rather than decarbonization. The draft regulation will encourage the sector to redirect these record profits into decarbonization.
The Canadian Climate Institute estimates that by 2025 Canada will experience annual losses in economic growth of $25 billion as a result of climate change, underlining the need to take urgent action for the sake of our economy and the environment.
The Government of Canada has supported carbon capture projects such as Strathcona Resources, an oil sands company that has a $2 billion project with agreements to store up to two million tonnes of carbon dioxide per year. The feds also recently supported Entropy, an Alberta-based company, to scale up its carbon capture and sequestration tech at a natural gas facility, which will reduce emissions by 2.8 million tonnes over 15 years and support more than 1,200 jobs.
Early estimates from the Canadian Climate Institute show that Canada’s emissions have started to decline in 2023, the first year since the pandemic when the economy was back in full operation.
Environment and Climate Change Canada analysis shows that, with the oil and gas GHG pollution cap, oil and gas production is projected to grow by 16 percent by 2030–2032 from 2019 levels, provided the sector implements technically achievable decarbonization measures.
The latest analysis from the International Energy Agency shows that global demand for fossil fuels, including oil, will peak by 2030 without any more policy action to reduce emissions. With further policy action, oil demand would peak even sooner.
Climate Action Network Canada welcomes the draft regulations.
“A year after the world agreed at COP28 to finally tackle the harms of the fossil fuel industry, Canada is delivering draft regulations to reduce oil and gas pollution at home,” said Caroline Brouillette, executive director of Climate Action Network Canada. “It is a long-awaited but historic first, and comes after years of advocacy from civil society to hold Canada’s biggest polluters accountable. The cap on pollution is good news for the environment, for people and for jobs, and must be implemented as soon as possible.
However, Broillette also added that leaving compliance until 2030 is like waiting until the second period of a hockey game to start keeping score. “Let’s not forget the reason why it is so delayed and far from oil and gas’ fair share of the national climate effort: billionaire companies and their political lackeys have spent millions in lobbying and disinformation campaigns. Despite rising oil and gas pollution being directly responsible for disasters, deaths, the loss of homes, farms and cherished areas, these massive corporations have continuously sought to avoid any accountability whatsoever.”
Keith Stewart, senior energy strategist at Greenpeace Canada also welcomes the draft regulations. States Stewart: “Politicians who oppose this measure should either say precisely what they would do that could credibly achieve equivalent reductions, or admit they are protecting polluters’ profits over people’s health and safety.”
However, the Canadian Association of Petroleum Producers (CAPP) released the following statement from President & CEO Lisa Baiton:
“The draft emissions cap regulations will be an unnecessarily complex layer on top of an already overly complex web of energy and climate regulations across the country. The introduction of this draft regulation comes with the high probability of negative impacts on the Canadian economy and no guarantee of emissions reductions.”
The Government of Canada will continue to consult to inform the final regulations, which it plans to publish next year. Written comments in response to the proposed regulations can be submitted during the formal consultation period from November 9, 2024, to January 8, 2025. To provide feedback, click here.
Featured image credit: Steven Guilbeault/X
