Canada introduces cap on oil & gas emissions; loopholes could create another failed plan

The federal government announced a framework to cap emissions from the oil and gas industry at the end of the year, a long awaited victory for environmental organizations across the country. But while the promised regulations are a positive step to regulate the country’s largest polluting industry, advocates are warning that several loopholes could hinder progress on reducing emissions.

The proposed regulatory framework, which was introduced in the middle of COP28 in Dubai, includes a cap for 2030 industry emissions at 30 to 38 percent below 2019 levels. The target is significantly weaker than Canada’s overarching emission reductions target of 40 percent below 2005 levels by the same year. According to the Canadian Climate Institute, between 2005 and 2019, emissions from the oil and gas sector increased 20 percent. Further modelling showed that without major policy shifts, with a business as usual scenario, emissions from the sector would put oil and gas emissions six percent above 2021 levels and 15 percent above 2005 levels, moving in the wrong direction at a time when wide ranging atmospheric change will dramatically affect the way we live if drastic emissions reductions are not achieved.

“As Canadians, we want Canada to meet its climate targets. And we want to be part of that contributing to driving emissions down and staying within 1.5 degrees and avoiding dangerous runaway climate change,” Tom Green, senior climate policy advisor at the David Suzuki Foundation, told The Pointer. “We can't do that if the oil and gas sector is making these obscene profits and allowing its emissions to go up.”

The framework was announced in a joint press conference with Minister of Environment and Climate Change Steven Guilbeault, Minister of Natural Resources Johnathan Wilkinson, and Employment Minister Randy Boissonnault, an Alberta Liberal MP. The representatives emphasized the completion of the draft framework was made possible by extensive consultation with industry, Indigenous groups, provinces and territories along with other stakeholders. 

“A promise we made to the Canadian people in the 2021 election was to put a cap on the amount of pollution from Canada's oil and gas sector and introduce it at a pace and scale needed to reach carbon neutrality in Canada by 2050,” Guilbeault said in his opening remarks. “Oil and gas is the largest emitting sector in Canada. And unlike almost every other sector of our economy, pollution from the oil and gas sector is still going up. We owe it to Canadians and to the rest of the world to address these emissions, as we owe it to our workers and businesses to ensure that Canada's well earned reputation for energy innovation remains our strong suit for the 21st century.”

Oil production is the biggest hindrance to meeting Canada’s emissions reduction targets.

(Graphic from Environmental Defence)

Canada is the fourth largest producer of oil in the world and the sixth largest producer of natural gas. In an era characterized by extreme weather events and unpredictable temperatures, with all international organizations declaring the current state of the climate crisis a “code red” for humanity, future pollution from the production of oil and gas has to be minimized. In Canada, it’s growing.

Oil and gas industry leaders have made wild claims that Canada’s oil is clean. A study published in the prestigious journal Science concluded that only three countries, out of 50, produced oil with a higher carbon footprint per barrel than Canada, where much of production comes from the Alberta Tar Sands, extracting oil from sand, a process that uses 160 pounds of carbon per barrel produced, dirtier than any other oil in the world. 

The new cap asks oil and gas producers to eliminate between 40 and 46 million tonnes of greenhouse gas annually by 2030. That is just one fifth of what is needed to reach Canada’s emissions targets. For context, the level of emissions reductions is roughly equivalent to the emissions released from the seven biggest oil facilities combined. 

The oil and gas sector is responsible for 28 percent of the nation’s total emissions.

“This outsized contribution is blocking progress,” Green said. 

Following the announcement, Pathways Alliance, a consortium of Canada’s biggest oil sands companies, released a statement that it would review the framework but felt its implementation was unnecessary.

“Imposing an emissions cap, with additional regulatory complexity, does nothing to advance the certainty necessary for the planned multi-billion-dollar decarbonization projects to proceed,” Kendall Dillings, President of Pathways Alliance, said. “While we recognize that the federal government adjusted some of the aggressive oil sands targets suggested in the Emissions Reduction Plan after analysis showed they were not technically achievable, we still need a greater understanding of how the cap integrates with other policies to support our emission reduction investments.” 

Pathways has previously stated it estimates emissions could be cut by 22 million tonnes by 2030, as a result of carbon capture and storage technologies, half of what will be mandated under the framework. This technology has not been proven to be an effective way to reduce carbon in the atmosphere at meaningful levels, but that has not stopped the industry from making claims about its effectiveness.

“For Canada's oil and gas sector, climate change is not just an environmental issue, it is a competitiveness issue. As the world moves to reduce emissions generated by the production and the combustion of fossil fuels, oil and gas that is extracted with the lowest production emissions are expected to be in highest demand,” Wilkinson said. “In recent years, Canada's oil and gas sector has made progress with respect to reducing emission intensity of production. Many leading firms in the sector have committed themselves to net zero by 2050, as have the provinces of Alberta, Newfoundland, Labrador, and British Columbia. However, ensuring long term competitiveness of Canada's sector requires that it achieves significant and sustained reductions in absolute emissions on a pathway to net zero production by 2050.”

Alberta Conservative Premier Danielle Smith has repeatedly stated that emissions reductions in the oil and gas industry cannot impact production.

(Government of Alberta/X)

Despite Alberta’s own emissions reduction targets remaining in line with federal targets, Alberta Premier Danielle Smith had strong words for the Environment Minister who she called an “eco-extremist”, and hinted the province may be pursuing a legal challenge. She said the cap is a “de facto” cut to production, a statement all three Ministers denied repeatedly. 

“I don't know how I can be more clear about this,” Boissonnault said. “The Premier's wrong. This is about a cap on pollution and emissions, not a cap on production. Production levels are predicted to go up.”

Wilkinson agreed that production right now will remain steady, but following the trajectory of the rapid transition to renewable energy and hydrogen cells, he said by the end of the decade oil and gas production will decrease. COP 28 ended last week with a historic deal to transition away from fossil fuels by promoting investments in clean energy sources. While it is the first deal of its kind, the agreement established no framework for how this ambitious goal will be achieved.

Wilkinson stressed the cap itself will be achieved through the 22 million tonne reduction from CCS that the sector has said is possible, added on top of the recently released methane strategy. The proposed methane regulations are designed to help Canada reach the target of 75 percent reduction in methane emissions from the oil and gas sector below 2012 levels. Many industry players have already said this can be met. 

Despite opposition from the Alberta government on the cap, and from premiers in Ontario, Saskatchewan and Nova Scotia on other policies including carbon pricing, two recent polls show that approximately 70 percent of Canadians support a cap on emissions from the oil and gas sector; and this includes a majority of Albertans (57 percent from the Leger poll and 62 percent from the Research Co poll). 

“Canadians are being asked to do our part to limit emissions, and many of us are happy to do so, but it’s only fair that the oil and gas companies primarily responsible for our poor climate track record also do their part, especially given the outrageous profits they have made in these otherwise hard times,” Conor Curtis, head of communications at the Sierra Club Canada, said in a press release. 

The statement from the Sierra Club stressed Canada needs to stop relying on direction from fossil fuel producers, stating that “over reliance” has caused Canadian policy to be heavily influenced by the very industry at the heart of the problem. 

“These right wing think tanks push back on the emissions cap on behalf of the oil and gas industry. And at great peril for the climate,” Green added. “It’s alarming just how much influence the oil and gas industry still has, and how little influence the sectors that are really where the growth opportunities in the future are.”

The influence of the fossil fuel sector was a noted issue at the recent COP summit, where journalists and environmental groups documented the overwhelming presence of oil and gas industry lobbyists trying to co-opt what was supposed to be a science-based conference to help reduce pollution (industry representatives claimed oil and gas production has no significant impact on climate change, a notion that was widely laughed at). 

The current Canadian proposal following COP28 is simply a framework; the targets are yet to be legislated. In the process of creating a first draft and then final regulations, the government will undertake further consultation with impacted parties.

“Industry will try to push as hard as it can to water it down because that's how they do it. And we will be urging our supporters, people living across Canada, to advocate for getting rid of some of the loopholes that have been included in this framework,” Green said. “And starting to make sure that the resulting regulations actually drive companies to take those huge profits instead of shareholders giving them out as corporate bonuses. To actually start cleaning up their act and stop treating the atmosphere as a sewer.”

One of the loopholes identified by DSF and other environmental organizations is the ability of industry players to pay their way into a larger emissions allowance. Paying into a fund does nothing to reduce harmful pollution.

“The industry pays into a technology fund. But that means it still gets to emit,” he said, noting this is proof industry lobbying has paid off. “So it means that that 10 times or 1000 times or a million times that they exceeded it and paid into that fund, [those emissions] still go into the atmosphere where it's going to contribute to extreme weather and other climate havoc.”

While the details of the cap and the price for exceeding limits remain unclear, Minister Wilkinson said the decision to choose a cap rather than stricter carbon pricing is because a hard limit provides more certainty about the reductions that will be achieved. Implementing carbon pricing on one of the richest industries in the world amounts to a drop in a bucket. The Sierra Club of Canada proposes direct enforcement of targets as the best measure.

The government predicts that final regulations will be implemented in 2026. After a year characterized by an unprecedented wildfire season, extreme heat and abysmal air quality, environmental organizations warn that we cannot wait two years for the policy to take effect. 

“It doesn't make sense to take that long. This has been under discussion for a long time. Industries had the chance to weigh in, the provinces had the chance to weigh in. So that timeline accelerated given the climate,” Green said.

Two years is also the best case scenario. A series of audits undertaken by Environment Commissioner Jerry DeMarco, emphasized how Canada’s environmental policies are often much slower to come into force than the initial timelines suggest. For example, the Clean Energy Regulations (CER) were intended to cement a new policy preventing new gas plants from being built without carbon capture technologies after 2023. However, the accompanying regulations are still only in draft form. Similarly, the Clean Fuel Regulations were proposed in 2016 with final regulations to be implemented in 2019, but the regulations faced a three-year delay and were finally published in 2022 with partial regulations coming into effect this past summer.

Provinces like Alberta and Ontario which keep pushing production of oil and gas respectively, hurt the ability to meet federal emissions reduction targets.

(Alexis Wright/The Pointer)

Canada has yet to achieve a single climate target it has set, missing each one of the ten climate plans it has signed onto since 1990. The failure is evident in the nation’s embarrassingly low ranking on the Climate Change Performance Index, ranking 62nd out of the 67 countries the organization collects data for. The Climate Action Tracker, an independently scientific project monitoring climate progress since talks in Glasgow in 2021, similarly grades Canada’s climate policy as “highly insufficient”.

The Tracker indicates, based on current projections, Canada’s emissions in 2030 will be 602 to 656 megatonnes of carbon dioxide equivalent, an 11 to 19 percent reduction below 2005 levels, far from the country’s reduction target.

The audits by DeMarco revealed the same; Canada will badly miss its 2030 target of a 40 to 45 percent reduction in emissions at the current pace, with oil and gas industry leaders, and some premiers continuing to challenge policies. Environment and Climate Change Canada previously estimated the measures in the Liberal’s 2030 Emissions Reduction Plan were not on par to reach the target of a 40 percent reduction of emissions below 2005 levels by 2030. It projected the actions set out in the plan would reduce Canada’s carbon dioxide equivalent emissions to 470 megatonnes in 2030; 27 megatonnes higher than what is needed to meet the target. In 2022, the estimates were updated to project an even greater shortfall, predicting Canada would only succeed in reducing its emissions to 491 megatonnes by 2030. This gap, DeMarco made clear, means Canada is unlikely to uphold its commitment under the Paris Agreement to keep global warming to 1.5 degrees from pre-industrial levels.

A new progress report of the Emissions Reductions Plan published two weeks ago indicates the opposite. It suggests that if all policies are implemented, Canada will exceed its 2026 interim target of a 20 percent reduction in emissions below 2005 levels and be well on its way to achieving its 2030 target. But DeMarco emphasizes that not all strategies outlined in the plan are being implemented. The plan has 80 actions directed at reducing emissions but the lack of transparency and absence of deadlines and milestones make the tracking of progress difficult. The government’s plan does not even include a target or expected emission reductions for 76 (95 percent) of the measures. 

Green said on top of Ottawa’s failures, provinces and territories are creating their own barriers to climate action.

“We could be on track, if all the provinces were doing their share of the heavy lifting. And instead, what do we have? We have premiers in Atlantic Canada trying to sabotage one of the most important climate policies, carbon pricing. We have Alberta, Saskatchewan and Ontario threatening the federal government with court action every time they come up with a new climate policy.”

“So, yes, the federal government should be doing more, but right now, I'd say, Canadians need to understand how much the provinces are blocking progress.”

Email: [email protected]

Twitter: @rachelnadia_

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