The federal government proposes to use an industry-specific cap-and-trade system or a modified carbon pricing system to set a cap on emissions from the oil and gas sector and reduce them by almost 40% by the end of this decade.
Both options are in a discussion paper that Environment Minister Steven Guilbeault will publish on Monday. It is the first vision Canadians have of how the Liberals expect to implement the promised oil and gas emission limit in last year’s election.
The oil and gas industry accounts for more than a quarter of Canada’s total emissions: 179 million tonnes by 2020, or roughly what an average car would emit around the equator more than 17 million times.
“We just can’t ignore the fact that the oil and gas sector is Canada’s largest emitter,” Guilbeault said in April during a House of Commons committee meeting examining the proposed oil cap and gas.
What Guilbeault did not say then, and what the discussion paper does not say now, is what the specific emission limit will be. It is supposed to start at “current levels,” which if you have the data available when that promise was made, would mean 2019 levels, or 203.5 million tons.
Fund documents and government sources suggest that the limit for 2030 will be very close to that proposed in the new National Emission Reduction Plan in March: 110 million tonnes. This represents a 46% cut from 2019 levels and 32% from 2005.
Canada aims to reduce emissions from all sectors by 40 to 45% from 2005 levels by 2030.
The oil and gas sector has not had such low emissions since 1992. In the last three decades, as production of gas, conventional oil and oil sands skyrocketed, emissions from the sector have increased by 83 percent. . Global emissions in Canada are approximately 23% higher over the same period of time.
The minister intends to have a definitive plan for 2023
Contributions on options for managing the limit will be accepted until September 30, with Guilbeault aiming to present the final plan in early 2023.
The first proposed option involves a new cap-and-trade system for the oil and gas sector in isolation. The total emissions allowed would be divided into individual rights that will be allocated to specific companies primarily through an auction.
Companies that do not buy enough rights to cover their emissions will have to buy credits from other oil and gas companies that have bought more than they need.
The funds raised from the auction would be recycled into programs that help the sector reduce emissions.
The second option would change the price of industrial carbon already applied to the oil and gas sector, possibly increasing the price itself if necessary, but with the aim of ensuring that the oil and gas industry’s own emissions go down limiting the trade in carbon credits. to the sector.
Currently, companies can reduce the price of carbon they pay by buying credits from others that produce less than their emission limit. The modified plan would only allow them to buy loans from other oil and gas companies, not from other industries.
Most oil and gas producers in Canada are already reducing emissions due to other regulations and the desire to become a cleaner and more competitive option for global customers.
This has been the Conservative Party’s position in the industry for years: using cleaner Canadian fossil fuels to displace the dirtiest produced elsewhere.
The industry has work to do, especially when it comes to oil, where Canada’s heaviest oils require more energy to extract them from the soil than in places like Saudi Arabia. Although emissions of oil sands per barrel of oil, known as emission intensity, have dropped by about 30% since 1990, they are still higher than that of many global competitors.
The Oil Sands Pathway Alliance, with six of the largest oil sands companies on board, aims to achieve zero net emissions by 2050, primarily through carbon capture and storage projects that trap greenhouse gases. greenhouse effect before they go out into the atmosphere and then store them back underground. .
The alliance, whose member companies account for 95 percent of oil sands production, released a plan this spring with the goal of reducing 22 million tonnes of emissions from 2019 levels by 2030.
Company leaders have said they do not oppose a limit, but insist it must be realistic and based on consultations with industry on what is feasible. Anything more than that would likely result in production cuts and job losses, they have argued.
But the Alliance and the government remain aloof on some key issues, such as determining where current emission levels really lie. The most recent national inventory report says oil sands production and processing emissions were 83 million tonnes in 2019, but the Alliance sets the figure at 68 million.
A government official, speaking on the background because he was not allowed to speak publicly, said that if the oil and gas sector’s emission limit exceeds the Emission Reduction Plan, it will force other industries to reduce more than the its share or Canada. it will not meet its 2030 targets.