OTTAWA-
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 the end of the year. this decade.
The two options are contained in a discussion paper that Environment Minister Steven Guilbeault will publish on Monday. It’s the first glimpse Canadians have of how the Liberals hope to implement the cap on oil and gas emissions promised in last year’s election.
The oil and gas industry accounts for more than a quarter of Canada’s total emissions: 179 million tons in 2020, or about what an average car would emit if it circled 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 meeting of the House of Commons committee studying the proposed emissions limit for oil and gas. the gas.
What Guilbeault didn’t say then, and what the discussion paper doesn’t say now, is what the specific emissions limit will be. It’s supposed to start at “current levels,” which, based on the data available when that promise was made, would mean 2019 levels, or 203.5 million tonnes.
Background documents and government sources suggest that the cap for 2030 will be very close to the one proposed in the new National Emissions Reduction Plan in March: 110 million tons. That’s a 46 percent cut from 2019 levels and 32 percent from 2005.
Canada aims to reduce emissions in all sectors by 40 to 45 percent from 2005 levels by 2030.
The oil and gas sector hasn’t had such low emissions since 1992. Over the past three decades, as gas, conventional oil and tar sands production soared, emissions from the sector have increased 83 percent. Total emissions in Canada are about 23 percent higher during the same time period.
Input on options for managing the cap will be accepted until September 21, and Guilbeault aims to reveal the final plan in early 2023.
The first proposed option involves a new cap-and-trade system in the oil and gas sector in isolation. The total emissions allowed would be divided into individual rights to be assigned 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 would be recycled into programs that help the sector reduce emissions.
The second option would modify the industrial carbon price already applied to the oil and gas sector, possibly raising the price itself if necessary, but with the aim of ensuring that emissions from the oil and gas industry itself go down by limiting carbon credit trading. to the sector
Currently, companies can reduce the carbon price they pay by buying credits from others that produce less than their emissions limit. The modified plan would allow them to only buy credits from other oil and gas companies, not from other industries.
Most of Canada’s oil and gas producers are already reducing emissions due to other regulations and a desire to become a cleaner, more competitive option for global customers.
That has been the position of the Conservative Party in the industry for years: using cleaner Canadian fossil fuels to displace dirtier ones produced elsewhere.
The industry has work to do, particularly on the oil side, where Canada’s heavier oils require more energy to extract from the ground than places like Saudi Arabia. While tar sands emissions per barrel of oil, known as emissions intensity, have fallen by 30 percent since 1990, they are still higher than many global competitors.
The Oil Sands Pathway Alliance, with six of the largest oil sands companies on board, aims to achieve net-zero emissions by 2050, primarily through carbon capture and storage projects that trap greenhouse gases before they are released. enter the atmosphere and then store them underground. .
The alliance, whose member companies account for 95 percent of oil sands production, launched a plan this spring with a goal of cutting 22 million tonnes 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 have argued.
But the Alliance and the government are standing apart on some fundamental issues, such as determining where current emission levels really are. The most recent national inventory report says emissions from oil sands production and processing were 83 million tons in 2019, but the Alliance puts the figure at 68 million.
A government official, speaking in the background because he was not authorized to speak publicly, said that if the emissions limit for the oil and gas sector is higher than the Emissions Reduction Plan, it will force other industries to reduce more than their fair share or Canada will miss its 2030 targets.
This report from The Canadian Press was first published on July 17, 2022.