A federal cap forces a reckoning with oil and gas emissions

Branding themselves the Pathways Alliance, six of the biggest producers operating in Canada’s oilsands have been running commercials touting their enthusiasm for reducing greenhouse gas emissions and their “plan” for doing so. 

That plan might be more of a proposal at this point, and it might depend on billions of dollars in public funding. But one way of looking at the federal government’s proposed oil and gas emissions cap is that it might simply call on the Pathways Alliance — and every other oil company executive, industry association and political leader who agrees even in theory with the need to reduce emissions — to get moving.

Viewed through a wider lens, the cap is part of an inevitable reckoning with both the facts of the oil and gas industry’s emissions and the scale of Canada’s ambitions for reducing this country’s emissions. That reckoning — tied up in the regional politics of energy in Canada — was always going to produce disagreement.

Within a half-hour of four federal ministers announcing the cap, Saskatchewan Premier Scott Moe was asserting provincial jurisdiction and saying the cap, along with new regulations to reduce methane emissions, would “burden” the oil and gas sector with “red tape and regulations.” Soon after, the Alberta government released a statement calling the cap “punitive” and an “intentional attack” on the Alberta economy that “undermines the unity of our country.” 

Without explaining what their party would do instead, Pierre Poilievre’s federal Conservatives fully condemned the Liberal proposal, claiming it would “kill” jobs and “send dollars to dictators” by shifting production overseas.

The hard math of oil and gas emissions

Some of the basic facts underpinning this debate are worth reviewing.

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Emissions from the oil and gas industry totalled 189 megatonnes (Mt) in 2021 — 28 per cent of Canada’s national total. And they’re not going down. The sector’s emissions were 183 Mt in 2020 and an early projection from the Climate Institute suggests that emissions from the sector will total 194 Mt in 2022.

To reach the goal of net-zero emissions by 2050 — a goal Canada shares with the United Nations and 120 countries — those emissions have to be significantly reduced. And there are now just 27 years left to make that to happen. 

It’s also relevant to note that the industrial sources of those emissions are largely located in a part of the country traditionally disinclined to vote Liberal (or think highly of anyone named “Trudeau”).

Alberta Premier Danielle Smith is at least notionally committed to the idea that Canada’s emissions must reach net-zero by 2050. So beneath the rhetoric (she described Environment Minister Steven Guilbeault as a “menace” on Thursday) and threats of a constitutional challenge, the crux of her argument is that the federal government is simply proposing to move too fast.

But then, how slowly should the industry be allowed to move?

Under the proposed cap, upstream emissions from the oil and gas sector — which totalled 171 Mt in 2019 — would be expected to fall to at least 137 Mt by 2030 — a 20 per cent reduction in a little over ten years.

That would be progress. But it also would merely return upstream emissions to about where they were in 2005. Canada’s overall national target, meanwhile, is to reduce emissions by at least 40 per cent below 2005 levels.

An estimate published by the Climate Institute last month projected that all emissions from the oil and gas sector — including emissions not covered by the cap — could be reduced to 110 Mt by 2030. That reduction would be achieved through a combination of methane reductions, carbon capture technology, fuel switching and electrification.  

And while Smith and others were suggesting the government was moving too fast, other voices were chiding the Liberals for not moving fast enough.

How fast is too fast?

Caroline Brouillette, executive director of Climate Action Network, said it’s “unacceptable” that regulations to enact the cap won’t be in place until 2026. Laurel Collins, the NDP’s environment critic, alleged the government “listened to oil and gas lobbyists” and came forward with a cap that was “riddled with loopholes.” 

Independent policy experts did raise concerns about the wisdom of proceeding with a new policy for the oil and gas sector when the Liberal proposal was studied by a parliamentary committee last year.

In an ideal world, the Liberals might rely exclusively on existing policies — in particular, the federal price on carbon — to reduce emissions from the sector. And the Liberal government presumably would have less reason to worry about quickly reducing emissions from oil and gas if it had settled for a less-ambitious national target.

But there are still plausible benefits — not least to the environment — of reducing emissions sooner rather than later. And the federal government isn’t just imposing requirements on the sector — it’s also offering an investment tax credit to help fund carbon capture projects.

WATCH | Ministers say Danielle Smith is ‘wrong’ on cap complaint: 

Ministers say Alberta premier ‘wrong’ on cap complaint

Alberta MP Randy Boissonault and Energy Minister Jonathan Wilkinson dispute complaints from Alberta Premier Danielle Smith, saying their plan is about capping pollution and emissions — not oil and gas production.

“A cap gives you a lot more certainty about the reductions than an increasing carbon price,” Natural Resources Minister Jonathan Wilkinson said Thursday when asked why the government hadn’t simply increased the existing price on carbon.

“And our view is that the sector actually has to play a role, just like every sector of the economy, to reduce emissions in line with our objective and the world’s objective to achieve net zero by 2050.”

While the cap is tied to emissions, not production, Smith and others argue that it is a de facto production cap because its requirements will lead to lower levels of production. Wilkinson insisted that, in designing the cap, the federal government focused on what was “technically achievable.”

“We spent a lot of time both internally but also working with experts and with industry to try to determine what actually could be done within this relatively short time frame that we have until 2030,” he said.

What is realistically achievable will remain a point of some debate — the Pathways Alliance said Thursday it needed more time to study the proposal before offering a judgment. Questions about fairness are inevitable.

But unless some disagreement remains about the need to reduce emissions — and if time is of the essence — the only real question is how to do that as quickly as possible.