Oil and gas emission cuts to limit pollution, not production: Canada's energy minister
Ottawa’s plan to cap emissions in the oil and gas sector is earning mixed reactions, with industry players and some provincial politicians opposing the move that environmental groups are celebrating as “necessary” to fight climate change.
On Thursday, Environment Minister Steven Guilbeault and other federal ministers announced a framework plan to cut emissions in the sector by more than one-third by 2030.
Under the framework, the sector will be forced to cut emissions by 35 to 38 per cent compared to 2019 levels, but can buy offset credits through a “cap-and-trade” system.
Energy and Natural Resources Minister Jonathan Wilkinson told BNN Bloomberg that the announcement is crucial in Canada’s work to combat climate change.
“Every sector of the economy needs to contribute in the fight against climate change that Canada and other countries around the world are waging,” Wilkinson said in a Thursday television interview following the announcement.
“The world is moving from an economic perspective and this is actually about the competitiveness of the oil and gas sector moving forward.”
Wilkinson said if Canada’s oil and gas sector can be a world leader in decarbonization, other countries will find Canadian oil attractive.
“Low-carbon intensity fuels are going to have value in a world that increasingly is going to value them.”
ALBERTA CALLS MEASURES 'ATTACK' ON THE PROVINCE
Alberta Premier Danielle Smith, whose government has repeatedly clashed with Trudeau’s federal Liberals over climate policies aimed at oil and gas, called the policy and “intentional attack” on her province by Ottawa and vowed the fight the measure.
“Alberta owns our resources, and under the Constitution we have the exclusive jurisdiction to develop and manage them,” Smith and Alberta Environment Minister Rebecca Schulz said in a written statement.
The provincial politicians called the federal measure “punitive” towards the oil and gas sector and argued it risks “hundreds of billions of dollars of investments in Alberta’s and Canada’s economies and core social programs.”
“Over the coming months, our cabinet and caucus will develop a constitutional shield in response to this and other recent attacks on our province by what is fast becoming one of the most damaging federal administrations in Canadian history.”
SECTOR SAYS PLAN IS ‘UNACCEPTABLE’
Oil and gas industry stakeholders were swift to denounce the federal government’s announcement.
Lisa Baiton, president and CEO of the Canadian Association of Petroleum Producers, said the emissions cap puts a ceiling on oil and gas production in the sector.
The industry association said the proposed system would result in “significant curtailments” on industry production, calling the framework “effectively a cap on production.”
“At a time when the country’s citizens are experiencing a substantial affordability crisis, coincident with record budget deficits, the federal government risks curtailing the energy Canadians rely on,” she said.
Wilkinson said the announcement shows the government actually expects Canada’s energy sector to increase production under these regulations.
“Between now and 2030, we anticipate increases in production in Canada and around the world, but we are going to reduce emissions in line with what industry themselves say they can do,” he said.
Wilkinson added even as Canada works to decarbonize in its climate change fight, he still expects there will be a market for oil and gas in the future.
“The demand for oil and gas is never going away entirely,” he said. “There are significant quantities of oil that are used for things like carbon graphite, asphalt and chemicals … gas can be used for ultra-low-carbon hydrogen, so there’s a certain portion of the market that’s going to be there even in a net-zero world.”
Pathways Alliance, a group of six major energy firms working to develop carbon capture projects, took a much more muted tone, however, and said it would need more time analyzing the framework “to determine how it may impact oil sands operations.”
The Explorers and Producers Association called the measures “unnecessary and unacceptable” and argued that the sector is already “achieving significant emissions reductions” on its own.
“Our sector must compete for investment,” the organization wrote in a statement.
“This requires balance, pragmatism, and incentives instead of punitive measures like an emissions cap that further damage Canada’s reputation as a place where projects are far too expensive, goalposts are uncertain, and environmental performance is not recognized.”
The Canadian Association of Energy Contractors also called for more “pragmatic and affordable policies” as the world decarbonizes.
“The federal government’s emissions cap will hinder Canada’s ability to attract capital. It means higher energy costs and fewer jobs for Canadian energy workers,” Mark Scholz, president and CEO of the CAOEC, wrote in a statement.
CLIMATE GROUPS CALL MOVE ‘NECESSARY’
Climate groups, on the other hand, welcomed the policy, though some flagged a lack of details around its implementation.
Rick Smith, president of the Canadian Climate Institute, called the emissions cap “reasonable and necessary” and said it should be implemented immediately.
“The stubborn rise in emissions from (the oil and gas sector) is wiping out climate progress in other parts of the economy,” he wrote in a statement.
“Capping oil and gas emissions is a critical element of a package of policies that can ensure Canada meets its emissions reduction targets while supporting the competitiveness of the sector.”
The Canadian Climate Institute has included an emissions cap in its list of four ways to reduce emissions in the oil and gas sector, along with increased regulations to reduce leaks, added support for carbon capture policies and government-backed investments in the green energy transition.
“The oil and gas cap announced today will help the oil sands industry, in particular, deliver on its commitment to work toward net-zero emissions by 2050,” Smith said. “An increasingly stringent cap on oil and gas emissions can drive innovation to better position Canada's energy sector to compete in global markets."
Janetta McKenzie, acting director of the oil and gas program at the clean energy think tank the Pembina Institute, called the announcement a “good news day for climate action in Canada.”
“We commend the federal government for developing the framework to reduce greenhouse gas emissions from Canada’s highest-emitting sector by far,” she wrote in a statement.
She noted that the proposed level of the cap is lower than a previous estimate, but still called it “a real reduction from Canada’s highest-emitting sector” and “completely doable.”
Meanwhile, Clean Energy Canada, a think tank that “works to accelerate Canada’s clean energy transition” also called the announcement “necessary and fair.”
“Canada should be commended for putting in place the world’s first national oil and gas emissions cap by a major fossil-fuel-producing country,” Mark Zacharias, executive director at Clean Energy Canada, wrote in a statement.
“The cap is the last line of defence to ensure that emissions from Canada’s fossil fuel industry don’t put the country offside its climate commitments.”
Zacharias noted, however, that the announcement was “light” on details about how compliance would be enforced and questioned the 2030 deadline.
“The longer the government waits, the harder it will be for industry to make the necessary investments to meet the target,” he said. “Long-term clarity and certainty are key ingredients for investors, and Canada should provide plenty of both.”