In an aggressive attempt to combat climate change, Canada has rolled out an unprecedented cap-and-trade emissions system aimed at curtailing greenhouse gas emissions in the oil and gas industry. The country’s Canadian sector is one of the world’s largest oil-producing countries, meaning it accounts for a significant portion of national greenhouse gas emissions. It plans to reduce those emissions by 27 percent below 2026 levels or 35 percent below 2019 levels. This system, the first of its kind in the world for a major oil and gas-producing nation, fits well with Canada’s goal of meeting its national emissions reduction targets.
The plan the government announced Monday is being phased in gradually and covers key players across the oil and gas sector, from Alberta’s oil sands to offshore production and liquefied natural gas. Large emitters in the sector would report from 2027; the smaller companies would start reporting in 2029; and the cap would take effect starting in 2030. Under this scheme, if a company finds that it has exceeded its emissions allowance, it will have the choice of purchasing extra allowances from other companies that have successfully reduced their carbon emissions. While the government claims that the cap will target emissions without impacting production, Alberta, which, along with other provinces, is a hotbed of oil production, already voiced its resistance. Similarly, business groups fear limiting the emissions in such an important sector might check growth in the economy further down the line. The Business Council of Canada warned that it could slow the pace of economic advancement at a time when Canada’s economy is experiencing slower growth, arguing stable economies are necessary to support climate action. According to environmental advocates, however, the measures are crucial steps toward sustainability and victory in the fight against climate change, which they call “a historic first.”
Under these regulations, the Canadian government models predict that oil and gas production may still increase by as much as 16 percent above 2019 levels by 2030. According to Environment Minister Steven Guilbeault, the point of this plan is not to limit production but rather to curb pollution. Setting clear limits on emissions, he said, Canada is nudging the oil and gas sector toward innovation solutions that could allow for responsible growth.
This cap on emissions program makes Canada stand out among other oil-producing nations since no other major oil and gas country has made such a move to regulate carbon emissions on this scale. The proposed rules apply broadly across upstream oil and gas activities, targeting pollution while seeking to strike a balance that allows for continued economic contributions from the sector. Despite the criticisms from the government, the federal government of Canada continues pursuing its climate action plan; it hopes that this is a framework that could be emulated by other nations in reducing industrial emissions.
The oil and gas industry is one of the significant contributors to the economy of Canada. Its production constituted 25 percent of the exports of the country in 2022 and earned revenue amounting to CAD 209 billion (USD 150 billion). However, ironically, it has seen the lowest levels of investment while reporting the highest profit levels in 2022. The federal government believes it is betting an emissions cap, teamed up with an incentivized marketplace for carbon reductions, can get the sector to cleaner operations without sacrificing its economic impact.
This remains an area that inspires nationwide debate over what methodology might best be pursued as part of a lasting sustainable approach to climate, due in part to acceptance in the form of environmental organization appreciation as well as against those of industry participants and, by extension, has only set Canada down that long journey with oil and gas producers toward more stridently rigorous environmental guidelines than exist currently.
Source: AFP