Ceiling on the oil industry | No reduction obligation before 2030

(Ottawa) The oil and gas industry will not be required to reduce its greenhouse gas (GHG) emissions before 2030 under the draft regulations proposed by the Minister of the Environment, Steven Guilbeault. It will have to reduce them by 35% below 2019 levels, but the government’s objective is to cap these emissions while maintaining production growth to meet global demand.

“I cannot ensure that regulations will force production reductions,” Minister Guilbeault explained at a press conference. If we did that, we would lose in court and it would serve no one’s interests. »

Alberta Prime Minister Danielle Smith was quick to denounce a new encroachment by Ottawa in one of her areas of jurisdiction.

“Make no mistake, this ceiling violates the Canadian constitution,” she reacted, raising threats of prosecution. She argued that this cap would amount to a reduction in production of one million barrels per day by 2030. “We will not stand idly by while the federal government sacrifices our prosperity, our constitution and our quality of life for his extreme program. »

On the contrary, the government predicts that oil and gas production will increase by 16% between 2019 and 2032, or 1% less than the growth forecast without an emissions cap.

The oil and gas industry is responsible for a third of the country’s GHG emissions. It is the most polluting.

Under the new regulation, it would be subject to a cap-and-trade system that rewards companies that can limit their polluting emissions and encourage others to invest their profits to produce greener oil and gas. This system will not be linked to that of Quebec and California.

“Investing in decarbonization” thanks to profits

The cap would be set at 35% below 2019 levels, which would reduce GHG emissions nationwide by 13.4 megatonnes. Once the regulations are adopted, they will have to register by 1^is January 2026. Large producers will have to declare their emissions in 2026 and small producers in 2028. The first compliance period will run from 2030 to 2032.

Minister Guilbeault believes, however, that businesses will have an interest in starting to reduce their GHGs first. “The regulations will come into force on 1^is January 2026 and if you are a business, you cannot wait until 2030 to start reducing your emissions and have regulatory obligations to meet, he said. It would literally be impossible to do that. »

He pointed out that profits in this industry have increased tenfold since the pandemic, going from 6.6 billion to 66 billion. It can therefore afford to “invest in decarbonization”.

The new cap and trade system, however, includes two “flexibility measures” through the purchase of offset credits to cover up to 20% of emissions and through a cash payment into a decarbonization fund which could cover up to 10% of emissions and would finance other GHG reductions in the industry.

Minister Guilbeault indicated that Canada is the only oil producing country to impose such a cap. His plan has drawn criticism from the industry and opposition parties. Its entry into force is planned for 2025 after holding a public consultation. There is therefore a possibility that it will not be official until after the next federal election.

Canada is the fourth largest oil producer in the world and the fifth largest gas producer.