Canada announced on Monday that it wanted to reduce emissions from its oil and gas sector by a third by 2030 by implementing a cap-and-trade system for carbon credits, without however reducing production.
The objective of the system, which would be implemented gradually over several years, would be to reduce emissions by 27% compared to 2026 levels, which is equivalent to 35% of 2019 levels. It does not include emissions linked to the final consumption of these hydrocarbons. Canada is the world's fourth largest oil producer and this sector “represents nearly a third of our climate pollution,” said Steven Guilbeault, the Minister of the Environment, emphasizing that “it must do its fair share.”
“Tackling pollution, not production”
Companies will thus be required to publish their emissions and production from 2026 but the effective capping period would not begin until 2030. According to the proposal, oil companies would be allocated emission quotas which would decrease over the years . If they exceed these thresholds, they would be authorized to purchase offset credits up to 20% of their emissions.
The government's plan “attacks pollution, not production,” added Minister Guilbeault, stressing that it encourages companies to invest in carbon capture technologies which are increasingly developing.
Ottawa estimates that oil and gas production would still have to increase by 16% from 2019 to the period 2030-2032, compared to 17% in the absence of a cap, and that this would only result in a reduction of 0. 1% of Canadian GDP.
The Canadian oil and gas sector, which represents 25% of the country's exports, multiplied its profits by 10 during the Covid-19 pandemic, from 6.6 billion Canadian dollars (4.4 billion euros) in 2019 to 66.6 billion in 2022.
Only one effect: slowing down the economy
For businesses, the proposal from Justin Trudeau's government will only have the effect of slowing down the economy. “As Canada's economy stalls, imposing a cap on oil and gas emissions will only make Canadians poorer,” the Canadian Council of Chief Executives said in a statement.
“This capping of production will harm families, businesses and the Canadian economy,” thinks the oil province of Alberta. It estimates that this cap will require a reduction in production of one million barrels per day by 2030.
Environmental groups including the Climate Action Network called the regulations a “long-awaited historic first” and “good news” that must be implemented “as soon as possible.”
