The federal government is proposing to use an industry-specific trade and cap system or a modified carbon pricing system to set ceilings on emissions from the oil and gas sector and reduce them to nearly 40% by 2020. end of this decade.
Two options are included in the discussion paper Environment Secretary Steven Guilbeault will release on Monday. This is the first glimpse Canadians have received of how the Liberal Party is expected to implement the oil and gas emissions limits promised in last year’s election.
The oil and gas industry accounts for more than a quarter of Canada’s total emissions – 179 million tons in 2020, equivalent to the average emissions of a car traveling around the equator more than 17 million times.
Guilbeault said in April during a meeting of the House committee to study the proposed emission limits for oil and gas.
What Guilbeault didn’t say then, and what the discussion report doesn’t say now, is what the specific emissions limit would be. It should start at “current levels” – according to the data available when that promise is made that would mean 2019 levels, or 203.5 million tonnes.
Baseline documents and government sources suggest that the limit for 2030 will be very close to that proposed in the new National Emissions Reduction Plan in March – 110 million tonnes. That’s a 46% cut from 2019 levels and 32% from 2005.
Canada is aiming to cut emissions across all sectors by 40 to 45 percent from 2005 levels by 2030.
The oil and gas industry has not had such low emissions since 1992. Over the past three decades, as production of gas, conventional oil and petroleum products has skyrocketed, emissions from the sector have increased by 83 percent. . Total emissions in Canada are about 23% higher than during the same period.
Input on options for cap management will be accepted until September 21 with the goal of Guilbeault announcing a final plan in early 2023.
The first proposed option involves a new trading and limiting system in the oil and gas sector separately. Total allowed emissions will be divided into individual allowances which will be distributed to specific companies mainly through auction.
Companies that do not buy enough allowances to cover their emissions will have to buy allowance credits from other oil and gas companies that have bought more than they need.
Proceeds from the auction will be recycled for programs that help the industry cut emissions.
The second option would modify the industrial carbon price already applied to the oil and gas sector, possibly by raising prices on its own if necessary, but with the aim of ensuring that emissions from the oil and gas sector are reduced by restricting the transportation of goods. translate carbon credits for this field.
Companies can now reduce the carbon price they pay by buying credits from others that generate less than their emissions limit. The revised plan would only allow them to buy credits from other oil companies, not from other industries.
Most of Canada’s oil and gas producers have been cutting emissions due to other regulations and aspire to be a cleaner, more competitive option for global customers.
That has been the Conservatives’ stance on the industry for years – using Canada’s cleaner fossil fuels to replace dirtier ones produced elsewhere.
The industry has a lot more work to do, especially on the oil front, where Canada’s heavier oils require more energy to extract from the ground than places like Saudi Arabia. While oil and emissions per barrel of oil, known as emissions intensity, have fallen by about 30% since 1990, it is still higher than many of its global competitors.
The Oil Sands Pathway Alliance, with six of the largest oil exploration companies, is aiming to bring emissions to net zero by 2050, primarily through carbon capture and storage projects aimed at keeping capture greenhouse gases before they enter the atmosphere and then store them underground. .
The alliance, whose member companies account for 95% of oil and gas production, launched a plan this spring that aims to cut emissions by 22 million tonnes from 2019 levels by 2030.
Company leaders said they were not opposed to the limit, but emphasized that it should be realistic and based in consultation with the industry on what is possible. They argue that anything more than that will lead to production cuts and job losses.
But the Coalition and government are still far apart on some fundamental issues, such as determining where current emissions levels actually stand. The most recent national inventory report put oil production and processing emissions at 83 million tonnes in 2019, but the Union pegged the figure at 68 million.
A government official, who spoke on background because he is not authorized to speak publicly, said that if emissions limits for the oil and gas sector were higher than the Emissions Reduction Plan, it would force other industries to cut drop more than their share or Canada will not meet its 2030 target.
This report by the Canadian Press was first published on July 17, 2022.