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Canada on Monday launched consultations on a plan to cap and cut greenhouse gases from the oil and gas sector, its largest and fastest-growing source of emissions, outlining two options to help achieve Prime Minister Justin Trudeau’s climate promises.

The Liberal government is aiming to cut emissions 40% to 45% below 2005 levels by 2030, and target net-zero emissions by 2050. To achieve this, policymakers need to enforce a sharp reduction in pollution from the oil and gas sector, responsible for 27% of Canada’s emissions.

The government is considering either a cap-and-trade system that sets regulated limits on emissions from the sector, or modifying - and potentially raising - the carbon price for heavy industrial emitters to create price incentives to drive down emissions, according to the discussion paper released on Monday.

The carbon price in Canada is currently set at $50 a tonne and is set to ramp up to $170 a tonne by 2030.

“The emissions cap will be a critical test for the federal government - and a defining moment for the Prime Minister’s legacy on climate change,” Julia Levin, national climate program manager at Environmental Defence said in a statement.

Trudeau first promised the cap during his 2021 election campaign, but details on the policy have been scarce so far.

The oil and gas sector, provinces and other stakeholders have until the end of September to comment on the discussion paper, and the government expects to outline the design of the emissions cap early next year.

Natural Resources Minister Jonathan Wilkinson said the industry will need to drastically cut emissions to remain competitive as the world moves towards a lower-carbon future.

“The demand for oil and gas in a net-zero economy will be entirely focused on those jurisdictions which can produce oil and gas with increasingly lower and ultimately near-zero production emissions,” Wilkinson said.

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