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The RBC report says oil and gas will likely remain critical and contentious energy sources for longer than some think.JASON FRANSON/The Canadian Press

Cutting emissions from Canada’s oil sands by 40 per cent will cost between $45-billion and $65-billion from 2024 through 2030, according to a new analysis.

While the new report from Royal Bank of Canada RY-T found that Canada’s oil and gas sector can indeed balance near-term energy security with advancing climate action, the sector will need regulatory certainty and support at all levels of government to do so.

The report, released Tuesday, builds on RBC analysis from the fall which found that achieving net zero in the next three decades could cost up to $2-trillion. Since then, however, Russia’s war on Ukraine has turned the sector on its head, with the globe now hyperfocused on energy security along with decarbonization.

Short of major additional action toward transitioning the world off fossil fuels, oil and gas will likely remain critical and contentious energy sources for longer than some think, the report says.

It found that oil sands and conventional producers could raise production by up to 500,000 barrels a day from 2021 levels to help shore up global demand, which could add nine million tonnes of greenhouse gases a year.

Abating that could cost at least $1.5-billion each year.

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The oil and gas sector is well-versed in making long-term, complicated and capital-intensive investments – particularly in the oil sands – but it’s also undergoing a fundamental economic shift as the world transitions toward different forms of energy.

That’s causing widespread uncertainty, which could be helped by a deliberate, measured approach to emissions-reduction spending, RBC economist and report co-author Colin Guldimann said in an interview.

“We can debate the pace and scale and the amount of oil demand that will exist in the future, but at the end of the day, none of us know for certain what that’s going to look like,” he said.

“We need to be thinking about the ordering of effort by the public sector, by the private sector, by financial institutions, by regulators and utilities in that process and making sure everyone is around the same table.”

The idea behind the report is to kick-start a national conversation about how Canada can balance its role in the global energy crisis with maintaining its commitments to tackling climate change, Mr. Guldimann said.

“That’s a conversation that we shouldn’t just be having in the halls of Parliament or in the boardrooms of the country, but on main streets across the country,” he said.

Those discussions need to happen soon, Mr. Guldimann said, to hasten decisions about how the oil sector will actually decarbonize – likely through a combination of large-scale deployment of carbon capture, utilization and storage, methane-emission reductions, intensive electrification efforts and technologies that haven’t yet been developed.

“No matter what technology we’re using, the transition is going to be an expensive endeavour that involves a lot of capital investment,” he said.

The report also makes the case for a North American energy alliance, starting with a high-level summit to align Canada and the U.S. on key issues, including oil and gas, cross-border pipelines, climate change, power grids, critical minerals and zero-emission vehicles.

If the Western world can ensure that all future oil demand is being met by countries that are aligned with net-zero, environmental and social goals, he said, “then perhaps we’re better off.”

But no matter how much fossil fuel the world ends up using in the next few decades, “net-zero oil production upstream is non-negotiable,” Mr. Guldimann said.

He added Canada must figure out how to deploy carbon-reducing technology to help balance investment risks with the protection of a critical economic sector.

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