The federal government expects to unveil its long-delayed oil and gas sector emissions cap during climate talks starting Thursday, underscoring Canada’s position that fossil fuels can still be part of the clean transition as long as their emissions are cut.
Environment Minister Steven Guilbeault set out the expectations for the global gathering, dubbed COP28, on Parliament Hill Wednesday, just before departing for the summit. He also said methane and zero-emissions vehicle regulations could be released at the gathering. But he cautioned it could take to the end of the year to release all three policies.
The proposed emissions cap in the oil and gas sector is a critical plank in Canada’s 2030 emissions reduction plan, but it will also open up another fight with Alberta, and marks another flashpoint in the fierce debate over the future of fossil fuels.
The annual climate talks are being held in the United Arab Emirates. The major oil producer’s host role and the presence of the oil and gas industry at the summit is already sparking criticism from some climate activists. Scientists say greenhouse gas emissions from burning fossil fuels are the biggest cause of climate change.
Mr. Guilbeault said Canada will be advocating for the phase-out of unabated fossil fuels – meaning offsetting emissions through technology such as carbon capture and storage.
He told The Globe and Mail that “COP would be a very good moment” to release the emissions cap details.
The minority Liberals have not yet said how the cap would be imposed, nor what the emissions limit will be. Options under consideration include a new cap and trade system or changes to the industrial carbon price.
Prime Minister Justin Trudeau first announced the cap in the 2021 election campaign. But the government has twice delayed its rollout.
The oil and gas sector emissions cap is supposed to take effect in 2025, setting a ceiling on emissions that would decrease in five-year increments. Mr. Guilbeault declined to say whether it will still take effect in just over one year’s time.
He also wouldn’t say what the new emissions limit will be for the oil and gas sector but said the emissions reduction plan shows the direction and scale of change needed.
That plan said the sector had to cut emissions by 42 per cent below 2019 levels by 2030. That would mark a significant turnaround for Canada’s highest emitting industry, and internal government documents obtained by The Globe in 2022 showed the feasibility of such a cut was in doubt.
Mr. Guilbeault said the government will first release a “framework” document explaining the emissions cap. Draft regulations will be released later.
“If we don’t put in place the cap on oil and gas emissions, we can’t achieve our 2030 targets,” he said.
Canada has promised to cut overall emissions by 40 per cent below 2005 levels by the end of the decade. The federal Environment Commissioner has said the country is not on track to meet that target.
In a separate interview on Wednesday, Natural Resources Minister Jonathan Wilkinson said the cap will ensure emissions are cut in a “manner that’s economically thoughtful” and it is not about shuttering the sector. The International Energy Agency has forecast that demand for oil will peak this decade, but that doesn’t mean the market will disappear.
“There’s no point in Canada effectively shutting-in production that’s not related to declines in global demand, and allowing the United States or Venezuela to actually export more,” he said.
While Alberta will be sharing a stage with Canada at the climate summit in Dubai, the province opposes the emissions cap because it believes it will be a de-facto production cut.
Government spokesperson Ryan Fournier said in a statement that the cap is “unacceptable and unconstitutional.” He said the targets are not achievable and would drive away investment.
Mr. Wilkinson made the pitch that decarbonization is how the sector will remain competitive. As global demand for oil and gas declines, he said competition will be driven by price and the carbon intensity of fuels.
Countries with the lowest carbon intensity of production emissions “are going to be winners,” Mr. Wilkinson said.
The government-funded Canadian Climate Institute said Wednesday that its modelling shows the emissions cap is achievable without cutting production as long as oil and gas prices don’t go below current levels.
At current prices, or higher, the institute said its modelling shows the sector can make the investments needed to cut emissions while continuing to grow and making a profit.
Janetta McKenzie, with the Pembina Institute, said the sector-specific emissions cap is needed because unlike other sectors, the oil and gas sector’s emissions continue to increase. “Existing policy is not enough,” she said.
While Alberta is working with Ottawa on policies like carbon capture, utilization and sequestration, it is trying to thwart other federal plans with the provincial sovereignty act. Ms. Smith invoked it on Monday against federal clean electricity regulations and has mused about using it to stop the emissions cap.
With reports from Carrie Tait and Reuters