Canada has introduced draft regulations aimed at limiting greenhouse gas emissions from the oil and gas sector by imposing a cap on the sector’s emissions and pushing for a 35% reduction from 2019 levels. The proposal hinges on setting a cap-and-trade system that rewards low-polluting companies and encourages higher-polluting ones to invest in cleaner technologies.
As the fourth-largest oil producer and fifth-largest natural gas producer globally, Canada’s role in the energy sector is significant. Though a major contributor to the economy, Canada’s oil and gas industry is also the largest source of national greenhouse gas emissions (GHGs). According to recent federal reports, the sector accounted for 31% of national emissions in 2022. With record profits since the pandemic, the federal government is urging oil and gas companies to reinvest in decarbonization to create sustainable jobs and address the climate crisis.
Statistics Canada indicates that operating profits in the oil and gas sector skyrocketed from $6.6 billion in 2019 to $66.6 billion in 2022. However, many companies have directed profits toward expanding production rather than reducing emissions.
“The science is clear — greenhouse gas pollution must be reduced significantly and urgently to avoid the most severe impacts of climate change,” announced Steven Guilbeault, Minister of Environment and Climate Change. “We are asking oil and gas companies to reinvest some of their recent record profits into cleaner technology that will reduce pollution and create jobs.”
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Environment and Climate Change Canada projects that oil and gas production could grow by 16% from 2019 levels by 2030-2032 if the sector adopts technically feasible emissions reduction measures.
Alongside the emissions cap, Canada is promoting carbon capture and storage technologies through initiatives such as the federal Canada Growth Fund and new tax credits. These measures aim to help companies in the oil and gas sector invest in the infrastructure needed to meet the emissions targets while maintaining production growth, Environment and Climate Change Canada announced on November 4.
The federal government has already supported projects like Strathcona Resources’ $2 billion initiative in Alberta, which could store up to two million tonnes of carbon dioxide annually. Similarly, Entropy, an Alberta-based company, received federal backing to implement carbon capture at a natural gas facility, potentially reducing emissions by 2.8 million tonnes over 15 years.
Capping GHG pollution from the oil and gas sector is one of the key measures outlined in Canada’s 2030 Emissions Reduction Plan, a sector-by-sector roadmap to reduce Canada’s overall emissions up to 45% below 2005 pollution levels.
Starting in 2030, the draft proposal states that oil and gas operators that meet the pollution threshold would be “prohibited from emitting any GHG from an industrial activity unless they remit sufficient eligible compliance units to cover their GHG emissions.”
Canada will consult with industry stakeholders, Indigenous groups, and other community representatives to finalize the regulations, expected in 2025. The formal consultation period is open from November 9, 2024, to January 8, 2025.
*The preceding regulatory news article is intended to be an overview of the report, legislation or proposal, and not a replacement for the actual guidance or information from the government. For the comprehensive data, please visit the linked source material within the article.
