Feds unveil plan to cap oil and gas emissions. What happens next?

Prime Minister Justin Trudeau’s government has been on a tight-rope for climate change policies, and is now trying to strike a balance between competing demands with a long-awaited plan to cap oil and gas sector emissions.

The proposed plan to tackle oil and gas sector emissions is to cut pollution from the sector by more than a third by 2030. The cap has two parts. There is a limit on the emissions oil and gas companies can produce in 2030. However, the limit is softened by allowing companies to buy carbon offsets or put money into decarbonization funds for a small portion (20 per cent) of the pollution they release.

It’s been two years since Trudeau pledged that Canada would ratchet down oil and gas sector emissions at the pace and scale required to reach net-zero by 2050. Thursday’s announcement is a trophy for the climate advocacy wing of the party, something brag worthy on the international stage. No such policy exists anywhere else in the world, let alone for a major fossil fuel producing country.

At the same time, courts in Canada have reigned in the federal government with rulings that telegraph Ottawa doesn’t have carte blanche to implement regulations that tread into provincial areas of jurisdiction like natural resource production. Recently, a Supreme Court of Canada ruling found the federal impact assessment law to regulate major development projects “largely unconstitutional,” while a federal court struck down a cabinet order underlying Ottawa's ban of some single-use plastics. The federal government is appealing.

Environment and Climate Change Minister Steven Guilbeault told Canada’s National Observer his government is paying close attention to these rulings and understands it needs to stay onside to avoid the policy from being struck down by inevitable court challenges.

Federal climate policy opponents point to those recent court decisions to argue Ottawa should back down on the emissions cap. However, the Supreme Court of Canada ruled in 2021 that the carbon price is constitutional, Guilbeault noted in an interview with Canada’s National Observer. The message: tackling planet warming greenhouse gas emissions is well within the feds jurisdiction.

“We can intervene on climate change pollution but it's not an open bar,” he said. “So we've worked really hard to ensure with these regulations we are clearly within our federal lane of jurisdiction.”

Reacting to the announcement Thursday, Alberta Premier Danielle Smith called the emissions cap a “de facto” production cut that she won’t tolerate.

“Over the coming months, our cabinet and caucus will develop a constitutional shield in response to this and other recent attacks on our province by what is fast becoming one of the most damaging federal administrations in Canadian history,” she said.

The emissions cap regulations are not yet set in stone. Thursday’s announcement was for a “framework” for the proposed cap. It is a precursor to draft regulations expected in the first half of 2024, and final regulations expected to be published in 2025, with plenty of consultation, and time to lobby, between each step.

Climate Action Network Canada executive director Caroline Brouillette said she’s hoping to see the draft regulations as early as February.

“Every day of unregulated emissions from the oil and gas industry means devastating health impacts, more climate catastrophes that destroy homes, and increased cost-of-living for families and communities,” she said. “Canada’s oil and gas industry’s desperate attempts to avoid regulation at all costs will only intensify — and so must the government’s resolve to side with people and the planet.”

The framework proposes an upper legal limit for oil and gas emissions at 131 to 137 million tonnes in 2030.

Of that target, companies will be required to slash 106 to 112 million tonnes of greenhouse gas emissions from their operations, representing a 35 to 38 per cent decrease from 2019 levels.

To meet the rest of the target, Ottawa is offering two “compliance” options to help bridge the approximate 25 million tonne gap.

One option is using a limited amount of verified carbon offset credits to meet the goal if the company pollutes more than its allowed, and another involves companies putting money into a yet to be defined decarbonization fund for future emissions cuts to be used for technologies like carbon capture and storage. Guilbeault described those options as a “pressure valve” designed to achieve emissions reductions, by offering flexibility in the face of changing oil and gas demand.

Guilbeault said the policy is agnostic about how the cuts are made, but emphasizes the aim is not to go after the production of oil and gas. He argues a strong cap is just about making sure the sector, which is the country’s largest and fastest growing source of emissions, does its fair share.

In the face of Canada's mandate to shift to electric vehicles in the transportation sector, and clean electricity rules in the power generation sector, “it would be highly inequitable if we allowed a sector to emit as if the sky's the limit,” he said.

Pathways Alliance president Kendall Dilling spoke Wednesday of federal climate policies like the carbon tax and proposed cap on oil and gas sector emissions, and said he recognizes the oil and gas industry can’t depend on a “trust us” approach.

President of the Canadian Climate Institute Rick Smith called the proposed cap “reasonable and necessary.”

“Under existing regulation Canada’s oil and gas sector has not meaningfully abated its GHG (greenhouse gas) pollution so clearly a new framework is required,” he said. “As our Institute has independently calculated it’s quite feasible for the industry to reduce its emissions without reducing production.

“For example, fully one third of the industry’s 2030 reduction obligation is simply getting serious about eliminating methane pollution.”

Oil and gas program manager with advocacy group Environmental Defence Aly Hyder Ali called the framework an important first step for the country’s effort to slash oil and gas pollution.

“Now, the government has to show it means business by prioritizing the urgent release of the draft regulations,” he said. “Any further delays will lead to more oil and gas pollution and more climate catastrophes. We cannot afford to wait any longer.”