From EnergyNow.ca

By Kasha Piquette

The incoming Trump Presidency has promised  to “unleash American energy” with plans to “free up the vast stores of liquid gold on America’s public land for energy development.”  This week, the Trudeau government unveiled the draft details of its plans for a cap on greenhouse gas emissions from the Canadian oil and gas sector. These proposed regulations would cap all greenhouse gas emissions equivalent to 35 percent below levels in 2019 with the lofty goal of achieving a 40-45 percent reduction by 2030.

It is a plan that the province of Alberta and others contend would be a cap on production and cause elevated prices for consumer goods across Canada, cost up to 150,000 jobs and reduce national GDP by up to C$1 trillion ($720 billion).

These proposals would make Canada the only oil and natural gas-producing country to attempt an emissions cap on such a scale. The regulations propose to force upstream oil and gas operations to reduce emissions to 35 percent less than they were in 2019 by 2030 to 2032. Notably, while hydrocarbon production increased from 2019 to 2022, Canadian emissions from the sector declined by seven percent.

Perhaps significantly, and much to the apparent annoyance of Alberta’s Premier, the Federal announcement was made slightly ahead of the UN COP29 Climate Summit in Azerbaijan. Per the Paris Agreement, each country submits its climate ambitions to UN as National Determined Contributions (NDCs).  However, the federal government has also passed the Net Zero Accountability Act, which, by December 1st, 2024, could require even more aggressive reduction targets for 2035. Does this mean that the federal government may be positioning itself to announce even more ambitious emission targets – all to be announced at that conference?

It is unclear whether, how and in what form, the emissions cap will come into effect. With the next federal election slated for late October 2025 and polls that show the current Liberal-NDP coalition government to be far behind the opposition Conservatives, the federal carbon tax and the proposed emission cap have an uncertain future.

Other business interests have voiced concerns about Canada’s increasingly discordant, incoherent climate policies and regulations, which have caused the Canadian oil and gas sector to be at a competitive disadvantage in the global energy market.  Clearly, Alberta considers that the Federal government has, once again, overstepped its constitutional bounds with the proposed emissions cap and, along with its victorious Supreme Court challenge against the Impact Assessment Act, has vowed to launch more court challenges.  Alberta and other Provinces have contended that, with regional exemptions, the federal carbon tax is being applied unfairly as a patchwork of standards with Alberta, New Brunswick, Saskatchewan, Ontario and Nova Scotia, and the opposition Conservative party, mounting a growing chorus against the Liberal government’s broader price on carbon. By contrast, the proposed regulations for an emissions cap have been aimed specifically at one industry sector – one that is largely concentrated in western Canada.

Meanwhile, Canadian oil production, aided by the new export capacity of the TransMountain Pipeline completed this year, has grown to a record 5.1 million barrels per day making Canada the prime (60%) source of US crude oil imports in 2023.  Meanwhile, the industry has been engaged in considerations for the potential development of carbon capture and storage (CCS) to trap greenhouse gasses underground. However, this untested technology would cost billions, needs to be proven on a larger scale and requires industry cooperation combined with all levels of government support.

The Federal announcement, and the hostile reaction from Alberta and possibly other oil-producing provinces, mean that once again, Canadian investment in the oil and gas sector will be confronted with ever more uncertainty as they encounter time-consuming court challenges.  These competing political agendas ensure that major Canadian investment decisions will, once again, be deferred while other international jurisdictions race to develop their hydrocarbon export capabilities, investments that are unencumbered by any emissions caps.

Canadians need to consider carefully how these policies and debates are affecting our energy security and standard of living as Canada. In addition to carbon pricing, Canada has already promulgated regulations for EV mandates in the transportation sector, policies that have required tens of billions in subsidies. It has also introduced the complex clean fuel standard and the proposed national clean electrical standards. These policies are affecting not just Canada’s productivity, GDP and exports. By attacking the Western provinces, Ottawa is unnecessarily creating regional tensions and a less politically stable federation. We need to think about how co-operative federalism can be re-established in ways that account for the basic needs of all Canadians – and not just accommodate arbitrary targets for emissions designed to impress international agencies.

Kasha Piquette is an Alberta-based strategic energy advisor and a former Deputy Minister of Alberta Environment and Protected Areas.

Author:

Matthew Lau

Adjunct Scholar, Fraser Institute