Canada’s Oil and Gas Emissions Cap Plan Would Cut Output
Canada’s proposed oil and gas emissions cap would cut output rather than boost investment in expensive carbon capture and storage (CCS) technologies, according to a report by consulting firm Deloitte published on June 19, 2024, by the Alberta government.
The Liberal government led by Canadian Prime Minister D. Trudeau is drafting regulations that would force the country’s highest-polluting sector to reduce emissions to 137 million tonnes by 2030, a 37% reduction from 2022 levels. However, Alberta, Canada’s top oil-producing province, and industry representatives are opposing the plan, arguing that it would lead to lower output.
Canada’s leading refineries are counting on CCS to cut emissions over the next decade. But a group of six major oil sands companies known as the Pathways Alliance has not made a final investment decision on their C$16.5 billion (about $12.03 billion) project. They say they need more government financial support.
In a report commissioned by Alberta, Deloitte’s modeling found that CCS would make high-cost oil sands fields unviable. For lower-cost oil sands assets, curtailing production would still be more profitable than investing in CCS.
L. Cameron, an analyst at the International Institute for Sustainable Development, a climate think tank, said the report raises questions about the cost of carbon capture technology.
Canada is the world’s fourth-largest oil producer, pumping out about 5 million barrels a day. Despite industry concerns, production is actually reaching record levels thanks to a new export pipeline and strong oil prices. Trudeau proposed the cap in 2021, and his government aims to complete the project before a likely 2025 election.
The emissions cap would likely result in oil production reaching 5.6 million barrels per day (bpd) by 2030, about 10% lower than it would have been without the cap, Deloitte predicts. Gas production at the end of the decade would be about 2.2 billion cfd (bcfd) under the cap, 12% lower than it would have been without it. That would cost Canada 90,000 jobs and C$282 billion in GDP between 2030 and 2040, the report says. In a statement, Alberta Finance Minister Nicola Horner said it was time to abandon the failed idea.
Deloitte estimates that oil and gas emissions would still exceed the proposed cap by 20 million tonnes by the end of the decade, even with efficiency gains and methane reduction measures. Asked about the emission ceiling on June 19, 2024, Federal Environment Minister S. Guilbault said the government does not have jurisdiction to limit production.
Recall that the Canadian government previously announced plans to reduce CO2 emissions to 511 megatonnes/year by 2030, which is 30% lower than 2005 levels. In 2022, Canada was confident that the country could achieve zero carbon dioxide emissions by 2050.
Also in August 2022, Canada signed an agreement with Germany under which Canadian hydrogen fuel will be supplied to Germany. The countries intend to create a common hydrogen market by 2025.
