Canada Aims for 35% Emissions Cut in Oil and Gas, No Production Limits

The Canadian government has introduced new regulations aiming to reduce emissions in the oil and gas sector by 35% by 2030, compared to 2019 levels. Environment Minister Steven Guilbeault emphasized that the goal is to target pollution, not production, reinforcing Canada’s commitment to achieving carbon neutrality by 2050.

The regulations introduce a cap-and-trade system that allocates emissions allowances to oil and gas facilities, incentivizing companies to reinvest profits into decarbonization projects. Under this system, high-emission facilities can either purchase credits from more efficient companies or contribute to a decarbonization fund, offsetting up to 20% of their emissions.

Canada’s oil and gas sector, which generated $66.6 billion in profits in 2022, will be encouraged to redirect earnings into technologies that reduce greenhouse gas output. Jonathan Wilkinson, Canada’s Natural Resources Minister, highlighted the importance of maintaining balance: “If you start to go beyond what is achievable, you are moving this from an emissions cap to a production cap,” indicating the government’s intent to sustain both emissions reduction and production growth.

Despite the emissions cap, Canada projects a 16% increase in oil and gas production by 2030, ensuring that facilities can continue to meet global demand while reducing their environmental impact. The plan aims to reinforce Canada’s position as a leader in sustainable energy while supporting economic growth.

Key components of the new regulations include a focus on methane reduction and carbon capture and storage (CCS). Backed by a $12.5 billion tax credit, CCS projects represent a growing area for Canada, which already hosts one-sixth of the world’s large-scale CCS initiatives. “Methane emissions reductions represent a significant opportunity for low-cost, high-impact GHG cuts,” Guilbeault noted, pointing to methane as a key area of focus for emissions reduction.

The proposed regulations are open for public consultation from November 9, 2024, to January 8, 2025. While some industry stakeholders, such as the Canadian Association of Petroleum Producers, have expressed concerns that the cap could deter investment, environmental groups are urging a more ambitious timeline. “The rules must take effect sooner than the proposed 2030 timeline,” stated Environmental Defence. Final regulations are expected to be finalized in 2025, following the consultation period.