This blog series will add value to readers by summarizing climate change and energy publications into less than 500 words.

Publication Title: Canada’s oil and gas sector, the road to net zero and regional fairness

Publication Type: Essay

Publication Authors: JONATHAN ARNOLD; DALE BEUGIN; SARA HASTINGS-SIMON; RICK SMITH; PETER NICHOLSON

Publication Date: Sept. 20, 2023

Publication Link

Canada's energy sector, specifically oil and gas, is facing a critical crossroads. Various sectors have managed to lower their emissions, oil and gas emissions persist at high levels, fueled by increasing production and profits. This intensifies a crucial question: how much capital — both political and financial — should the federal government spend to decarbonize a sector that international markets will eventually transform? Authors' answer: a significant amount of each.

There are two stark realities. Firstly, the current trajectory does not position Canada to meet its emissions targets, primarily due to the continuously surging emissions from oil and gas production. Secondly, the oil and gas sector is responsible for 28% of Canada's total greenhouse gas emissions, while contributing ~5% of the nation's GDP. Oil and gas production scope 1 and 2 emissions are Canada’s biggest and fastest growing set of emissions. 

Four primary goals and associated policies have been outlined to steer the sector toward a sustainable future:

  1. Emissions Reductions: Emission targets aim to mitigate climate change's costs and risks. However, without rapid policy implementation, Canada risks missing its 2030 target, complicating the journey to achieve net-zero by 2050.
  2. Cost-effectiveness: The sector plays an economic role, benefiting workers, contributing to GDP, and generating revenue for provinces.
  3. Competitiveness: Canadian policies must focus on emissions reduction without compromising production. A shift in global demand is imminent, with scenarios indicating a decline in oil demand.
  4. Regional Fairness: Policies should account for regional disparities, ensuring equitable treatment across provinces.

To address the above goals, four pivotal policies have been proposed:

  • Regulations on Methane: New stringent regulations aim for a 75% reduction in methane emissions by 2030, a potent greenhouse gas. Provincial governments, like Alberta and British Columbia, are championing even stricter regulations.
  • Support for Carbon Capture and Storage (CCS): CCS offers one of the most promising pathways to drastically reduce emissions. However, massive capital investments are required. Proposals include Investment Tax Credits and carbon contracts for difference to stimulate investments.
  • Emissions Cap: Regulatory framework consistent with future targets. The exact decline rate for the cap is still debated, balancing industry concerns and the urgency of climate goals.
  • Transition Taxonomy: Adopting a standardized framework like the Climate Investment Taxonomy will guide financial markets, ensuring investments align with Canada's climate aspirations.

In conclusion, to build a sustainable future for Canada's energy sector and achieve emissions targets, a mix of stringent regulations, technological innovation, financial incentives, and equitable policies is essential. The stakes are high, but so are the opportunities for positive change.

Common Sources of Federal Greenhouse Gas Emissions
Common Sources of Federal Greenhouse Gas Emissions
Source: US Environmental Protection Agency (EPA)
https://www.epa.gov/greeningepa/greenhouse-gases-epa