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Canada Introduces 35% Emissions Cap for Oil and Gas Sector by 2030

Canada Introduces 35% Emissions Cap for Oil and Gas Sector by 2030

Canada Introduces 35% Emissions Cap for Oil and Gas Sector by 2030
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  • New Emissions Target: Canada sets a 35% reduction target for oil and gas sector emissions by 2030 (based on 2019 levels), focusing on pollution reduction rather than production cuts.
  • Cap-and-Trade System: Allocates emissions allowances, incentivizing reinvestment into cleaner technology and providing offsets for high-emission facilities.
  • Economic and Environmental Goals: The plan supports projected production growth of 16% by 2030 and includes $12.5 billion in tax credits to support carbon capture, enhancing Canada’s position in clean energy.
  • Industry and Political Reactions: Provinces and industry groups have voiced economic concerns, while environmental groups push for an accelerated timeline.

The Canadian government’s proposed regulations aim to cut emissions in the oil and gas sector by 35% by 2030, compared to 2019 levels. Environment Minister Steven Guilbeault clarified, “This goes after pollution, not production,” emphasizing that the cap supports Canada’s commitment to carbon neutrality by 2050

Canada’s Environment Minister, Steven Guilbeault

Cap-and-Trade System to Drive Investment

The new cap-and-trade system allocates emissions allowances to facilities, rewarding companies that reinvest profits into decarbonization projects. High-emission facilities can either buy credits from more efficient companies or contribute to a decarbonization fund, offsetting up to 20% of emissions.

Canada’s oil and gas sector, which recorded $66.6 billion in profits in 2022, will be encouraged to redirect earnings toward technologies that reduce greenhouse gas output. Jonathan Wilkinson, Canada’s Natural Resources Minister, noted, “If you start to go beyond what is achievable, you are moving this from an emissions cap to a production cap,” underscoring the balance between emissions reduction and production growth.

Balancing Emissions Cuts with Production Growth

Canada projects a 16% increase in oil and gas production by 2030, even with the emissions cap in place. The plan is to ensure that facilities continue to meet global demand, while reducing their environmental impact and reinforcing Canada’s position in sustainable energy.

Focus on Methane and Carbon Capture

Methane reduction and carbon capture storage (CCS) are pivotal in the new regulations. 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 projects. “Methane emissions reductions represent a significant opportunity for low-cost, high-impact GHG cuts,” Guilbeault highlighted, pointing to methane as a low-cost, high-impact focus area.

RELATED ARTICLE: Canada Raises $2 Billion in Green Bond Reopening, First to Include Nuclear Energy Expenditures

Path Forward and Industry Consultation

The proposed regulations are open for public input from November 9, 2024, to January 8, 2025. While some industry stakeholders, such as the Canadian Association of Petroleum Producers, have voiced concerns that the cap could deter investment, environmental advocates urge a faster timeline. “The rules must take effect sooner than the proposed 2030 timeline,” stated Environmental Defence. Finalized regulations are expected in 2025, following this period of consultation and input.

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