Canada introduces framework to cap greenhouse gas pollution from oil and gas sector
December 7, 2023 – Ottawa, Ontario
Canadians are making decisions and choices today that will profoundly impact the world we leave to our children and grandchildren. Climate action pays immediate dividends in good jobs and cleaner air and water, but it also opens up more opportunities for the generations that will follow. Every sector of the economy has a part to play in cutting pollution, particularly the oil and gas sector—one of a few where greenhouse gas pollution levels continue to increase.
Today, the Honourable Steven Guilbeault, Minister of Environment and Climate Change, and the Honourable Jonathan Wilkinson, Minister of Energy and Natural Resources, introduced Canada’s draft framework to cap pollution from the oil and gas sector to reduce emissions and remain competitive in a shifting global market. No sector of the economy should be allowed to emit unlimited pollution—not when we are all driving toward the same goal of net zero by 2050 to ward off the worst impacts of the climate crisis. The proposed emissions cap sets a limit on pollution, not production.
The proposed Regulatory Framework for an Oil and Gas Sector Greenhouse Gas Emissions Cap was developed following extensive engagement with industry, Indigenous groups, provinces and territories, and stakeholders. It proposes to cap 2030 emissions at 35 to 38 percent below 2019 levels, while providing compliance flexibilities to emit up to a level about 20 to 23 percent below 2019 levels. The greenhouse gas pollution cap puts a limit on the amount that the sector can pollute and will be key to making sure we reduce our emissions as a country, on the road to reaching net zero by 2050.
The greenhouse gas pollution cap will spur reductions over time at a pace and scale needed to ensure the sector achieves net-zero emissions by 2050, which aligns with provincial and industry commitments. This framework comes at a critical time for Canada, with many Canadians having seen firsthand the impacts of the climate crisis—from floods, heatwaves, and wildfires to economic loss and health impacts.
The greenhouse gas pollution cap has been designed to ensure greenhouse gas emissions from the sector decline, while providing compliance flexibilities to respond to global demand for oil and gas. Facilities will be able to buy a limited amount of carbon offset credits or contribute to a decarbonization fund, which would hold them accountable for a limited volume of emissions above the greenhouse gas pollution cap. These compliance flexibility options will both help reduce emissions—offsets will result in reductions in other sectors, and proceeds from the decarbonization fund will be reinvested to support emissions reductions within the oil and gas sector.
The proposed emissions cap is part of a suite of measures designed to help Canada’s important oil and gas sector remain competitive in a global economy that is rapidly moving to net zero, supporting the talented and skilled energy workers of the sector. Alongside the introduction of the draft Regulatory Framework, Minister Wilkinson has released a Roadmap for the Decarbonization of Canada’s Oil and Gas Sector that sets out the many measures being taken by the Government of Canada, provinces and territories, and the investment community to build a strong, sustainable energy resource sector that can thrive in the 21st century.
The Government of Canada will continue engaging with industry, Indigenous groups, provinces, territories, and all other stakeholders to get this system right. Written comments in response to the Framework should be submitted by February 5, 2024.
At a time when oil and gas companies are reaching record profits, this emissions cap and the suite of complementary measures will stimulate the kinds of investment needed to create and maintain good-paying jobs. The oil and gas sector has time and again proven its ability to innovate, and today marks another step forward in our shared work to keep our air clean and build a strong, thriving economy that works for everyone.
“Every sector of Canada’s economy must do its part to combat climate change and build a safe, prosperous, and healthy future for Canadians. All sectors of our economy need to reduce their emissions, and that includes oil and gas companies. The Government of Canada’s plan to cap and reduce emissions from Canada’s largest emitting sector is ambitious, but practical. It considers the global demand for oil and gas—and the importance of the sector in Canada’s economy—and sets a limit that is strict, but achievable. Canadians have always risen to the challenge of building a brighter future, and this greenhouse gas pollution cap will help Canada compete and succeed in a world that is moving to a clean-energy future.”
– The Honourable Steven Guilbeault, Minister of Environment and Climate Change
“Today, we are moving forward on our commitment to introduce an ambitious and achievable pollution cap on oil and gas sector emissions. The pollution cap will ensure Canada’s oil and gas sector does its part to reduce emissions and it will enhance the sector’s competitiveness in the rapidly decarbonizing global economy. Today’s announcement is a key component of our plan to decarbonize Canada’s oil and gas sector. A plan which recognizes the direction the global economy is heading. A plan that collaborates with provinces and territories, industry, Indigenous peoples, workers, and international partners. And a plan that protects the planet and enhances the competitiveness of Canada’s economy for decades to come.”
– The Honourable Jonathan Wilkinson, Minister of Energy and Natural Resources
According to the most recent National Inventory Report, Canada’s oil and gas sector accounted for 28 percent of national emissions in 2021, making it the largest contributor to Canada’s emissions, followed by the transportation sector at 22 percent.
Capping the greenhouse gas pollution from the oil and gas sector is one of the key measures outlined in Canada’s 2030 Emissions Reduction Plan (ERP), released in March 2022, that is a sector-by-sector roadmap to cut emissions to achieve 40 to 45 percent below our 2005 pollution levels in the most cost-effective way possible, while building a stronger economy for the 21st century.
Today, the Government of Canada also published the first Progress Report on the 2030 ERP to provide an update on progress toward the 2030 target, based on Canada’s most recent inventory of historical emissions and recently updated emissions projections. The publication is timely, as Canada participates in the 28th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP28), where ambitious mitigation action is front and centre.
The Government of Canada proposes to implement the national cap-and-trade system through regulations to be made under the Canadian Environmental Protection Act, 1999. The Government is planning to publish draft regulations by mid-2024.
Cap-and-trade is a market-based system where the regulator issues a quantity of emissions allowances, and may allow for some compliance flexibilities, that together act as a limit on emissions from covered sources.
The cap-and-trade system would cover all direct greenhouse gas emissions, while also accounting for indirect emissions related to the production of oil and gas and carbon storage. The greenhouse gases covered would include carbon dioxide, methane, nitrous oxide, and others. Each emission allowance will be equivalent to one tonne of carbon dioxide equivalent emissions (CO2e).
The greenhouse gas pollution cap would regulate upstream oil and gas facilities, including offshore facilities, and would also apply to liquefied natural gas facilities. These subsectors represent the majority of emissions from the oil and gas sector—the upstream subsector represented 85 percent of sector emissions in 2021. The emissions cap will cover activities such as oil sands, conventional oil production, natural gas production and processing, and production of liquified natural gas.
- A Regulatory Framework for an Oil and Gas Sector Greenhouse Gas Emissions Cap
- Backgrounder: Canada’s Regulatory Framework for an Oil and Gas Sector Greenhouse Gas Emissions Cap
- Roadmap for the Decarbonization of Canada’s Oil and Gas Sector
- The 2023 Progress Report on the 2030 Emissions Reduction Plan
Office of the Minister of Environment and Climate Change
Environment and Climate Change Canada
819-938-3338 or 1-844-836-7799 (toll-free)
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