Oil and gas emissions cap
The oil and gas sector is a major contributor to Canada's economy. It is also Canada's largest source of greenhouse gas emissions and, as such, has a critical role to play in meeting the country's climate objectives.
Canada has committed to cap and reduce greenhouse gas emissions from the oil and gas sector at a pace and scale necessary to contribute to Canada’s 2030 climate goals and to achieve net-zero GHG emissions by 2050, in a way that allows the sector to compete in the emerging net-zero global economy.
The cap will be on emissions, not oil and gas production. It will ensure the sector is positioned to deploy technically achievable emissions reductions, be a highly efficient and low-carbon source of fossil fuels as the globe shifts to lower carbon emission and zero carbon emission energy sources, and achieve net-zero by 2050.
The emissions cap is part of a broader suite of policies and investments designed to support decarbonization of the oil and gas sector. The design of the emissions cap will take into account other regulations, such as the commitment to reduce oil and gas methane emissions by at least 75 percent by 2030, as well as complementary climate policies by federal and provincial governments. Some of the Government of Canada emissions reduction measures already under way include:
- Carbon pollution pricing
- Methane Regulations
- Clean Fuel Regulations
- Carbon Capture, Utilisation and Storage (CCUS) Investment Tax Credit
- Emissions Reduction Fund
- Clean Growth Program
- Best in Class Guidance for new oil and gas projects subject to a federal review
On December 7, 2023, the Government of Canada published a Regulatory Framework for an Oil and Gas Sector Greenhouse Gas Emissions Cap to outline key design details of the proposed approach to setting a cap on emissions and seek public comment. Formal written submissions in response to this document should be submitted by email to PlanPetrolieretGazier-OilandGasPlan@ec.gc.ca by February 5, 2024.
The framework proposes a cap-and-trade system (under the Canadian Environmental Protection Act) that sets a regulated limit on emissions from the sector. For an overview, please refer to the Backgrounder on Canada’s Regulatory Framework for an Oil and Gas Sector Greenhouse Gas Emissions Cap.
The design of the proposed cap-and-trade regulations on emissions will be guided by the following principles:
- GHG emissions decline at a pace and scale to meet net-zero by 2050
The regulations would be designed to ensure GHG emissions from the upstream and liquified natural gas (LNG) subsectors decline over time to reach net-zero by 2050.
- accounts for technically feasible emissions reductions and forecasted global oil and gas demand
The legal upper bound on GHG emissions from covered sources would account for technically achievable emissions reductions and for the forecasted global demand for oil and gas.
- administrative burden is minimized
The regulations would be designed to complement and leverage other federal and provincial regulations and programs and to minimize additional administrative requirements, to the extent possible.
- a commitment to review
The effectiveness of the emissions cap-and-trade regulations would be subject to ongoing monitoring and regular reviews, including to assess the legal upper bound on GHG emissions, the quantity of allowances available and the approach to their allocation, and access to compliance flexibility.
The Government of Canada will continue to engage with provinces and territories, oil and gas companies, Indigenous organizations and other stakeholders to develop an emissions cap that will ensure the oil and gas sector's emissions decline on the trajectory needed to meet the shared goal of net-zero GHG emissions by 2050.
The Government expects to publish draft regulations of the oil and gas emissions cap in mid-2024.
Recent oil and gas announcements
- December 7, 2023 – Canada introduces framework to cap greenhouse gas pollution from oil and gas sector
- December 4, 2023 – Minister Guilbeault announces Canada’s draft methane regulations to support cleaner energy and climate action
- July 18, 2022 - Government of Canada outlines next steps to develop an oil and gas emissions cap
- April 6, 2022 - Government of Canada to develop guidance for best-in-class new oil and gas projects and net-zero emissions requirements by 2050
- March 29, 2022 - 2030 Emissions Reduction Plan: Clean Air, Strong Economy
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