Canada's government announced Monday the release of a new draft regulation aimed at capping greenhouse gas emissions from the oil and gas sector and introducing a new emissions trading system to reduce them by more than a third pollution in the sector. reports esgtoday.com.
Although it aims to reduce the sector's emissions, however, the government stresses that the new regulation is designed to allow continued growth in oil and gas production, forecasting that it will increase by 16% by 2030-2032 compared to with a base year of 2019 if the sector implements "technically achievable decarbonisation measures".
Canada's largest source of greenhouse gas pollution
The oil and gas sector is the largest source of greenhouse gas pollution in Canada, accounting for more than 30% of national emissions. The sector is also a major employer in Canada, supporting approximately 400 jobs.
Canada has set national climate goals, including commitments to reduce greenhouse gas emissions by 40%-45% by 2030 and to reach net zero emissions by 2050.
The new proposed regulation would see Canada launch a new cap-and-trade system for the oil and gas sector, under which producers would be allocated annual emission allowances, each representing one tonne of carbon emissions, with fewer allowances given over time , in line with the declining emissions cap.
Companies that do not have enough allowances to cover their emissions will be able to buy allowances from companies that have a surplus. Alternatively, companies will be able to contribute to a decarbonisation program for up to 10% of their emissions or use greenhouse gas offset credits for up to 20%, with the combined options accounting for no more than 20% of their emissions.
The new system will be phased in between 2026 – 2029.
The new cap-and-trade system is expected to be phased in between 2026 – 2029, with companies required to record and report their emissions and production during this phase, starting with major emitters in 2027 (for emissions in 2026 d.) and smaller operators in 2029 and with allowances first allocated in 2029 for 2030 as the first year of compliance.
According to Stephen Guilbeau, Canada's environment and climate change minister, the new cap-and-trade system is designed to recognize top-performing companies while incentivizing larger emitters to invest in cleaner production processes. The government highlighted methane prevention and carbon sequestration as key areas of potential investment from the sector to tackle greenhouse gas emissions.
"Every sector of Canada's economy must have a fair share when it comes to curbing our country's greenhouse gas pollution, and that includes the oil and gas sector." We are asking the oil and gas companies that have made record profits in recent years to reinvest some of that money in technology that will reduce pollution in the oil and gas sector and create jobs for Canadian workers and businesses," urged Stephen Guilbeau.
The new oil and gas pollution cap will apply to upstream oil and gas facilities, including offshore facilities, as well as LNG production facilities, with the upstream sub-sector accounting for approximately 85% of the sector's emissions. Activities covered by the emissions cap will include oil sands extraction and upgrading, conventional oil production, natural gas production and processing, and LNG production.
The Canadian government said it is launching a consultation period for feedback on the new draft regulation, which will be open until January 8, 2025, with the final regulation expected to be published in 2025.
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