The natural-gas and oil industry has long told the federal government that its proposed emissions caps on the sector would mean reduced production, loss of jobs, and loss of government revenues at all levels.
And First Nations leaders have said the cap will hurt Indigenous peoples.
On Day One in office new Prime Minister Mark Carney cut Canada’s carbon tax to zero for consumers (industrial emitters still pay). Then BC did the same with its consumer carbon tax, costing the provincial government $1.5 billion in revenue.
Now Carney proposes to come up with some new “industrial carbon pricing system.”
He says that some form of Canadian pricing on carbon “for the largest emitters” will be required by governments in Europe, the UK, and developing Asian countries if Canada is to sell LNG to them. (Although this does not apply at this time to US LNG exports.)
Carney has given no details yet, so, until he says otherwise, the proposed federal cap system is still alive, and would aim to cap greenhouse-gas emissions from oil and gas production, by 2030, at 35% below 2019 levels.
The new environment minister, Terry Duguid, says that if the Liberals form the next government, they will maintain the oil and gas emissions cap.
Ottawa has insisted that this cap-and-trade system would not affect production. Natural Resources Minister Jonathan Wilkinson and then-environment minister Steven Guilbeault (now minister of Canadian culture and identity) said that the caps can be achieved with existing technology, without cutting production. “We go after pollution and not production.”
But now comes the independent Parliamentary Budget Officer with a different story:
“PBO estimates that the required reduction in upstream oil and gas sector production levels will lower real gross domestic product (GDP) in Canada by 0.39 per cent in 2032 and reduce nominal GDP by $20.5 billion.
“PBO estimates that achieving the legal upper bound will reduce economy-wide employment in Canada by 40,300 jobs and full-time equivalents by 54,400 in 2032.”
Then, In a most unusual move, Resources Minister Wilkinson publicly slammed the Parliamentary Budget Officer:
“Unfortunately, the PBO wasted their time and taxpayer dollars by analyzing a made up scenario.
“Governments and industry themselves agree on the potential of technically achievable (CCS) to cut pollution from the oil and gas industry while the production of oil and gas increases, and thousands of good jobs are created.
“PBO is once again misleading Canadians and ignoring reality.”
That attack drew a response from the PBO: “Under PBO’s baseline scenario, which excludes the proposed oil and gas emissions cap regulations, upstream production (excluding liquified natural gas) is projected to be 17 per cent higher, on average, over 2030 to 2032 compared to current (2022) levels.
“To achieve the legal upper bound (that is, maximum allowable emissions), we estimated that production for these subsectors would have to be reduced by 4.9 per cent relative to their projected baseline levels.
“Under the scenario with proposed regulations, total production from these subsectors would be 11.1 per cent higher, on average, over 2030 to 2032 relative to current (2022) levels. As noted in the report, the 2022 production levels for these subsectors are at or close to historical highs.”
It all led Heather Exner-Pirot of the Macdonald-Laurier Institute and the Business Council of Canada to challenge the feds to make public their scenario, an Environment and Climate Change Canada model “which taxpayers haven’t been able to scrutinize yet.”
While Prime Minister Carney has yet to explain his coming industrial carbon-pricing system, Guilbeault said of it: “That gives us three times more emissions reduction (than the consumer carbon tax).”
Guilbeault added: “And you should remember that our climate change plan doesn’t rest on one or two measures. It’s more than 100 measures that we’ve deployed over the years.”
Ottawa says the oil and gas sector is responsible for 28 per cent of Canada’s emissions.
Wilkinson also says Ottawa is also looking to reduce methane emissions by 75% from 2019 levels, by 2030. Resource Works reports: “That is projected to impose $15.4 billion in new costs by 2040, equating to $71 spent for every tonne of emissions reduced — a figure four times higher per tonne than previous methane reduction efforts.”
(Meanwhile, with an election looming, the Conservatives say they would scrap the industrial carbon tax and use incentives to reward companies that reduce emissions.)
While the feds say their emissions cap would not hit production, a report from consultants Deloitte Canada said: “Curtailing production would be a more cost-effective option compared to investing in CCS (carbon capture and storage). Hence, the most likely outcome is that producers would opt to curtail production if confronted with the proposed cap in 2030. “
And for natural gas, Deloitte said: “Meeting the cap obligations through curtailment suggests that Canada would need to reduce . . . gas production by approximately 2.2 billion cubic feet a day, equivalent to a 12% reduction in production volumes relative to BAU (business-as-usual) production in 2030.”
Earlier, the Conference Board of Canada said: “Total output in the oil and gas sector, as measured by barrels per day equivalents, would be much lower—growing only 1.6 per cent between 2023 and 2030, compared with 14.3 per cent without the policy.
“This reduced output would . . . impact federal and provincial finances. For the federal government, nominal revenues are expected to be 0.8 per cent lower due to the reduced economic activity in the oil and gas sector. . . .
“Alberta government revenues would be $4.5 billion lower in nominal terms in fiscal year 2030–31 as a result of this policy.”
Alberta Premier Danielle Smith challenged the planned cap system on constitutional grounds: “We will defend our province, our country and our constitutional rights.
“Make no mistake, this cap violates Canada’s constitution. Section 92A clearly gives provinces exclusive jurisdiction over non-renewable natural resource development, yet this cap will require 1 million b/d (barrels a day) of production cut by 2030.”
And, following the graphic picture above, the Calgary Chamber of Commerce declared: “This is not just a cap on emissions – it is ultimately a cap on production and Canadian prosperity. . . . Rather than support investment, the emissions cap, as currently structured, will create more uncertainty, ultimately leaving Canada further behind.”
And all this as Canada struggles with Donald Trump’s trade war.
Meanwhile, some First Nations leaders say the federal emissions cap will in particular hurt First Nations and Indigenous people.
For one, Dale Swampy, president of the National Coalition of Chiefs, says: “Many Indigenous people would particularly suffer from Environment Minister Steven Guilbeault’s proposed emissions-cap approach, harming our quest for economic independence, self-determination and sustainable community infrastructure — the three pillars that define Indigenous economic reconciliation.”
He added, in a guest column in Financial Post: “Almost 14,000 self-identified Indigenous people work for Canada’s oil and gas industry. Their incomes benefit their families and communities across the country, allowing for significant progress in areas that address poverty and inequality experienced by Indigenous people. . . .
“The implementation of this policy proposal will have numerous negative consequences. Consumer prices will rise further. Our economy will suffer more. Investments into carbon technology will become less likely, making climate change an even greater threat for all of us.
“And Indigenous reconciliation, something the Liberal government supposedly cares deeply about, will become even harder to achieve.”
