OTTAWA | TRADITIONAL, UNCEDED TERRITORY OF THE ALGONQUIN ANISHINAABEG PEOPLE 

The David Suzuki Foundation welcomes draft regulations that will cap Canada’s oil and gas pollution for the first time and calls on the federal government to finalize the new rules without delay.

Today, Canada’s Environment and Climate Change Minister Steven Guilbeault will unveil the long-awaited draft regulation to limit greenhouse gas pollution from the oil and gas sector. A 60-day consultation will begin on November 9, 2024. The government has said it intends to finalize the regulation in 2025.

The government pledged to cap oil and gas emissions in its 2021 electoral platform. Canada’s 2025 Emissions Reduction Plan reinforced the commitment.

Thomas Green, Senior Climate Policy Adviser, David Suzuki Foundation, said:

“The fossil fuel industry is largely responsible for driving the climate crisis and we can’t expect to solve it if the sector’s emissions remain unchecked. The federal government is doing the right thing by moving forward with regulations to curb the harmful oil and gas pollution that has contributed to the extreme weather we are facing in Canada.

“The oil and gas industry is Canada’s largest source of emissions — and its emissions are still rising. We need these regulations to come into effect as soon as possible in 2025.

“The world is turning to renewable energy sources and Canada should too. These regulations will help create a healthier, safer environment for current and future generations and finally ensure that all sectors do their share of the climate effort.”

Andréanne Brazeau, Senior Policy Analyst for Quebec, David Suzuki Foundation, said:

“Today, environmental advocates everywhere in the country are celebrating this win for the planet and people. The oil and gas industry has gone to great lengths to stall and ‘scrap’ this much-needed climate regulation. It is great and hopeful news that the regulation is moving forward.

“Relentless oil and gas industry lobbying and opposition from some provincial politicians must not get in the way of finalizing this essential regulation to get the sector’s emissions under control. Climate science is clear: there is an urgent need to rein in fossil fuel pollution to limit global warming to 1.5 C and avoid the worst impacts of climate change.

“While publication of the draft regulations is a massive step forward, loopholes need to be closed so that oil and gas companies can’t buy their way out of this new cap on pollution or delay emissions reductions until after 2030.”

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For more information, please contact:

Melanie Karalis, David Suzuki Foundation: mkaralis@davidsuzuki.org, +1 548 588 1279

 

DSF analysis of the draft regulations:

  • According to Environment and Climate Change Canada, operating profits in the oil and gas sector increased tenfold from $6.6 billion in 2019 to $66.6 billion in 2022. Despite record profits, oil and gas companies have been returning profits to shareholders rather than investing in reducing pollution or in clean energy.
  • ECCC analysis projects no impacts on the cost of gas or groceries from the regulation, as oil and gas prices are set in global markets.
  • DSF’s initial review of the draft regulation identifies the following weaknesses that should be addressed in the final regulation:
    • Overall lack of stringency compared to what the climate science indicates emissions reductions need to be and to align with Canada’s 2030 emissions target.
    • The regulation will cap total emissions from covered oil and gas facilities at 27 per cent below reported 2026 levels (equivalent to 35 per cent below 2019 levels) and a significant portion of these reductions will already be required by other measures, such as the forthcoming amendments to Canada’s methane regulations. As a result, the incremental cumulative greenhouse gas emission reductions from the cap are expected to be modest in the first three-year compliance period (13.4 MT).
    • The first conformity period starts in 2030, delaying emission reductions and implying the cap will do little to help achieve the 2030 climate target.
    • Emissions allowances are initially allocated for free, violating the polluter-pays principle (best practices in cap-and-trade systems require that allowances be auctioned).
    • For up to 10 per cent of their compliance obligations, polluters will be able to pay into a “decarbonization fund” at $50/tonne rather than reducing emissions.
    • The use of the decarbonization fund to support GHG reduction projects in the oil and gas industry appears to allow resulting emission reductions to be double counted across compliance periods.
    • For up to 20 per cent of their compliance obligations, oil and gas sector polluters will be able to purchase offset credits rather than reducing emissions.
    • The effective price signal for investments in emission reductions will be low due to the decarbonization fund and offsets.
    • The draft regulations may create a perverse incentive to emit more in the initial reporting period (2026-2029), since the average of this period sets the compliance obligation in the first three-year compliance period (January 1, 2030, to December 31, 2032).
  • Importantly, the proposed regulations do not allow for the use of Internationally Transferred Mitigation Outcomes as a compliance option — which would risk undermining the cap. However, ECCC indicates that it will continue to consult on ITMOs rather than rule out their eventual use.
  • DSF commented on ECCC’s December 2023 proposed Regulatory Framework to Cap Oil and Gas Sector GHG Emissions and will submit comments on the draft regulation.

 

Background:

  • A poll from May 2024 shows that 70 per cent of Canadians want the federal government to stop letting oil and gas companies delay pollution reduction policies and actions, and 66 per cent want Ottawa “to move quickly” to put in place a policy to reduce oil and gas emissions.
  • In Quebec, almost nine out of 10 (86 per cent) people want oil and gas companies regulated so that they reduce their emissions.
  • The majority of Albertans, around six out of 10 want a nationwide cap on oil and gas emissions, with support strongest among Alberta’s youth.
  • The latest early estimate of national emissions from the Canadian Climate Institute show that upstream oil and gas emissions continued their upward trend in 2023 — one of only two sectors that did not show reductions. The oil and gas sector now makes up 31 percent of Canada’s total national emissions.
  • Climate change is costing Canada billions. Over the past decade, climate change is estimated to have reduced Canada’s GDP by $25 billion and affects low-income households the most.