The oil and gas emissions cap is a dose of cold reality for a warming world
There can be no path to net zero that doesn't run through the oilsands
Prime Minister Justin Trudeau's restatement this week of a promise to implement a declining cap on greenhouse gas emissions from Canada's oil and gas industry — coupled with some of the reaction his comments provoked — is reality setting in.
Informed by rigorous science, the nations of the world have decided that global greenhouse gas emissions need to reach net-zero by 2050 in order to limit the catastrophic effects of climate change. Canada has agreed to do its part by getting its national emissions to net-zero by mid-century. Every major federal party agrees with that goal.
The commitment is being driven by some very basic math.
In 2019, the last year for which data are available, Canada produced 730 megatonnes of GHG emissions. The oil and gas industry accounted for 26.2 per cent of that total.
The sector's total emissions increased from 159.9 Mt in 2005 to 191.4 Mt in 2019. In the oilsands specifically, emissions have more than doubled from 35 Mt to 83.1 Mt. Now those emissions need to be significantly reduced over the next 30 years.
Better late than never?
Chris Severson-Baker, Alberta regional director for the Pembina Institute, said this week that a legislated emissions cap has been "a long time in coming."
"In order to have a credible position behind the pledges that we've made and that we're trying to encourage the rest of the world to make, we need to actually have an answer for how we're going to deal with oil and gas emissions in the future," he said.
Producers should perhaps feel lucky that the federal government is focusing on emissions, Severson-Baker said. Some environmentalists have called for an outright cap on production.
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But it's not just politicians, scientists and environmental groups adopting net zero as a goal. On Wednesday, ConocoPhillips became the latest company to join an alliance of major Canadian oil producers — collectively representing about 95 per cent of all oilsands production — touting their own "Pathways to Net Zero" initiative.
"We've made a commitment to work together to put together a plan ... that reduces emissions. So the announcements that have come out this week — I guess what I would say, we're indifferent to those because that's something we're already working on," said Pathways director Al Reid on Wednesday.
'The path matters'
If everyone agrees on the destination, the logical next step is to figure out how to get there. And a gradually tightening emissions cap is one way to ensure you make steady progress and arrive on time.
"The path matters a great deal because the effects of GHGs are cumulative. Reducing earlier is of greater benefit than doing so later. Hence, having a committed plan for the path to net-zero has value," said Blake Shaffer, an economist at the University of Calgary who studies energy and climate change.
Figuring out the means was always going to be a challenge. But a cap forces political and industry leaders to confront that reality.
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Actually implementing a cap won't be simple — and both Severson-Baker and Shaffer suggest it will lead to difficult choices about how the allowed space for emissions is used. But the big questions now are how much the emissions from oil and gas production can be reduced, how quickly that should happen and and how much governments should help.
The answers will include technologies like carbon capture utilization and storage (CCUS). In addition to proposing an emissions cap, the federal government is also consulting on plans to provide an investment tax credit for CCUS. One industry association has suggested that such a tax credit should cover 75 per cent of costs — Pembina has proposed 50 per cent — while Premier Jason Kenney's government in Alberta reportedly has asked for $30 billion over the next ten years in federal support.
The industry confronts its future
The Pathways initiative put forward by major oil producers envisions a pipeline and storage hub that would connect more than 20 oilsands facilities. In the medium-term, it also points to hydrogen development and small nuclear reactors, while also leaving substantial room in its long-term projections for offsets and emerging technologies like direct air capture.
All of this work would be done "collectively" with federal and provincial governments. Two industry executives have suggested it would require investments totalling $60 billion.
Reid said it would be "difficult" to estimate a total cost "but I think it is going to require an unprecedented level of private and public cooperation to get this work done."
But it won't make sense to decarbonize all oil projects, Severson-Baker said — particularly as global demand for oil declines.
So the push to implement a cap on oil and gas emissions should also accelerate thinking about how to support people who may be forced to change jobs in the decades ahead. The government can help give industry a "fighting chance of meeting that cap while maintaining economic activity and jobs" but beyond that is the question of "how you effect the transition more smoothly," Shaffer said.
Tough choices ahead
The notion of a "just transition" is often championed, but — like net zero — it now needs to be turned into something real and credible.
As they decarbonize the economy, governments may also have to make choices about how limited public funds will be dispersed across different sectors and resources, Severson-Baker said.
"If we get into a situation where we have to choose … I think there's a lot of arguments to say we need to be putting more into the sectors that we know we're going to really need and will be around well into the future in a carbon constrained world," he said.
Severson-Baker said one thing the Alberta government could do right now is remove unnecessary regulatory obstacles standing in the way of decarbonization projects.
The same Liberal election platform that included a commitment to cap emissions from the oil and gas industry also proposed zero-emission vehicle mandates for automotive sales and a clean electricity standard. That rather complicates claims that oil and gas is being unfairly targeted now.
But the politics of reducing emissions from the sector is uniquely complicated. It would be easier if the industry wasn't so regionally concentrated. And it is perhaps unfortunate that the challenge has fallen to a prime minister named Trudeau (Stephen Harper once promised to do something about oil and gas emissions, but could never bring himself to follow through).
But some prime minister was going to have to face that reality. And now is as good a time as any to do so.