This text was beforehand revealed within the Edmonton Journal.
This week, conversations at Local weather Week in New York and the World Petroleum Congress in Calgary are framing very totally different solutions to that query — with out a lot overlap.
Possibly that’s as a result of there’s multiple option to measure “greatest.” The truth is, probably the most sensible option to spur the oil and gasoline sector towards lowering emissions is to design coverage that delivers on a number of goals, utilizing a number of approaches. Accomplished proper, a coverage bundle could be better than the sum of its particular person components.
Let’s begin with the goals of local weather coverage.
Sure, emissions within the sector are an issue. Whereas most sectors of Canada’s financial system have seen local weather air pollution peak and start to say no since 2005, emissions from the oil and gasoline sector remain stubbornly high. More and more, emissions within the oil and gasoline sector are making it more durable for Canada to realize its emissions objectives.
Prices matter too. Oil and gasoline nonetheless occupies an vital section of Canada’s financial system, producing round 5 per cent of GDP, and the sector has boosted incomes for employees in oil and gas-producing provinces. It additionally generates important income — from each earnings tax and useful resource royalties — for provincial governments. That’s why coverage that aggressively phases-down oil and gasoline manufacturing in Canada isn’t a viable possibility: it could little question cut back Canada’s emissions, however at a high cost.
On the identical time, sound local weather coverage ought to take into account how areas can appeal to and preserve funding by way of a worldwide shift towards web zero — and the decline in demand for fossil fuels that may include it. Even within the Canada Energy Regulator’s state of affairs the place the remainder of the world strikes extra slowly towards web zero, Canadian oil manufacturing falls by 22 per cent and its gasoline manufacturing by 37 per cent by 2050 (from 2022 ranges). However over time, and with the best coverage indicators, the oil and gasoline sector may effectively transform itself to serve new markets for goods and services, even these beyond fuels, which can be per a web zero world financial system.
Lastly, and maybe controversially, sound coverage ought to share each prices and emissions reductions pretty throughout areas inside Canada. That problem cuts each methods: Provinces equivalent to Alberta and Saskatchewan see the prospect of coverage concentrating on the oil and gasoline sector — equivalent to a cap on oil and gasoline emissions — as unfair. However absent focused coverage, oil and gasoline emissions are projected to continue to grow, given the excessive value of lowering emissions within the sector. Consequently, reaching targets requires different sectors and different areas to scale back emissions much more deeply and do extra of the heavy lifting, primarily getting a smaller share of Canada’s allowable emissions.
How, then, can we reconcile these variations? In a new discussion paper, we suggest that 4 particular insurance policies can set the oil and gasoline sector on a path to a aggressive future per a net zero Canada and a net zero world.
More and more stringent rules on methane emissions can drive low-cost emissions reductions and might ship round one third of the emissions reductions required to align the sector with 2030 targets. They’ll additionally be sure that future sources of development, equivalent to hydrogen manufacturing, really are per web zero.
A cap on oil and gasoline emissions is a significant a part of making certain Canada can achieve its 2030 and 2050 local weather targets. It ensures that different insurance policies, equivalent to authorities assist for emissions reductions within the sector, don’t undermine reaching emissions objectives by locking in emissions-intensive tasks. And it ensures that the sector and the areas wherein it operates are contributing to Canada’s web zero progress.
Sensible public monetary assist for applied sciences like carbon seize will help the sector meet its obligations beneath the oil and gasoline cap, addressing equity issues from dealing with a better carbon value. It may possibly additionally provide value for public dollars even within the face of declining worldwide demand for oil and gasoline by supporting carbon seize infrastructure that different sectors can use (whereas leveraging personal oil and gasoline funding {dollars}).
And a government-backed Climate Investment Taxonomy will help the oil and gasoline sector increase transition-aligned capital from the personal sector to assist pay for brand new investments beneath each the emissions cap and methane rules, supporting low-carbon competitiveness but additionally cost-effective transitions to web zero.
Collectively, these 4 insurance policies complement one another, serving to to make sure that the oil and gasoline sector contributes to Canada’s clear vitality transition, whereas supporting financial development and long-term competitiveness. This bundle of insurance policies can be truthful for fossil fuel-producing provinces, the federal authorities, the business, and the remainder of Canada.
And that simply is likely to be a ticket to credible, sturdy local weather coverage for Canada’s oil and gasoline sector.
