RoydadNaft –  Several energy stakeholders have voiced their disagreement with Canada’s proposed greenhouse gas emissions cap, with some calling it effectively a limit on oil and gas production for the nation.

Canada’s federal government announced the draft framework requiring the oil and gas industry to reduce emissions 35 to 38 percent below 2019 levels by 2030 during COP 28. The pollution cap puts a limit on the amount of emissions the sector produces, but provides compliance flexibilities, mostly with a limited number of emissions allowances or permits, for an output of 20 to 23 percent below 2019 levels. The federal government in a statement said the proposal “sets a limit on pollution, not production”, further stating that “no sector of the economy should be allowed to emit unlimited pollution”.

Alberta Premier Danielle Smith and Environment and Protected Areas Minister Rebecca Schulz in a separate statement strongly disagreed with key areas of the draft framework, calling it a “de facto production cap on Alberta’s oil and gas sector” that amounted to “an intentional attack by the federal government on the economy of Alberta and the financial well-being of millions of Albertans and Canadians”.

“Alberta owns our resources, and under the Constitution we have the exclusive jurisdiction to develop and manage them”, Smith and Schulz said. “We have done so responsibly by setting a price on carbon as far back as 2007, developing a carbon offset and trading program (TIER), investing billions in commercial scale carbon capture, creating an innovation fund that has so far supported 260 emissions-reducing projects with [CAD] 2.6 billion in grants, and by establishing a clear framework for reaching carbon neutrality across our entire economy by 2050”.

“With their pronouncement singling out the oil and gas sector alone for punitive federal treatment, Prime Minister Justin Trudeau and his eco-extremist Minister of the Environment and Climate Change Steven Guilbeault are risking hundreds of billions of dollars of investments in Alberta’s and Canada’s economies and core social programs, are devaluing the retirement investments of millions of Canadians, and are threatening the jobs of hundreds of thousands of Albertans”, the statement continued.

The two Albertan politicians said the province’s cabinet and caucas plan to “develop a constitutional shield” in response to the emissions cap, calling the federal government “one of the most damaging federal administrations in Canadian history”.

“The federal government must stay out of our province’s constitutional jurisdiction and instead work with us to align their emissions-reduction efforts with our effective made-in-Alberta plan”, the statement concluded, referring to Alberta’s Emissions Reduction and Energy Development Plan, which aims to achieve a carbon-neutral economy by 2050 through a combination of investments in emissions-reducing technologies combined with practical emissions offsets.

The Canadian Association of Petroleum Producers (CAPP) shared the same sentiments, saying that the emissions cap “could result in significant curtailments”, effectively making it a cap on production.

“An emissions cap on the upstream oil and natural gas industry is unnecessary, given the longstanding carbon policies which already have Canada well on its way to meet or exceed emissions targets”, CAPP President and CEO Lisa Baiton said in a statement. “The added complexity of yet another layer of carbon policy is potentially detrimental to established carbon markets that fund clean energy projects”.

“The government’s own data shows that Canadian conventional producers have achieved meaningful absolute reductions in both methane and Scope 1 carbon dioxide equivalent emissions – absent a legislated cap – through investments in clean technologies and other innovations”, Baiton continued.

“CAPP will raise our concerns through the consultation process and continue our efforts to work with the federal and provincial governments to ensure the draft framework released today does not become a cap on Canadian oil and natural gas production”, Baiton concluded.

Pathways Alliance, a group of Canadian oil sands developers, said it needed time to analyze the emissions cap framework to determine how it may impact oil sands operations.

“It is our view that existing, economy-wide carbon pricing systems, including provincial equivalents such as Alberta’s Technology, Innovation and Emissions Reduction (TIER) system, already provide appropriate regulation to drive emissions reductions toward net zero by 2050”, Pathways Alliance President Kendall Dilling said in a statement. “Imposing an emissions cap, with additional regulatory complexity, does nothing to advance the certainty necessary for the planned multi-billion-dollar decarbonization projects to proceed”.

“While we recognize that the federal government adjusted some of the aggressive oil sands targets suggested in the Emissions Reduction Plan after analysis showed they were not technically achievable, we still need a greater understanding of how the cap integrates with other policies to support our emissions reduction investments”, Dilling added.

Independent public policy think tank Montreal Economic Institute (MEI) said the emissions cap would cost the Canadian economy over $4.41 billion (CAD 6.0 billion) per year and “have a negligible impact on the environment”.

“Each time Ottawa forces the Canadian energy sector to contract, it is foreign producers who win”, MEI public policy analyst Gabriel Giguère said in a statement. “Ottawa does not have the means to affect global demand, so reducing local supply will only end up exporting jobs and tax revenues”.

Meanwhile, Canadian advocacy organization Environmental Defence said the framework is still “far from perfect”, adding that final rules needed to be implemented as soon as possible, “at the latest by February 2024”.

“For the target to ensure oil and gas companies are doing their part, it must increase to at least align with Canada’s national emissions reduction target, which is a 40–45 percent reduction from 2005 levels by 2030”, the organization said in a statement.

Environmental Defence also called the inclusion of offsets and free allocations in the framework “concerning”, saying that “the federal government must ensure that oil and gas companies are not allowed to use these flexibilities as loopholes to shirk their responsibilities”.