Trudeau Climate Plan Seeks 42% Cut in Oil and Gas Emissions

(Bloomberg) -- Prime Minister Justin Trudeau’s government wants a 42% reduction in emissions from the oil and gas sector as part of Canada’s plan to meet its 2030 emissions-reduction goal.

Trudeau’s blueprint promises industry a tax credit to help pay for carbon-capture projects, details of which may come as soon as next week’s federal budget. It doesn’t, however, include a specific emissions cap on the fossil-fuel sector, which accounts for about a tenth of Canada’s total economic output.

The document, introduced Tuesday in parliament by Environment Minister Steven Guilbeault, promises an additional C$9.1 billion ($7.3 billion) in new spending to reach Canada’s climate targets. Overall, the government aims to reduce emissions more than 40% from 2005 levels by 2030. 

Releasing a climate plan is a key step toward turning the Trudeau government’s lofty environmental rhetoric into reality. While it lacks many vital details for the economically-crucial energy industry, the prime minister argued the overall sectoral target makes it clear to producers what’s expected of them.

“If there’s any oil and gas sector in the world that can do it, it’s Canada’s,” Trudeau told a conference in Vancouver. “Big oil lobbyists have had their time on the field,” he added, saying it’s now up to workers and engineers to bring emissions down.

Reaction in Canada’s oil patch was cautiously supportive. 

The government plan acknowledges that oil and gas demand will continue for decades, Terry Abel, executive vice president of the Canadian Association of Petroleum Producers, said in an emailed statement. But he added that Canada can help reduce global emissions by providing cleaner natural gas to offset crude oil from places like Russia, whose invasion of Ukraine has reignited calls in Western Canada to promote more ethically-sourced fossil fuels.

“One of the largest contributions Canada can make to lowering global greenhouse gas emissions is by exporting Canadian liquefied natural gas to displace the use of coal in the world’s energy mix,” he said. “This is a crisis brought on by years of energy policies around the globe that are misaligned with the realities of energy demand leading to an increasing reliance on dictatorships to provide critical energy supplies.”

Enbridge Inc., Canada’s largest pipeline company, is reviewing the government’s targets but already has “a well-developed emissions reduction plan that’s aligned with the objectives of the Paris agreement,” spokesperson Jesse Semko said by email. “We’ve been able to reduce our scope 1 and 2 emissions intensity by 21% and our absolute emissions by 14% compared to our 2018 baseline.”

The government’s target is more aggressive than many Canadian energy companies have themselves planned. Suncor Energy Inc., for example, aims to cut emissions by about a third by 2030.

Climate activists, meanwhile, complained that Trudeau didn’t go far enough. “Avoiding catastrophic climate change requires winding down production of oil and gas over the next decade,” Keith Brooks, program director at Environmental Defence, said in a statement.

And in parliament, New Democratic Party Leader Jagmeet Singh -- who agreed last week to keep the Liberals in power for three years in exchange for more social spending -- lamented that the plan had little say on ending fossil-fuel subsidies and helping workers transition to greener jobs.

Meeting Canada’s targets won’t be cheap. The total spending -- from both governments and businesses -- needed over the next three decades to get to net zero is C$2 trillion, according to a Royal Bank of Canada report last fall, which it said translates to at least C$60 billion a year in spending given current technologies.

Tuesday’s plan says the government is working to reduce oil and gas methane by at least 75% by 2030, and support clean technologies to further decarbonize the sector.

It outlines support for the transition to electric vehicles, including a mandate that at least 20% of all new light-duty vehicles offered for sale by 2026 have zero emissions. The government has previously said it aims to hit 100% in that category by 2035.

The Canada Infrastructure Bank will spend C$500 million on electric vehicle charging infrastructure, and the government will put forward an extra C$400 million towards building charging stations. 

Canada’s total greenhouse gas emissions in 2019 were 730 megatons of carbon dioxide equivalent. Oil and gas extraction represents about 26% of those emissions, and the government will be heavily relying on the carbon capture tax credit and the emissions cap to ensure the sector reaches its goals.

Production Implications

On the emissions cap, the government said Tuesday a discussion paper will be published this spring, to be followed by consultations with provinces, Indigenous partners, industry and civil society. The government also said it doesn’t intend to use the cap to lower production that is “not driven by declines in global demand”

Increased oil production in Canada is still possible under the plan, according to a government official who briefed reporters on condition they not be named. The official said the measures will significantly improve emissions intensity in the sector, potentially allowing for more production if the market demands it.

Trudeau’s government will soon be deciding on at least one large oil project, the Bay du Nord offshore development near Newfoundland. Guilbeault has until April 13 to decide if the project has significant adverse environmental effects, though that deadline has already been extended twice.

The prime minister pledged during last year’s election campaign his Liberals would force oil and gas companies to set five-year targets to cut their emissions with the aim of reaching net zero emissions by 2050. The program would be poised to begin in 2025. Part of this plan includes a C$2 billion fund to create green jobs in oil-producing regions.

Canada is the only country in the Group of Seven to see its harmful emissions actually rise between 2015 and 2019. Trudeau has blamed his country’s record on emissions to date on the previous Conservative government, which in 2011 withdrew from the Kyoto protocol, a precursor to the 2015 Paris agreement. The prime minister also has said four years of climate skepticism in the U.S. under Donald Trump also effectively held Canada back.

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