CAPP responds to federal government emissions cap framework

Despite the federal government’s stated objective that the emission cap should not put a limit on Canadian oil and natural gas production, the unintended consequences of the draft framework announced today of a cap-and-trade system with an interim target of a 35% to 38% emissions reductions below 2019 by 2030 could result in significant curtailments – making this draft framework effectively a cap on production. At a time when the country’s citizens are experiencing a substantial affordability crisis, coincident with record budget deficits, the federal government risks curtailing the energy Canadians rely on, along with jobs and government revenues the energy sector contributes to Canada.

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 emission targets. The added complexity of yet another layer of carbon policy is potentially detrimental to established carbon markets that fund clean energy projects.

Canada is a major exporter of hydrocarbons to its western allies who value our commitment to energy security while operating under one of the most stringent environmental regulatory regimes in the world. 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. In addition, Canada’s largest oil sands companies have committed to reaching net zero emissions by 2050 and have put into place a credible plan to achieve that goal with interim targets.

While the draft framework released today does allow for Internationally Transferred Mitigation Outcomes (ITMOs) and compliance flexibility, the trajectory and target remain problematic for industry as technology pathways will be challenging by 2030.

In 2022, Canada’s oil and gas industry contributed over $9 billion in cash taxes to the federal treasury. CAPP believes the proposed policy risks triggering unforeseen socioeconomic consequences not the least of which is likely to be higher energy prices for Canadians.

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, allowing industry to continue its path of emissions reduction while growing Canada’s role as a secure provider of responsibly produced energy.

Lisa Baiton is the president and CEO of the Canadian Association of Petroleum Producers.