Guilbeault: Canada Aims to Cut Emissions by One-Third by 2030

Under a new federal policy, the oil and gas sector must reduce emissions by over 33% within seven years or purchase offset credits.

Since the 2021 election, the Liberals have assured a restriction on emissions from the fossil fuel industry. However, the recent announcement on Thursday explicitly outlined the precise reduction the government expects the industry to achieve.

By the year 2030, traditional oil companies, oil and gas producers, and natural gas companies will need to collectively reduce their emissions by 35 to 38 percent compared to their 2019 levels. However, this requirement will not include oil refineries, as their emissions fall under the regulations of the clean fuel standard.

However, they have the option to purchase offset credits or contribute to a decarbonization fund, enabling them to reduce the obligatory emissions target to a range of merely 20 to 23 percent.

In 2022, the government projected that the oil and gas sector would be required to reduce emissions by 42 percent compared to the 2019 levels for Canada to achieve its climate goals by 2030.

Minister of Environment Steven Guilbeault mentioned that the specific figure was determined following thorough consultations with various stakeholders, including the industry, to ensure its attainability and minimize susceptibility to potential constitutional challenges from provinces regarding jurisdiction.

“I think what we’re doing is historical, not just in the Canadian context but in the international context as well,” said Guilbeault. “We’ve never put in place regulations in Canada that would ensure that the oil and gas sector reduces its overall emissions. We’ve never done that.”

On Thursday, a framework delineating the cap was released, detailing intentions for draft regulations to be proposed next spring, with the final regulations set for 2025.

According to Natural Resources Minister Jonathan Wilkinson, the policy factors include the anticipation that production will continue to rise for several more years before reaching a point where demand starts to stabilize.

Regarding real emissions, the cap requires oil and gas producers to reduce greenhouse gas emissions by approximately 40 to 46 million tonnes per year by 2030. This figure is roughly equivalent to the combined emissions from the seven largest oil and gas facilities, or the equivalent of what nine to ten million passenger cars would emit in a year.

It accounts for less than 20% of the reduction Canada must achieve to reach its present 2030 goal of cutting overall emissions by 40 to 45 percent from 2005 levels.

The new policy will introduce a cap-and-trade mechanism for oil and gas companies, establishing a maximum limit on emissions, which will be allocated among the respective companies involved.

Companies that manage to operate below their purchased or allocated emissions quota have the option to sell credits to those surpassing their designated limits.

It’s possible to acquire carbon offset credits from other industries.

The federal government is establishing a decarbonization fund, offering companies unable to reduce emissions below their allocated limits the option to invest in the fund, purchase offsets, or both.