5 months ago
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By Ismail Shakil and Steve Scherer
OTTAWA (Reuters) -Canada unveiled a plan on Thursday that would require oil and gas companies to cut emissions by 35% to 38% from 2019 levels in the next six years, in a move aimed at meeting the government’s aggressive climate goals.
The government is proposing a cap-and-trade system starting in 2026 to help the industry cut pollution without lowering output. Federal Environment Minister Steven Guilbeault said the plan was “ambitious, but practical.”
“It considers the global demand for oil and gas, and the importance of the sector in Canada’s economy, and sets a limit that is strict, but achievable,” Guilbeault said in a statement.
But the long-awaited proposal drew immediate opposition from two of Canada’s main oil-producing provinces Alberta and Saskatchewan.
Alberta Premier Danielle Smith said the announcement intentionally attacked Alberta’s economy, and that her government will develop a “constitutional shield” in response to the proposal in the coming months.
“This proposed cap also undermines the unity of our country,” Smith said in a statement.
Canada is the world’s fourth-largest oil producer, and the oil and gas industry is responsible for more than a quarter of total Canadian emissions. It has pledged to cut greenhouse gas emissions by 40% to 45% below 2005 levels by 2030. No other sectors of the economy faces such a cap.
But companies can have the flexibility to emit between 20% to 23% below 2019 levels by buying carbon offsets. They can also pay into a fund that promotes decarbonization in the sector if their emissions exceeds the limit.
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Canada is planning to publish draft regulations for a national cap-and-trade system by mid-2024, with final rules targeted a year later and enactment in 2026. Cap-and-trade is a market-based system where the regulator limits emissions and issues emissions allowances that producers can use if they exceed the cap.
The first major government-led cap-and-trade market called the emissions trading system (ETS) was launched by the European Union in 2005. Since then, carbon prices hit a record of about $107 a metric tonne this year.
In 2009, about a dozen U.S. states formed the Regional Greenhouse Gas Initiative (RGGI), a cap-and-trade market on carbon emissions from power plants. RGGI has helped to fund energy efficiency programs and gotten many officials used to carbon markets, but analysts say the market is too small and the prices for emitting, which hit about $13.85 a ton late this year, have so far been too low to significantly impact emissions.
California also has a cap-and-trade market that launched in 2013 on a wider variety of industrial emitters.
Canada’s emission allowances would initially be free, though Ottawa may consider auctioning them in the future. Companies can sell unused allowances to another company under the trade system. The allowances would not be fungible with other carbon pricing systems or regulatory instruments.
The sector produced 189 megatonnes of emissions in 2021, according to the federal government’s national inventory report, more than a quarter of the country’s total. Prime Minister Justin Trudeau first proposed a cap on oil and gas emissions during his 2021 election campaign.
Alberta’s Smith is also challenging the federal government’s requirement for a net-zero electricity grid by 2035 using a legislative framework to defy federal laws Alberta deems unconstitutional.
(Reporting by Ismail Shakil, Steve Scherer and Nia Williams; Additonal reporting by Timothy GardnerEditing by Denny Thomas and Josie Kao)
Disclaimer: This report is auto generated from the Reuters news service. ThePrint holds no responsibilty for its content.
