Pembina Institute

New analysis shows that weak oil and gas regulations would paint Ottawa into a corner for its climate target

Published June 24, 2013.

OTTAWA — With the federal government’s latest deadline to announce greenhouse gas regulations for the oil and gas sector just a week away, new analysis from the Pembina Institute highlights the consequences of adopting a weaker-than-required approach to this high-profile industry.

In April, the Pembina Institute published a report outlining the key features of effective regulations to reduce greenhouse gas pollution from Canada’s oil and gas sector. Since that analysis was published, media reports have revealed details of several proposals being considered by the federal and Alberta governments.

“These regulations will be a make-or-break moment for Canada’s climate target and a test of the government’s commitment to responsible oil and gas development,” said Clare Demerse, director of federal policy at the Pembina Institute and co-author of the new analysis. “Regulations that reduce the sector’s greenhouse gas pollution would be good news for oil and gas companies facing scrutiny of their environmental track record. But weak oil and gas regulations would paint the government into a corner, leaving Ottawa with some very tough choices to make to hit its 2020 emissions target.”

The federal government has chosen a sector-by-sector regulatory approach as its main policy tool to reduce emissions to its national emission target for 2020, a goal the government adopted to align with the United States’ objective. Canada is currently projected to miss that target by a significant margin, but effective oil and gas regulations could get the country on track.

Asking relatively little of oil and gas companies would leave the federal government with three options with regard to its 2020 target, none of them simple. They are:

  • Rapidly adopting stringent regulations for all of the remaining sectors (a group that includes manufacturing, chemicals, agriculture and landfills, among others).
  • Admitting that the sector-by-sector regulatory approach, as it has been applied, will see Canada miss its 2020 target by a significant margin.
  • Adopting a national carbon price as a complement to the sector-by-sector regulations. Although carbon pricing enjoys widespread support among economists, environmentalists and industry groups, the Harper government has strongly opposed it in recent years.

In March, Environment Minister Peter Kent publicly committed to outline the government’s approach to limiting greenhouse gas pollution from Canada’s oil and gas sector in the first half of 2013, giving himself a deadline of July 1. The oil and gas sector accounts for nearly a quarter of Canada’s greenhouse gas pollution and the oilsands are the fastest-growing source of emissions in Canada.

The Pembina Institute’s new analysis highlights three issues to watch when greenhouse gas regulations for the oil and gas sector are announced:

  • Greenhouse gas implications: The analysis considers a hypothetical mid-point regulation that fall between the weakest and strongest proposals reportedly under consideration. Under such a scenario, the oil and gas sector’s emissions would likely be higher in 2020 than they are today.
  • A technology fund: The federal government is likely to give companies the option of paying into a technology fund rather than reducing their emissions directly, as the Government of Alberta does today. If Ottawa adopts Alberta’s approach wholesale, the new federal fund would be unlikely to generate any significant reductions in time to meet Canada’s 2020 target.
  • Looking beyond the oilsands: It’s clear from media reports of the targets and prices under discussion that these would apply to the oilsands. What’s not clear is whether the rest of the oil and gas sector will be treated the same way. There is a risk that the approach to the oilsands will represent the high-water mark for the regulations, and that other oil and gas subsectors will face even less stringent requirements.

“Well-designed regulations could make a significant difference in the environmental footprint of Canada’s oil and gas sector,” said P.J. Partington, a policy analyst at the Pembina Institute and co-author of the new analysis. “Strong regulations would also help the oilsands compete as the world makes a transition to lower-carbon sources of energy.”

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Visit the Pembina Institute's website to download a copy of Key issues to watch in federal oil and gas climate regulations.

Contact

Clare Demerse
Federal Policy Director
Cell: 613-762-7449
Office: 613-562-3447 x222

P.J. Partington
Technical and Policy Analyst, Climate Change
Office: 647-478-9563 x212

Bernard Rudny
Communications Lead
Cell: 416-993-2455

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