On Thursday, the Trudeau government unveiled its plan to cap greenhouse gas emissions from Canadaâs oil and gas sector. The plan calls for a âcap-and-tradeâ system rather than a mandatory hard cap on emissions.
A previous plan would have required the oil and gas sector to reduce emissions by 42 per cent (from 2019 levels) by 2030. The new plan calls for a 35 per cent to 38 per cent cut (again, compared to 2019 levels by 2030). So the government has somewhat softened the target. However, the slight change is unlikely to improve the cost/benefit analysis for the sector or affected provinces.
As noted in a study published earlier this year, the Trudeau governmentâs previous plan would have resulted in at least $45 billion in revenue losses for the oil and gas sector in 2030 alone, which would imply a significant drop resource royalties and tax revenue for governments. And costs would ripple farther out from the oil and gas sector, into the plastics and petrochemical sectors, imposing more costs and threatening the employment of many Canadian workers in those sectors.
Crucially, according to the study, this economic gain would come with little or no environmental benefit. While the reductions would be large when only considering Canadaâs oil and gas sector, the impact on climate change, which is a matter of global GHG concentrations, would be virtually nonexistent. The governmentâs previous plan called for Canada to reduce GHG emissions by 187 megatonnes in 2030, which would equate to four-tenths of one per cent of global emissions and likely have no impact on the trajectory of the climate in any detectable manner and hence offer equally undetectable environmental, health and safety benefits. In other words, the Trudeau governmentâs new plan would reduce an already unmeasurable climate benefit to one even less measurable.
And now, there are serious questions if the new plan will deliver even the miniscule climate benefit mentioned above. Under a cap-and-trade scheme, companies can trade in emission offsets if theyâre unable to reduce emissions via their own technological processes, and to avoid cutting oil and gas production. But emission offset schemes are deeply dodgy.
As noted in a Guardian investigation of Verra, the worldâs leading offset marketâbasically, organizations that reduce carbon in the atmosphere by tree-planting and other initiativesâmore than 90 per cent of Verraâs rainforest offset credits (among the most commonly used by companies) are likely âphantom creditsâ and do not represent genuine carbon reductions. And as reported in the ultra-green Grist, rainforest credits are not the only bogus game in town. âIn reality⌠the market for these offsets is âriddled with fraud,â with offset projects too often failing to deliver their promised emission reductions.â
Canadaâs domestic carbon offset market may be more robust than in other countries, but thereâs no guarantee. If a significant share of Canadaâs offsets prove to be as bogus as the international norm, GHG reductions from the oil and gas sector might be smaller still.
The Trudeau governmentâs new GHG cap on the oil and gas sector is a moderate improvement over the previous plan. The cap is a bit less stringent, and therefore might be easier to attain. And the use of cap-and-trade rather than a hard cap will give the oil and gas industry more flexibility, and more importantly, allow it to avoid curtailing production to satisfy the cap. But the plan still fails a critical cost/benefit analysis. It remains quite high in potential costs for Canadaâs oil and gas sector, particularly in provinces which produce the most oil and gas, yet will deliver environmental benefits that are too small to measure.
Author:
Senior Fellow, Fraser Institute
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