The emissions cap would lead to at least $45 billion in lost economic activity in 2030 alone, which would also mean a substantial drop in government resource royalties and tax revenue. New emission limits are being placed on the oil and gas sector – and not any other sector in Canada.
It’s a basic fact that a unit of carbon dioxide has the same atmospheric effect whether emitted from an oilsands mine in Alberta, a steel mill in Ontario or a manufacturer in Quebec. And yet, this fall the Trudeau government will propose new regulations that would impose new emission limits on the oil and gas sector—and not any other sector—to reduce emissions to 42 per cent less than 2019 levels. If passed by Parliament, these new regulations will pile on top of the existing federal carbon tax and a host of other regulatory measures.
According to federal Environment Minister Steven Guilbeault, these new regulations are necessary to combat “climate change,” particularly in light of recent comments by Suncor CEO Rich Kruger who said his company plans to refocus on oil production. But in reality, more restrictions on emissions will come at a significant cost to Canadians with no detectable environmental benefit.
For example, a recent study published by the Fraser Institute found that an emissions cap on the oil and gas sector would inevitably reduce production and exports, resulting in significant negative economic impacts in Canada. Specifically, the cap would lead to at least $45 billion in lost economic activity in 2030 alone, which would also mean a substantial drop in government resource royalties and tax revenue. The impact will be disproportionately felt in Alberta and Newfoundland and Labrador where the oil and gas industry accounts for up to 25 per cent of their respective economies.
But these economic costs come with almost no discernible environmental benefit. According to the study, even if Canada were to entirely shut down its oil and gas sector and thus eliminate all GHG emissions from the sector by 2030, the resulting reduction in global GHG emissions would amount to a mere four-tenths of one per cent (i.e. 0.004 per cent), which would have virtually no impact on the climate nor produce any detectable environmental, health or safety benefits.
Moreover, every credible forecast of world energy consumption indicates that oil and gas will remain predominant in the global energy supply mix for decades. Given the persistent demand for fossil fuels, curtailing oil and gas production and exports in Canada merely shifts production to other regions, potentially to countries with lower environmental and human rights standards, such as Iran, Russia and Venezuela.
Ironically, Minister Guilbeault criticized Suncor from China, a country that quadrupled the amount of new coal power in 2022 and has six times as many coal plants starting construction as the rest of the world combined. According to the International Energy Agency, a significant rise in GHG emissions from the power generation sector in China and India is expected in 2024, mainly due to the increased use of coal in those countries. Any environmental benefit from the Trudeau government’s emissions cap in Canada will be more than offset by the increased use of coal in these two developing countries.
Finally, Canada possesses abundant reserves of natural gas, a cleaner alternative to coal, which could be instrumental in helping countries such as China transition away from their reliance on coal. By exporting natural gas, we could actually play a pivotal role in the global effort to reduce GHG emissions and enhance energy security. However, our current approach prioritizes symbolism over practical solutions.
Overall, Canadians should be deeply concerned about Ottawa’s planned new capping regulations, which will further threaten our prosperity and energy security while failing to reduce global GHG emissions. The Trudeau government should reconsider these regulations and explore more effective pragmatic solutions for addressing climate change while safeguarding Canada’s economic wellbeing.
Authors:
Junior Policy Analyst
Director, Natural Resource Studies, Fraser Institute
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