Strengthening Cap-and-Trade Guidelines for the Oil and Gas Sector
Image credit: David Thielen on Unsplash
The new Oil & Gas GHG Pollution Cap draft regulation for the oil and gas sector comes at an important time as many Canadians are experiencing the impacts of flooding, extreme heat and wildfires. The introduction draft regulation is a positive step in cutting emissions, but the proposed cap-and-trade system is not ambitious enough, considering the urgent nature of climate change. Larger targets, and the elimination of loopholes which allow “business as usual” behaviour are important to avoid the worst impacts of the climate crisis.
Calls to action
The federal government released its first draft of the regulations on November 4, 2024. The final regulations are scheduled to be phased in between 2026 and 2030.
Why this matters to us
We are a concerned Canadian business that is working to reduce our emissions by setting our own ambitious targets. With Canada experiencing record-breaking wildfires with devastating impacts on our forests, biodiversity, communities and air quality, we believe it’s imperative that every industrial and business sector in our economy does its fair share in reducing emissions. We understand that the people most affected by climate change are typically the ones contributing to it the least.
Some of our goals include:
• Carbon neutrality by 2025
• Reducing Scope 1 and Scope 2 emissions by 50% from our base year (2019) by 2030
• Removing 99.9% of plastic from our packaging by the end of 2024
• Developing more formal processes and policies for managing our waste
To learn more about what we are doing take a look at our
Impact Report
Why Stricter Guidelines are Needed – Business as usual
The draft regulation’s reduction target is 35% less emissions than 2019 levels. It falls short of the recommendation of the International Energy Agency and the 1.5 degree pathway which calls for a 60% reduction, and Canada’s national targets of a 40-45% reduction.
The draft also includes flexibilities which allow for oil and gas operators to account for up to 20% of their emissions by simply putting money towards carbon offsets and a decarbonization fund. The low target combined with these flexibilities could reduce the effectiveness of the cap-and-trade system, allowing companies to avoid making substantial and real reductions in their emissions, and continue “business as usual”.
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According to the most recent National Inventory Report, Canada’s oil and gas sector accounted for 28% of national emissions in 2021, making it the largest contributor to Canada’s emissions.
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What is Cap-and-Trade?
Cap-and-Trade is a market-based approach to reducing greenhouse gas emissions.
Cap refers to the limit on greenhouse gas (GHG) emissions that drive global warming. Over time, the cap gets stricter to increase emissions reductions.
Trade refers to the market where companies can buy and sell credits that allow them to emit a certain amount. Trading incentivizes companies to cut their emissions and sell their unused credits, and therefore rewards innovation.
Image credit: Photo by Zbynek Burival on Unsplash
Does the cap and trade regulation result in higher prices on gas and groceries?
Oil prices are set by global markets and according to the David Suzuki Foundation “Prices for many key goods are affected to a far greater degree by other factors such as volatile fossil fuel markets, oil company and other corporate price gouging and supply chain bottlenecks.”
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Did you know? The oil and gas sector is experiencing record profits within Canada. Post-pandemic, profits increased tenfold from $6.6 billion in 2019 to $66.6 billion in 2022. Learn more here.
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Historical Success of Cap-and-Trade
The cap-and-trade framework has proven successful in the past. It was used as a response to the pressing issue of acid rain in the 1980s, which was caused mostly by coal-fired power plants. The program was successful in achieving large emissions reductions, leading to improved air quality and ecosystem recovery.
Image credit: New York Dept. of Environmental Conservation
In the 80’s the urgent issue was acid rain, now it’s carbon emissions, which contribute to the greenhouse effect. Greenhouse gases are a natural part of the atmosphere, and are responsible for maintaining Earth’s temperature. However, in the last century, human activity (primarily burning fossil fuels) has led to in an increase of greenhouse gases in the atmosphere and is disrupting Earth’s balance. The extra gases in the atmosphere are causing global temperatures to rise.
Regulation progress and our recommendations
On December 7, 2023, the Government of Canada introduced a draft framework to cap pollution from the oil and gas sector, signaling a significant step towards addressing emissions from the largest emitting sector in the country. Then on November 4, 2024, after the Government of Canada consulted with many stakeholders, released a draft of the Oil & Gas GHG Pollution Cap regulation.
We worked with Ecojustice, Canada’s largest environmental law charity, to develop the following recommendations. These recommendations are in line with those of the International Energy Agency and the 1.5-degree pathway, as well as Canada’s national targets in line with the Paris Agreement.
| Dec 7 2023 Draft Framework |
Nov 4 2024 Draft Regulation |
Our recommendations |
| Target to cap 2030 emissions at 35-38% below 2019 levels |
Reduce 35% by 2030-2032 |
The cap to be set at least at 40-45% below 2019 levels by 2030 or ideally at 60% |
| A phased approach between 2026 and 2030 |
Same as framework |
Regulations to come into effect no later than 2025 |
| Flexibilities for companies to emit up to a level about 20-23% below 2019 levels |
Flexibilities allow up to 20% of emissions to be accounted for through offsets and a decarbonization fund
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Eliminate loopholes that allow companies to operate “business as usual” |
| Allowing production to increase 12% above 2019 levels |
Allowing production to increase 17% above 2019 levels |
The history of cap-and-trade demonstrates its potential to address environmental challenges, however, the urgency of the climate crisis requires more action and greater ambition.
Sign our letter!
If your business agrees the targets should be more ambitious, take a moment to sign our letter. The letter will be sent in December 20 before the public commenting period closes in early January 2025.
Resources
Moving Forward with Collective Action: Play a part in advocating for stricter cap-and-trade regulations by taking the following steps:
1. Educate yourself: Learn more about cap-and trade systems and how they can play an important role in addressing climate change. Check out the resources below.
2. Raise Awareness: Talk about the cap-and-trade guidelines with friends, family and your community. Share educational content on social media or write to your local news outlet. By spreading the word, you can build support for stronger regulations.
3. Engage with decision makers: Engage with elected officials and policy makers at the local, provincial and national level to express your support for stricter cap-and-trade regulations. This can involve writing letters and making phone calls. Download this template to email your local Member of Parliament.
4. Participate in Public Campaigns: Signing petitions or participating in rallies and protests can be beneficial in influencing decision makers and public opinion. Here are a few to sign:
5. Support Sustainable Businesses: Show your support for businesses and industries that prioritize environmental responsibility. By choosing products and services from responsible companies, you can promote market demand for more sustainable practices. Check out some of our fellow B-Corporations here.
6. Vote Responsibly: Vote for candidates and political parties that prioritize climate action and support stricter cap-and-trade regulations. By electing representatives who are committed to tackling climate change and advancing environmental policies, you can have a voice in the policy making process.
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