a. The 2030 Cap Level is Not Ambitious Enough – The Numbers

An understanding of the numbers is essential to understanding the proposed Framework.

The 2030 Emissions Reduction Plan: Canada’s Next Steps for Clean Air and a Strong Economy (the “ERP”), published by ECCC on 29 March 2022, set out in considerable detail the programs and policies that ECCC would implement to reach our pledge under the Paris Agreement of reducing Canada’s GHG emissions by 40 to 45% below 2005 levels by 2030. [36]

The ERP called for reductions in GHG emissions from oil and gas production of 31% from 2005 levels by 2030.  Because emissions from oil and gas production had risen considerably between 2005 and 2019, this equated to reductions of 42.5% from 2019 levels by 2030. [37]

However, instead of cuts of 42.5% from 2019 levels, the Framework proposes cuts of only 17.8%.

Canadians expect the federal government to keep its promise on climate change and not just follow the demands and wishes of the oil and gas industry.  All Canadians who care about the climate and a livable future for all should use the public consultation to ensure that ECCC knows this.

To do so, we must arm ourselves with the facts and knowledge of how this situation has come to be.

In the ERP, ECCC included a long table that considered various GHG emitting sectors.  For the “Oil and Gas” sector, it provided the following data: [38]

Figure 1:  Canadian Oil and Gas Sector Actual and Projected GHG Emissions

According to the ERP on 29 March 2022, therefore, the O&G Emissions Cap needed to cut 81 Mt of emissions from 2019 levels by 2030:

 191
-110
  81

The first thing that ECCC is proposing to that makes the O&G Emissions Cap more lenient is to simply remove 20 Mt of emissions, which are those from downstream oil refineries and gas transmission pipelines, from the scope of the emissions that need to be reduced.

On 18 July 2022, ECCC published Options to Cap and Cut Oil and Gas Sector Greenhouse Gas Emissions to Achieve 2030 Goals and Net-Zero by 2050 Discussion Document (the “Discussion Document”). [39]

The Discussion Document stated “In addition to upstream activities, the government is seeking input on whether the cap should apply to natural gas transmission pipelines and petroleum refineries.” [40]  Of the 22 Questions it posed, Question #8 was “Should the cap include petroleum refineries and natural gas transmission pipelines?” [41]

Under the heading “Scope of application”, the Framework states:  “The emissions cap-and-trade system would apply to LNG facilities and to upstream oil and gas facilities, including offshore facilities.”  [42] Petroleum refineries and natural gas transmission pipelines have now been omitted.

In 2019, emissions from (downstream) petroleum refining were 19 Mt and emissions from natural gas distribution were 1.1 Mt (which we shall round down to 1 Mt). [43]

As such, ECCC has made the goal easier, and the required reductions smaller, simply by taking those 20 Mts out of consideration:

 191
- 20
 171

Under the heading “Emission allowances and legal upper bound on emissions in 2030”, the Framework states:

There are two key values in the proposed approach: (1) the emissions cap level, which is equivalent to the total emission allowances issued by the government for a given year, and (2) the legal upper bound, which is the maximum emissions the sector will be allowed to emit that year, comprised of the total number of emission allowances issued plus the maximum allowable quantity of other eligible compliance units. [44]

The Framework proposes that the 2030 emissions cap (the number of allowances issued) be set at between 106 Mt and 112 Mt CO2e. It proposes that the legal upper bound in 2030 of between 131 Mt and 137 Mt. [45]

From the 171 Mts of emissions still covered by the scope of the O&G Emissions Cap, therefore, we can remove the 2030 “emissions cap level” of 112 Mts:

  171 Mt
- 112 Mt (“emissions cap level”, i.e. emissions permitted by allowances)
   59 Mt

The Framework proposes that oil and gas producing companies can emit an annual total of 25 Mt of “other compliance units” in 2030. [46]

Regarding those “other compliance units”, the Framework states:

It is proposed that… facilities have the option to remit domestic offset credits or make   contributions to a decarbonization funding program to cover a limited portion of their GHG emissions.  Consideration is also being given to allowing facilities to remit compliance units that represent mitigation outcomes that have been authorized for use by Canada as internationally transferred mitigation outcomes (ITMOs) to cover a portion of their GHG emissions. [47]

   59 Mt
-  25 Mt (“other compliance units”, i.e. offset credits or emissions reduction fund)
   34 Mt

And that’s how we get from 81 Mt of emissions reductions from O&G production called for in the ERP to only 34 Mt proposed by the Framework.

Returning to the 2019 emissions of 191 Mt set out, as above, in the ERP, we can see this:

34 / 191 x 100 = 17.8%

So, again, instead of the 42.5% of emissions reductions from 2019 levels called for by the ERP, ECCC is now proposing less than half of that: 17.8%.

You can reach the same conclusion by starting at the other end:

Start with the 112 Mt “emissions cap level”, i.e. the emissions permitted by allowances.

Add in the 25 Mt of additional emissions permitted by “other compliance units”.

112  Mts
+25  Mts
137  Mts

Then add in the in the 20 Mts that is permitted from downstream refining and gas pipelines, because the Framework will now simply not apply to them:

 137 Mts
+ 20 Mts
 157 Mts

Those 157 Mts of emissions are 47 Mt, or 42.7% over the ERP’s “Where we could be in 2030” of 110 Mts.