g. Delayed Reporting and Verification

With respect to existing oil and gas facilities, the Framework states:

Facilities would be required to register before the end of 2025, or before releasing GHGs as a result of carrying out a covered activity after January 1, 2026. Annual reporting of verified information using the specified quantification methods would be required for calendar years as early as 2026. Consideration will be given to how to phase in the system between 2026 and 2030… [139]

Publication of the final regulations is targeted for 2025, with the first reporting obligations starting as early as 2026 and full system requirements phased in between 2026 and 2030. [140]

Saying that reporting of GHG emissions will be required “as early as 2026” leaves the possibility open that it could begin later. This is unacceptable given the urgency to reduce GHG emissions as fast as possible. How could the oil and gas sector meet the 2030 emissions target if they don’t even begin tracking and reporting their emissions right away? 

The Framework goes on to say, “Consideration will be given to how to phase in the system between 2026 and 2030.” This very broad and very vague sentence could be used to create all kinds of loopholes in the forthcoming regulations that would put the 2030 emissions target in jeopardy. For example, is the government considering phasing in reporting requirements so that only partial reporting is required in the first few years? We don’t even know if “the system” refers only to reporting and verification of emissions, or to the entire cap-and-trade system for GHG emissions from the oil and gas sector. Much more clarity is needed on what exactly would be “phased in” and how to allow stakeholders to be meaningfully consulted.

Oil and gas companies would likely argue they will need time to implement the new reporting requirements. However, the oil and gas sector has already known for more than two years that an emissions cap is coming. [141] They have been heavily consulted on the development of the currently-proposed Framework, and will continue to be involved as the regulations are developed. They will likely have a year between the planned publication of the draft regulations in 2024 and the final regulations coming into force in 2025. [142] That’s over four years (2021 –  2025) to prepare. Furthermore, most facilities covered by the cap are multi-billion dollar companies, with record profits, that have existing divisions focused specifically on regulatory compliance. Given the urgency of the climate crisis and the ample resources of the oil and gas sector to comply with regulatory requirements, it seems appropriate that full reporting and verification of GHG emissions begin immediately.

With respect to new facilities, the Framework states:

New facilities would have to register before emitting GHGs from a covered activity. Reporting and verification obligations would start on January 1 of the following year. Consideration is being given to delaying the first compliance period until after a new facility reaches a set proportion of its design capacity, or two years after first producing a product, whichever comes first. [143]

Under this rule as it is described, new facilities would be allowed to emit GHGs for up to one year before they even have to begin reporting their emissions, and they might not have a limit on their emissions for up to two years. This is a massive loophole that should absolutely not be permitted.

The International Energy Agency recently said, “no new long-lead-time upstream oil and gas projects are needed.” [144] The International Institute for Sustainable Development went further, saying, “Governments should prevent the development and licensing of any new oil and gas fields. Developing any fields beyond those already in operation or under development would pose substantial risks of either not meeting the 1.5°C target or creating stranded assets…” [145]

So at a time when international experts unequivocally state that new oil and gas projects are both not necessary and are fundamentally incompatible with 1.5°C, the Framework proposes to allow new facilities to pollute unregulated for up to two years.

New oil and gas facilities will be operated by well-financed (absurdly including public subsidies), sophisticated, and long-established companies. They have ample capacity and should be required to report their GHG emissions and be subject to the sector’s cap immediately upon commencing operations. This should be a basic requirement of doing business, like passing a building inspection or paying taxes.

If this is not done, the oil and gas sector could use this loophole to get around the sector-wide cap on GHG emissions. They could operate their existing facilities up to the maximum GHG emissions allowed, and set up an unlimited number of new facilities whose GHG emissions would not be subject to the cap for two years.

Recommendations:

The loopholes created by the proposed delayed reporting and verification of GHG emissions should be closed. Specifically,

• Existing oil and gas facilities should be required to begin reporting and verification immediately when the regulations come into force;

• New oil and gas facilities should be required to begin reporting and verification immediately when operations commence;

• New oil and gas facilities should be subject to the emissions cap immediately when operations commence; and

• The federal government should clarify exactly what parts of the cap-and-trade system it is considering “phasing in” between 2026 and 2030 and how, so stakeholders can be consulted in a meaningful way.