Oil & Gas Cap Policy Toolkit​

7. Suggested Responses To The Framework's Discussion Questions

Toolkit Contents

    1. Production Emissions
    2. Consumption Emissions
    1. Scope of Application
      1. Covered Facilities
      2. Covered Activities
      3. Covered Greenhouse Gasses (GHGs)
    2. The Emissions Cap Level: The Starting Point
    3. The Legal Upper Bound: How Much Can Really Be Emitted
    1. The 2030 Cap Level Is Not Ambitious Enough – The Numbers
    2. The Cap Proposed by the Framework Will Make It Almost Impossible to Meet Our Canada-Wide 2030 Target
    3. The Framework’s O&G Emissions Cap Will Do Less Work Than It Appears
    4. The O&G Emissions Cap Has Effectively Been Dictated by the Oil and Gas Producers
    5. The Oil and Gas Industry’s Re-investments to Reduce Emissions Has Been Contemptible
    6. The O&G Emissions Cap is based on O&G Production Increasing by 2030
    7. The “Other Compliance Units” Are Mostly a Very Bad Idea
    1. Emissions Trading
    2. Multi-Year Compliance Periods
    3. Banking of Emissions Allowances
    4. Making Contributions to a Decarbonization Fund
    5. Domestic Offset Credits
    6. Internationally Transferred Mitigation Outcomes (ITMOs)
    7. Delayed Reporting and Verification

Page 10 of the Framework poses questions for public consultation. Individuals can respond to these discussion questions and also provide feedback on other elements of the Framework by sending an email to PlanPetrolieretGazier-OilandGasPlan@ec.gc.ca by February 5, 2024.

Suggested responses are shown beneath each question.You are welcome to use any or all of our ideas, without attribution to us.  In fact, we do not want attribution:  If you think it is a good idea, adopt it as your own.  Also, modify the words to make the point in a way that you like better.  Importantly, this also serves to make your submission unique.

The nine discussion questions posed by ECCC do not allow us to address all of the input we want to provide, so please also see the suggestions for other matters you may wish to address under the section “8.0  I don’t have time to read this long document.  What should I do?“

How should allowances be allocated? What should be taken into account? How should changes in production and new projects be considered? 

Allocation of allowances:

• Emission allowances should not be given to O&G companies for free. This ignores the costs of GHG emissions to society and sends the wrong signal to the industry and to the economy as a whole.  Also, the cost of administering the system should be borne by those being regulated by the system:  the oil and gas producers.  The cost should not be borne by taxpayers.

• O&G companies, who are well-resourced organizations making record profits, should be required to meet conditions to be eligible for allowances. For example:

◦ give up all direct and indirect government subsidies (federal and provincial).

◦ submit a realistic plan, verified by a third party, to wind down their O&G production operations to zero by 2050.

◦ establish and fully fund a trust to cover the estimated $123 billion needed to clean up the environmental liabilities created by oil and gas companies in Canada [148] so taxpayers aren’t stuck with the bill.

• O&G companies should then have to buy emission allowances at the current price of carbon. Funds from selling emissions allowances should go towards climate change adaptation and a just transition.

Changes in production:

• The priority when considering how to respond to changes in production must be to ensure the total annual cap level for the sector is not exceeded.

• The Framework would allow facilities to trade emissions allowances under the cap. This process is sufficient to deal with increases or decreases in production at particular facilities.

• The government should not play any role in adjusting a facility’s allowances in response to production. Attempts to do so in a way that all players would consider fair would require negotiation. For example, if one facility’s production increases and they want more allowances, that means someone else would have to give up allowances to maintain the cap level. Given the effectiveness of the O&G industry’s lobbying efforts in general, it seems likely the government would be pressured to issue new allowances over and above the cap, rather than rescinding allowances from some facilities.

• The Framework notes that the “cap-and-trade” model is a market-based instrument. The market should be allowed to work without interference. Let facilities trade allowances with each other without government involvement, except to ensure the cap is not exceeded.

New projects:

• New O&G facilities should be subject to the emissions cap immediately, not after 2 years as planned under the Framework.

• New O&G facilities should be required to begin reporting and verification immediately, not after 1 or 2 years as planned under the Framework.

• Under no circumstances should the creation of new facilities lead to new allowances being issued that exceed the annual cap level for the sector.

What process should be established to review the emissions cap trajectory for the post-2030 period?

Review of emissions cap trajectory:

• The only factor considered when reviewing the trajectory of the emissions cap post-2030 should be whether the sector is meeting their emissions reduction targets, and how to reduce those emissions more quickly.

• The profitability of the Canadian O&G sector should not be a factor. This sector must be wound down by way of a just transition for us all to survive.

If, when and to what extent some compliance flexibilities should be phased down or phased out? 

Compliance flexibilities:

• To ensure Canada’s increasingly ambitious emissions targets are reached, all compliance flexibilities should be phased out well before we reach net-zero in 2050.

Banking of emissions allowances:

• To ensure emissions are reduced as fast as possible and the 2030 target is met, banking of allowances should be limited to a single three-year compliance period, rather than six years.

• Unlimited banking of allowances should not be allowed. A clear limit must be included in the regulations, with the percentage set at a low level that accounts for the declining emissions cap in future years.

• The regulations should phase out the ability to bank allowances, and completely eliminate it well before Canada reaches net-zero in 2050.

“Pay to pollute” compliance flexibilities:

• The compliance flexibilities that allow companies to pay to emit 25 Mt more than the sector emissions cap must be eliminated. Specifically, domestic and international carbon offsets and contributions to a decarbonization fund should not be allowed.

• Companies should collectively not be allowed to emit more than the sector cap, full stop. The “legal upper bound” should be set at the same level as the cap. In other words, the extra 25 Mt of emissions flexibility must be eliminated.

How should the proposed approach to indirect GHG emissions be implemented?

• It is good that ECCC plans to include indirect emissions (emissions generated when O&G producers use purchased energy such as natural gas, diesel, or coal-fired electricity to produce oil and gas) under the cap.

• It will be crucial that the “third parties” responsible to verify emissions, including indirect emissions, are  independent and are not captured by the oil and gas industry. Timely and accurate verification of emissions reductions will be crucial to ensuring the annual sector cap is not exceeded.

• The oil and gas production firms must then be required to include these indirect emissions on a strict tonne-per-tonne basis as part of their emissions output, and every tonne of them must be included in the quantity of the cap.

What measurement protocols or quantification methods most accurately estimate methane emissions at the facility level? 

• Currently, nobody in the Climate Messengers has the technical expertise to provide a useful suggestion for answering this question.  We do not believe in “faking it”.  There is no need for anyone to address all of the questions ECCC has posed.  If anyone using this Toolkit has the technical knowledge to answer this question, we encourage you to do so.

What administrative approaches can be used to define and regulate facilities with GHG emissions below 10 kt CO2e per year?  

• It is good that ECCC plans to include small facilities, which account for one third of the O&G sector’s emissions, in the cap.

• ECCC must ensure small facilities remain in scope in the forthcoming regulations, despite potential reporting challenges or resistance from the oil and gas industry.

How should the proceeds from the decarbonization funding program be distributed? How should contributions be used to support decarbonization of the oil and gas sector? 

• Contributions to a decarbonization fund would go to the oil and gas industry to help them reduce GHG emissions. This “double dipping” is absurd, giving the industry credit twice under the cap for spending the same funds. 

• In November 2021, the Auditor General released a report outlining how, when the federal government tried to design and implement an emissions reduction fund, it failed badly.  They should not try again.

The decarbonization fund should be eliminated. If it is not eliminated, the funds should be given to organizations with a proven track record of reducing GHG emissions. Under no circumstances should the funds be given to the O&G industry.

• If the decarbonization fund is not eliminated (although it should be eliminated), the money should be used to build up Canada’s renewable energy sector, and not be given back to the oil and gas sector.

What are the advantages and disadvantages of a federal offsets fund? How should a federal offsets fund operate? 

• Carbon offsets allow a company to pay money to continue polluting in exchange for someone else reducing emissions somewhere else.

• Carbon offsets are extremely problematic:

Offsets do not work. Offset schemes have been proven to be completely ineffective, with as little as 12% of offset projects creating real emissions reductions.

◦ The world will become less stable and less predictable in the future due to climate change, making offsets even less likely to work. For example, an offsets project to restore a forest will actually emit more GHGs if a climate-fueled wildfire burns that forest down.

Offsets do nothing to meet the objective of this Framework to reduce GHG emissions from oil and gas production. In fact they allow companies to avoid reducing emissions by shifting responsibility to someone else.

◦ Offsets are linked to human rights abuses and greenwashing, where companies claim to be more climate-friendly than they actually are.

◦ It’s not fair to allow oil and gas companies to pay to keep polluting rather than doing their part to reduce Canada’s GHG emissions.

• We urge the government to eliminate offset credits from the proposed cap-and-trade system and force companies to directly reduce GHG emissions instead.

• If offsets are not eliminated, the government should:

◦ Reduce the percentage of a facility’s allowable emissions that could be covered by offset credits.

◦ Phase out the use of offsets as soon as possible.

◦ Ensure that no money from an offset fund goes to an O&G company under any circumstances.

 What role should ITMOs play in compliance flexibility?

• We urge the government not to include ITMOs as a compliance option for the oil and gas emissions cap.

• Internationally transferred mitigation outcomes (ITMOs) are essentially the same as domestic carbon offsets, but happen between countries rather than within a single country.

• ITMOs are an even less effective instrument than domestic offsets and, having only started in 2022, have no track record.

• ITMOs only shift the responsibility for reducing emissions, and do nothing to accomplish the Framework’s objective to reduce GHG emissions from the oil and gas sector.

• ITMOs should not be used as an excuse for Canada to have weaker climate policies at home. As a wealthy country, Canada should be a global leader in reducing GHG emissions rather than paying other countries to do it while we keep polluting.

  1. Environmental Defence, “PAST DUE: Tallying the Costs of Oil and Gas Cleanup in Canada” July 2023. Retrieved January 11, 2024 from: https://environmentaldefence.ca/report/past-due-tallying-the-costs-of-oil-and-gas-cleanup-in-canada/