A cap and trade system for oil companies | COP28: climate summit in Dubai

The Minister of the Environment will reveal the details on Thursday, as part of COP28 in Dubai.

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Steven Guilbeault, Federal Minister of Environment and Climate Change (Archive photo)

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The Trudeau government ultimately retained the option of a cap and trade system for the Canadian oil industry to achieve the greenhouse gas (GHG) emissions caps that the federal Minister of the Environment, Steven Guilbeault, had promised to announce by the end of the year.

< p class="StyledBodyHtmlParagraph-sc-48221190-4 hnvfyV">The government believes that the new rules, the details of which will be revealed Thursday as part of COP28 in Dubai, will make it possible to limit GHGs, without directly regulating the production of Canadian oil companies.

According to a source familiar with the details of the plan, the system will focus on what is technically achievable by the oil and gas industry. The targets will be fixed, but oil companies will benefit from a certain flexibility to adapt to them, in exchange, for example, for a contribution to a decarbonization fund or the payment of compensatory credits.

Organizations in the oil and gas sector must be given time to adapt, time to plan, time to actually acquire the technology, said the Minister of Energy and Natural Resources, Jonathan Wilkinson, just before the question period, Wednesday. So it will take time to adopt it, but there will be a significant reduction in greenhouse gas emissions from the oil and gas sector by 2030.

Finally, the Trudeau government is putting something on the table, says the head of the climate-energy campaign at Greenpeace, Patrick Bonin. However, due to pressure from the industry and the premiers of Alberta and Saskatchewan, the proposed system will be less restrictive and the industry will not make its fair share of the required efforts.

COP28: climate summit in Dubai

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COP28: climate summit in Dubai

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Greenpeace also fears that the new rules will allow oil companies to circumvent targets by contributing to a compensation system, for example.

For us, it is problematic if companies can buy compensation, or pay to continue to pollute, adds Patrick Bonin.

Long discussions surrounded this choice, to ensure that Ottawa had the power to legislate in this sector. Last October, the Supreme Court of Canada found that the impact assessment law adopted by the federal government in 2019 encroached on provincial jurisdiction, particularly with regard to the management of their natural resources.

We are capping pollution, but not production, indicated a source familiar with the new rules. In 2021, the nation's highest court ruled that greenhouse gas emissions had a national impact. Ottawa thus had the right to impose a price on carbon, the Court ruled.

The oil and gas industry represents more than a quarter of total emissions in Canada annually. The emissions plan presented by the government last year calls for cutting emissions in the sector by almost half by 2030.

In his report published at the beginning of November, the Commissioner of the Environment and Sustainable Development expressed serious doubts about Canada's ability to achieve its targets of reducing GHG emissions of 40 to 45% by 2030 by compared to 2005 levels. Although the 2030 Emissions Reduction Plan includes important measures to reduce emissions, we found that some of these measures have been delayed, including capping emissions from the oil and gas sector and Clean Fuel Regulations, the document read.

• Daniel Thibeault (View profile)Daniel ThibeaultFollow