Federal Proposals for Reduced Oil and Gas Emissions Could Be Counterproductive in Limiting Emissions: Analysts

News Analysis

A federal government discussion paper on the “next steps” to reduce greenhouse gas emissions in the energy sector threatens to burden the industry with increased complexity, analysts say, while ignoring the potential for Canadian exports to indirectly reduce emissions elsewhere.

Released July 18, the paper proposes either a cap-and-trade system under the Canadian Environmental Protection Act to set limits on emissions from the energy sector, or increasing the carbon pricing for heavy emitters to drive emissions down to federal targets.

Kevin Birn, an analyst for S&P Global Commodity Insights, says the industry can cut emissions further, but it has already made substantial progress.

“There’s been demonstrated improvement … focusing first and foremost on methane as a low-hanging fruit to drive some significant reductions. Whether the oil and gas sector is on track to meet Canada’s targets—an ambitious 42 percent reduction by 2030—is a much harder question to answer,” Birn told The Epoch Times.

Interested parties have until Sept. 30 to submit responses to the federal proposal. Birn says until a final policy is confirmed, it will slow investment in extraction, something already compromised by volatile prices due to pipeline delays.

“It’s these pancaking policies that make it confusing. And then is this the last policy or will be there be yet another policy after that?”

Environment Canada says the oil and gas sector accounts for 27 percent of Canada’s greenhouse gas emissions. However, Birn says domestic natural gas production already compares well with international peers on the intensity of its carbon emissions, and much better than coal-fired plants still used in many countries. He believes if federal regulations make the domestic energy sector uncompetitive, the result will be bad for the environment.

“There is a bigger, easier question here: It’s to what degree would this contribute to global emissions? … What you do risk is carbon leakage, which is when we either artificially reduce the output below what would be economically achieved given the price of oil, or reduce the investment in the sector to the degree that that investment is redirected elsewhere in the world. Both can happen,” he says.

“Then what happens is you stimulate economic activity elsewhere in the world to produce a barrel of oil [there]—and it’s not necessarily the case that those developments would be more efficient, or lower carbon, than … in Canada.”

Ian Madsen, senior policy analyst at the Frontier Centre for Public Policy, calls the proposals “punitive and restrictive” and says their effects on greenhouse gas emissions would range from “miniscule” to “counterproductive.” He says the production ecosystem of oil and gas has many moving parts that are necessary to consider.

“Canada’s heavy oil is vital in U.S. refineries to augment the light-oil bias of their shale-formation-dominated oil and gas industry. Their refineries cannot produce enough of the main commercial output, gasoline, if there is not enough heavy oil. In turn, optimum U.S. refinery output is crucial to make the total output of U.S. shale formations commercially profitable,” Madsen said in an interview.

“This, it turns out, makes the natural gas commercial and desirable to produce, which, in turn, displaces coal-burning in power generation stations—not just in the U.S., but where it is exported, to Japan, China, South Korea, and Europe, where coal competes with gas, which is now in short supply as Russia turns off the taps.”

Madsen says methane is a main component of natural gas, so the federal goal to reduce methane production 75 percent by 2030 could have dire implications.

“It is in the oil and gas sector’s own commercial interest to minimize methane leaks; it loses them money. However, attempting to get to mere thousands of cubic metres lost per annum, or even less, at the cost of many millions of dollars, if not billions, is senseless,” he said.

“Canada’s CO2 and CH4 (methane) emissions, while superficially large in relation to the size of its economy and on a per capita basis, are miniscule versus those in China, and there’s a forecast of enormous increases in emissions from existing and planned coal-burning plants in China, India, and elsewhere in the developing world, and in the EU and Japan.”

Narrow Focus

Madsen says an economic drag from the proposed regulations would hinder the necessary renewal of oil and gas supplies, and thereby jeopardize the production of plastics and fertilizers. He adds that there are other areas in the energy sector that aren’t getting enough attention, such as making energy storage technology more affordable which he says is “crucial to making solar and wind power reliable.”

“When it comes to alternative energy sources, there seems to be curiously little attention paid to ocean currents, tidal sources, and geothermal resources,” he says.

“Finally, so little effort has been made to encourage development of conventional and new, modular nuclear plants and other more exotic ideas such as hydrogen fusion, that it further confirms suspicions that the climate crusaders are inauthentic and their true agenda is something else.”

Dan McTeague, an 18-year former Liberal MP who became the founder and president of Canadians for Affordable Energy, told the Epoch Times that Canada’s climate policies put it on the same path that jeopardized energy security in Europe and led to protests.

“Is there a cure for such demented policies? It’s an obsession by enviro nuts, leading towards an economic death wish. What’s unfolding in Europe is precisely the very thing the wokesters in Parliament here want,” McTeague told The Epoch Times.

“I am convinced Canadians are completely oblivious to what this entails,” he adds.

“Worse, those proposing and imposing this are impervious to the reality such an unwarranted move will do to drive away capital from Canada, permanently. The policy is the clearest evidence yet of technocrats willing to sacrifice the very viability of the nation in pursuit of their climate catastrophist delusions.”