Alberta using controversial report to rally against proposed oil and gas emissions cap

Pumpjacks draw out oil and gas from a well heads as wildfire smoke hangs in the air near Calgary, Alta., on Sunday, May 12, 2024. (THE CANADIAN PRESS/Jeff McIntosh)

Alberta’s government is using a controversial report forecasting a decline in oil and gas production in Canada to rally against the federal government’s proposed greenhouse gas emissions caps.

The report, completed by S&P Global Commodity Insights for the Canadian Association of Petroleum Producers (CAPP), offers various scenarios forecasting oil production in Canada based on various emissions caps.

The Government of Canada introduced a regulatory framework for an oil and gas greenhouse gas emissions cap in December, proposing to cap 2030 emissions at 35 to 38 per cent below 2019 levels.

“The greenhouse gas pollution cap puts a limit on the amount that the sector can pollute and will be key to making sure we reduce our emissions as a country, on the road to reaching net zero by 2050,” the federal government said in a December news release.

The report suggests emissions caps could lead to a loss of jobs and GDP across Canada by 2035.

The Government of Alberta released a joint statement on behalf of Premier Danielle Smith, Minister of Environment and Protected Areas Rebecca Schulz and Minister of Energy and Minerals Brian Jean on Monday using the report to advocate for Ottawa to scrap the emissions cap.

“The Prime Minister's empty promises ring hollow in the face of 51,000 fewer jobs annually, $247 billion in lost GDP by 2035, and the forced shut-in of more than two million barrels per day by 2035,” the statement reads.

“Alberta will bear the brunt of this production cut, but the pain will be felt across every province and territory.”

The report projects scenarios predicting what would happen to oil and gas production with 40 per cent and 55 per cent emissions caps by 2035, compared to current policy conditions.

The “Stress Case”, which makes predictions based on a 40 per cent emissions cap, suggests it would result in a reduction of one million barrel of oil equivalent per day by 2030.

Under those circumstances, the report predicts a $247-billion decrease in GDP contributions between 2024 and 2035, along with 51,000 fewer jobs supported annually across the country.

The analysis also forecasts that a 55 per cent emissions cap could result in a reduction of two million barrels of oil equivalent per day in 2035.

A statement from the office of Canada’s Minister of Environment and Climate Change called the report an “analysis of a non-existent scenario.”

“Everything in it flows from false assumptions that make it so deeply flawed, it amounts to disinformation,” a spokesperson said in the statement.

“It does not at all reflect the most recent framework we recently released in December and the extensive consultation that went into that draft, including a range of compliance flexibilities to ensure the cap is technically feasible.

“We have been clear all along that the emissions cap will be designed to reduce emissions not production.”

Policy impasse

Based on the analysis, CAPP said the proposed emission cap framework is “unnecessary and should not proceed.”

“Under existing proven policy measures the conventional oil and natural gas sector is growing production while lowering emissions,” Lisa Baiton, the president and CEO of CAPP, said in a news release.

“Instead, Canada should give the policies in place time to work while collaborating with industry and provinces on pragmatic solutions to deliver emissions reductions in the short term while positioning Canada and our energy industry for long-term success.”

Environmental groups, however, are calling the report misleading.

Environmental Defence argued that the proposed emissions cap would create regulations for what oil and gas companies have already promised to do.

“It is disappointing to see that (CAPP) has once again resorted to using disinformation and stoking fear to avoid taking any responsibility for its climate pollution,” Aly Hyder Ali, the oil and gas program manager for Environmental Defence, said in a statement.

“CAPP claims that the oil and gas emissions cap will result in economic losses. Yet CAPP continues to ignore the overwhelming economic impacts of the oil and gas industry’s greenhouse gas emissions that are driving climate change.”

The Pembina Institute, a clean energy think tank, said its research shows the proposed 2030 emissions cap is “feasible, without impacting levels of production.”

“Today’s report is another example of economic modelling that assumes the industry takes very little meaningful action in its current operations to reduce emissions and therefore has no choice but to limit production, which is misleading for Canadians,” Pembina Institute said in a statement Monday.

CAPP said it commissioned the assessment to better understand the potential economic implications of the production scenarios, including one where a fixed emissions cap is imposed.

It noted the report only focused on the effects on conventional production and did not include oil sands production.

The federal government said the proposed emissions cap is a part of the process to help the oil and gas sector achieve net-zero emissions by 2050.