Strengthening Cap-and-Trade Guidelines for the Oil and Gas Sector
Image credit: David Thielen on Unsplash
The new Canadian cap-and-trade framework for the oil and gas sector comes at an important time as many Canadians are experiencing the impacts of flooding, extreme heat and wildfires. The introduction of the regulatory framework is a positive step in cutting emissions, but the proposed cap-and-trade system is not ambitious enough, considering the urgent nature of climate change. Larger targets, and the elimination of loopholes which allow “business as usual” behaviour are important to avoid the worst impacts of the climate crisis.
Calls to action
The federal government is currently preparing its first draft of cap-and-trade regulations, which will be available by spring 2024. The final regulations are likely to arrive in early 2025.
Why this matters to us
We are a concerned Canadian business that is working to reduce our emissions by setting our own ambitious targets. With Canada experiencing record-breaking wildfires with devastating impacts on our forests, biodiversity, communities and air quality, we believe it’s imperative that every industrial and business sector in our economy does its fair share in reducing emissions. We understand that the people most affected by climate change are typically the ones contributing to it the least.
Some of our goals include:
• Carbon neutrality by 2025
• Reducing Scope 1 and Scope 2 emissions by 50% from our base year (2019) by 2030
• Removing 99.9% of plastic from our packaging by the end of 2024
• Developing more formal processes and policies for managing our waste
To learn more about what we are doing take a look at our
Impact Report
Why Stricter Guidelines are Needed – Business as usual
Since the cap is designed to limit pollution but not production, there are flexibilities or loopholes, that allow companies to exceed the emissions cap up to a certain limit. These flexibilities could reduce the effectiveness of the cap-and-trade system, allowing companies to avoid making real reductions in their emissions, and continue “business as usual”. The timeline for implementation is also quite lengthy. Here are some examples of those flexibilities:
Flexibilities that curtail reductions:
The ability for companies to purchase a limited amount of carbon offset credits and the ability for companies to contribute to a decarbonization fund.
Timelines that are too long:
New regulations are set to take effect in 2025 but mandatory annual reporting of greenhouse gas (GHG) emissions will be a phased approach between 2026 and 2030.
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“This is a sensible approach, but the government needs to move faster—there’s no need to push off implementation to 2026 or later.” – Rick Smith, President of the Canadian Climate Institute
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What is Cap-and-Trade?
Cap-and-Trade is a market-based approach to reducing greenhouse gas emissions.
Cap refers to the limit on greenhouse gas (GHG) emissions that drive global warming. Over time, the cap gets stricter to increase emissions reductions.
Trade refers to the market where companies can buy and sell credits that allow them to emit a certain amount. Trading incentivizes companies to cut their emissions and sell their unused credits, and therefore rewards innovation.
Image credit: Photo by Zbynek Burival on Unsplash
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According to the most recent National Inventory Report, Canada’s oil and gas sector accounted for 28% of national emissions in 2021, making it the largest contributor to Canada’s emissions.
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Historical Success of Cap-and-Trade
The cap-and-trade framework has proven successful in the past. It was used as a response to the pressing issue of acid rain in the 1980s, which was caused mostly by coal-fired power plants. The program was successful in achieving large emissions reductions, leading to improved air quality and ecosystem recovery.
Image credit: New York Dept. of Environmental Conservation
In the 80’s the pressing issue was acid rain, now it’s carbon emissions, which contribute to the greenhouse effect. Greenhouse gases are a natural part of the atmosphere, and are responsible for maintaining Earth’s temperature. However, in the last century, human activity (primarily burning fossil fuels) has led to in an increase of greenhouse gases in the atmosphere and is disrupting Earth’s balance. The extra gases in the atmosphere are causing global temperatures to rise.
Recent Developments in Canada
On December 7, 2023, the Government of Canada introduced a draft framework to cap pollution from the oil and gas sector, signaling a significant step towards addressing emissions from the largest emitting sector in the country.
We worked with Ecojustice, Canada’s largest environmental law charity, to develop the following recommendations. These recommendations are in line with those of the International Energy Agency and the 1.5-degree pathway, as well as Canada’s national targets in line with the Paris Agreement.
| Government of Canada Draft Framework |
Our recommendations |
| Target to cap 2030 emissions at 35-38% below 2019 levels |
The cap to be set at least at 40-45% below 2019 levels by 2030 or ideally at 60% |
| A phased approach between 2026 and 2030 |
Regulations to come into effect no later than 2025 |
| Flexibilities for companies to emit up to a level about 20-23% below 2019 levels |
Eliminate loopholes that allow companies to operate “business as usual”
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| Allowing production to increase 12% above 2019 levels |
The history of cap-and-trade demonstrates its potential to address environmental challenges, however, the urgency of the climate crisis requires more action and greater ambition.
Resources
Moving Forward with Collective Action: Play a part in advocating for stricter cap-and-trade regulations by taking the following steps:
1. Educate yourself: Learn more about cap-and trade systems and how they can play an important role in addressing climate change. Check out the resources below.
2. Raise Awareness: Talk about the cap-and-trade guidelines with friends, family and your community. Share educational content on social media or write to your local news outlet. By spreading the word, you can build support for stronger regulations.
3. Engage with decision makers: Engage with elected officials and policy makers at the local, provincial and national level to express your support for stricter cap-and-trade regulations. This can involve writing letters and making phone calls. Download this template to email your local Member of Parliament.
4. Participate in Public Campaigns: Signing petitions or participating in rallies and protests can be beneficial in influencing decision makers and public opinion. Here are a few to sign:
5. Support Sustainable Businesses: Show your support for businesses and industries that prioritize environmental responsibility. By choosing products and services from responsible companies, you can promote market demand for more sustainable practices. Check out some of our fellow B-Corporations here.
6. Vote Responsibly: Vote for candidates and political parties that prioritize climate action and support stricter cap-and-trade regulations. By electing representatives who are committed to tackling climate change and advancing environmental policies, you can have a voice in the policy making process.
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