Federal Consultation on Capping and Cutting Oil and Gas Emissions

SCAN! submission

September 29, 2022

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Presentation to General Membership Meeting

Gail Greer, October 27, 2022

Assumptions made by Federal proposals�Questioned by SCAN!

• Federal gov’t focuses on reducing emissions from the production of oil and gas in Canada – not on reducing production itself.
• That ignores the fact that more than 85% of GHGs from our oil and gas occur when they are consumed at home but mostly abroad because so much is exported, which
• - underestimates industry’s current and historical contribution to global warming,
• - minimizes the cuts in emissions that should be expected from the industry and
• - places an unfair burden for emissions reductions on the rest of the Canadian economy.
• This is done in part because of the UN accounting convention of holding countries responsible only for GHG emissions occurring within their national borders.
• Clearly, it isn’t a cap on emissions that is needed but an end to fossil fuel production.

Assumptions made by Federal proposals�Questioned by SCAN!

• Ah, but the Canadian Constitution assigns jurisdiction over the development natural resources to the Provinces – replies the Government. Case closed in their view.
• Not so fast – in face of the climate emergency which has been declared by Parliament, we have the Canadian Emergency law that could be called on.

Assumptions made by Federal proposals�Questioned by SCAN!

• The biggest assumption made by the Federal proposals is that there is a technological fix – that by deploying Carbon Capture and Storage facilities that capture the GHG emissions arising during production and storing them in underground reservoirs net zero emissions can be achieved. Fossil fuels forever!
• A few slight problems:
• – CCS technology is inefficient, extremely expensive, and installed at nowhere near the scale required to meet Canadian or the world’s emissions reductions goals;
• - the industry itself is buying in very reluctantly – and only on condition of massive tax credits for their investment – and even then say they can deliver only one-third of the cuts the government expects
• -and of course, totally ignored are the GHGs emitted during consumption whether at home and abroad.

The Federal Government’s Policy Options

• Option 1) : A new cap and trade system instituted under the Canadian Environmental Protection Act (CEPA). This is a proposal to place a hard, declining cap on emissions. Producers would be incentivized to meet the cap, either through a grant or an auction of permits/credits that add up to the cap. The cap would be ratcheted down on a timeline aligned with meeting Canada’s emissions reduction goals. To incentivize compliance, a market exchange for trading those credits would be established enabling those reducing their output to benefit financially by selling them. Of course, those unable or unwilling to meet their allocation would be the buyers of those permits, so this is just a net-zero market game played at any specified emissions level with expensive government administration.

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The Federal Government’s Second Option

• Option 2: A pricing system instituted under the Greenhouse Gas Pollution Pricing Act (GGPPA). This is a proposal to place a charge for carbon emissions on producers within the industry. Many Canadians are now familiar with the carbon charge or tax on fuel imposed under that same act, which is rebated. Only this charge would not be rebated but a real cost to producers. What happens to real costs to producers? They’re handed on to consumers, and they know it. Consequently, the effectiveness of this pricing option in changing the behavior of producers is questionable.
• Furthermore, now that we’re living in a world of compounding crises – Covid, wars where energy is a weapon and weather disasters wipe out crops - with supply shock induced inflation, the higher the price on emissions goes, the more pain to consumers and the higher the cost in political support to the government.

SCAN!’s Assessment of the Federal proposals

• Neither of the policies proposed by the government to cap and cut emissions from the oil and gas industry will do so effectively by 2030 or even 2050. Both are seriously flawed market pricing mechanisms that will facilitate continued growth of the industry and the GHG emissions its products create.
• They rely on carbon capture and storage technologies that are still inefficient and extremely expensive, especially at the scale required.
• Cumbersome and taking years to have any significant impact, we just don’t have time for such measures.
• We’ve seen such incoherence in Canadian government policy and action before in the announcement of an agreement on Canadian carbon pricing followed a day later by the purchase of the Kinder Morgan, now the Trans Mountain, pipeline. It is evident yet again in these two options from the government. They are another Recipe for Failure!

SCAN! proposed a different policy – one that cuts both emissions and production

• The government has the authority under existing law to directly regulate GHG emissions by:
• a) instituting a hard cap on emissions at today’s levels and ratcheting it down annually in line with Canada’s pledge to reduce emissions by 40 to 45% by 2030;
• b) ending all federal government subsidies to the industry, including tax breaks for CCS research and technologies; the Trans Mountain Pipeline and underwriting the industry’s cleanup liabilities;
• c) regulating Canadian financial institution investment in the industry,
• d) adequately funding programs across all sectors of the economy that reduce demand for fossil fuels, from EVs to housing retrofits – electrify everything.
• e) and last, and equally important, rapidly expanding alternate renewable energy sources and use.

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Conclusion

• SCAN!’s position - the Federal government’s approach is a mug’s game of trying to sustain and even increase oil and gas production over the next several decades while attempting - at great public cost - to reduce emissions by one or another complex market pricing scheme and a high-risk gamble on CCS. That game will be played at the expense of the major investment needed to transition to a sustainable, low carbon economy.
• We don’t have time for yet another Recipe for Failure.