Emissions cap in the oil and gas sector leading to job losses with little environmental gain
The federal government’s forthcoming emissions cap on the oil and gas sector will not only kill jobs and hurt the Canadian economy; it will do so for little to no environmental gain.
The plan, announced in December by Environment Minister Steven Guilbeault, aims to cut greenhouse gas emissions in the oil and gas sector to 38 percent below 2019 levels by 2030.
According to a report recently published by Deloitte, this cap will force a binary choice for oil and gas companies in Canada: either invest heavily in carbon capture technology to offset their production emissions or be forced to cut production. The report predicts a production cut simply because carbon capture is currently too expensive.
Of course, this doesn’t mean global oil production will stop. In fact, the rest of the world will gladly pick up the slack since global energy demand continues to grow. By 2030, the demand for oil will be 3.2 million barrels per day higher than in 2023.
A Canadian emissions cap will, therefore, merely displace oil production to other jurisdictions with less stringent environmental regulations.
The problem is that the fight against global warming is being treated as if it were a local issue. Reduced production in Canada would not lead to an overall drop in global emissions, as Ottawa has no control over growing global demand.
On the other hand, a genuine local issue is how closely our prosperity is tied to energy. For comparison purposes, in 2022 the sector accounted for 11.8 percent of our GDP, or $309 billion – the equivalent of about two-thirds of what Ottawa plans to spend this year.
Then there are the nearly 700,000 jobs that rely on the sector either directly or indirectly. This is the economic pillar the Trudeau government is undermining with its emissions cap.
And what Ottawa conveniently omits to mention is the industry’s progress in terms of environmental protection. Between 2012 and 2021, natural gas production saw a 22 percent reduction in emissions. In the oilsands, emissions per barrel are down 20 percent.
In short, by reinvesting some of its profits in new technologies, the industry has become more efficient, helping Canada’s energy sector grow while simultaneously reducing its emissions footprint.
Despite these strides, investor hostility to the industry has persisted, and it has not gone unnoticed. Investment in the Canadian energy sector has already plummeted from $76.1 billion in 2014 to $39.2 billion in 2023, a staggering 48 percent decline.
The proposed emissions cap will likely exacerbate this trend, as it could lead to a loss of $75 billion in capital investment over the next nine years and a $6 billion annual loss to the economy. Alberta alone stands to lose 54,000 jobs.
Canada should be front and centre when it comes to helping meet global energy needs, and we can be. Within the existing regulatory framework, oil production in Canada could increase by 30 percent by 2040. As our allies clamour for Canadian energy, this expanded capacity could actually result in the displacement of energy from other, less ethical jurisdictions.
Indeed, several world leaders have recently visited Canada with the stated intention of procuring some of our LNG.
In March of this year, the Greek Prime Minister made the case for Greece to serve as an entry point for Canadian natural gas to the Balkans. Not only would this support Eastern Europe in general, but it could help supply Ukraine with energy. Greece is also looking to phase out coal, making natural gas a larger part of their energy mix.
The following month, the President of Poland confirmed he would “of course” be interested in purchasing Canadian LNG if Canada were willing to supply it.
Last year, it was Japan that came knocking. The year before, it was Germany. But so far, the only response from the Trudeau government has been stark refusal. This stubbornness has led many European nations to look to Qatar and other gas-producing nations instead of buying from us.
Ultimately, Ottawa’s oil and gas sector cap will leave Canadians and our allies worse off without doing much, if anything, to reduce global emissions.
Krystle Wittevrongel is Director of Research with the Montreal Economic Institute.
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