According to a new Deloitte analysis, Canadian oil and gas businesses that are subject to a federal emissions cap will choose to reduce their output rather than make the costly investment in carbon capture and storage equipment.
The Canadian Press was able to secure a copy of the analysis, which was commissioned by the Alberta government, and it evaluates the proposed cap’s potential economic effects.
The federal government’s position that its planned cap on greenhouse gas emissions from the oil and gas industry would be a cap on pollution, not a cap on output, is contradicted by its findings. Furthermore, it bolsters Alberta’s argument that a legally-mandated cap would result in significant economic ramifications and production reductions.
However, the Deloitte analysis also raises doubts about the notion that the oil and gas industry’s emissions will decrease in the near future due to the widespread implementation of carbon capture and storage technology, arguing that scenario doesn’t make financial sense.
“We expect that the cap (will impose) 20 megatonnes in emissions reduction on producers by 2030, which will need to be achieved by CCS (carbon capture and storage) investments, or through production curtailment,” according to the Deloitte assessment.
“Curtailing production would be a more cost-effective option compared to investing in CCS.”
As the most polluting industry in Canada, the oil and gas sector is seeing an increase in overall emissions at a time when many other economic sectors are effectively lowering their overall emissions due to the production of more oilsands.
Global oil demand is increasing; according to the International Energy organization, it will rise by 3.2 million barrels per day by 2030 compared to 2023. However, the organization also predicts that sometime this decade, rising supply will surpass rising demand.
The federal government suggested imposing a cap on oil and gas emissions in a draft framework that was made public in December of last year in an effort to mitigate climate change. By 2030, the industry would have to reduce its greenhouse gas emissions by 35–38% from 2019 levels, according to the standards. Additionally, businesses would be able to purchase offset credits or make contributions to a decarbonization fund, which would reduce the required reduction to just 20–23%.
However, the Deloitte analysis projects that between 2021 and 2040, this nation’s oil and gas production might rise by 30% and 16%, respectively. These numbers are derived from a forecast by the Canada Energy Regulator and current government plans.
