Canada presents options for emissions cap on oil and gas industry

Bloomberg) — The Canadian government released potential designs for an emissions cap on the oil and gas industry, the next step in Prime Minister Justin Trudeau’s plan to cut emissions in the sector by 42% by 2030.

Environment Minister Steven Guilbeault published a discussion paper on Monday that outlined two regulatory options.

The first is a cap-and-trade system that would see a set number of allowances distributed to all oil and gas facilities. Lower-emitting facilities would then be allowed to trade allowances with higher-emitting ones. The total allowances would decline over time in line with the emissions cap for the sector.

The other option would impose a steeper carbon price on the sector to drive down emissions, and require provincial governments with their own carbon pricing systems to make the same changes.

“Both options could include some time-limited flexibilities to reflect the timelines of major emission reduction projects,” the government said in a background document to the discussion paper. 

“The cap will focus on emissions and will not be a cap on oil and gas production,” Guilbeault’s department said in the document. “It will maximize opportunities to invest in decarbonizing the sector while accounting for evolving energy security considerations. And it will be designed to manage competitiveness challenges and minimize carbon leakage risks.”

The industry can submit feedback on the proposals until Sept. 21, and the government intends to unveil the final design in early 2023.