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Pumped-up Alberta oil and gas sector sinks Canada's climate targets

Canada's national emission reductions targets are likely toast due to climate policy setbacks and rising emissions from the oil and gas sector, early emissions estimates from the Canadian Climate Institute show. Illustration by Ata Ojani

Canada’s fossil fuel industry has singlehandedly scotched any chance of the country hitting its legally-binding 2030 emissions reduction targets, due to increasing oil and gas production.

Despite reductions in electricity, transport, building and heavy industry, Canada’s 2024 emissions flatlined due primarily to a 1.9 per cent increase from the oil and gas sector. Oil and gas production is Canada’s largest and fastest-growing source of planet-warming emissions, according to calculus by 440 Megatonnes, a project of the Canadian Climate Institute (CCI), a think tank.

Syncrude oilsands facility in Alberta. Photo by: Jason Woodhead / Flickr

Last year, oil and gas accounted for 31 per cent of the total 694 million tonnes (Mt) of greenhouse gases released nationally, the analysis found.

Canada’s legally-binding climate targets require emissions reductions of 40 to 45 per cent compared to 2005 levels by the end of the decade. However, the CCI said Canada’s emissions are only on track for a 20 to 25 per cent reduction by 2030, falling far short of the legislated target and “well below what could have been achieved if governments across the federation had implemented climate policies as announced.”

What is the CNZEAA and why does it matter?

The damning totals are being compounded by significant setbacks in climate policy at the federal and provincial levels, and the acceleration of plans to build more liquefied natural gas (LNG) facilities that will increase national emissions once in operation, said the CCI.

Canada’s legally-binding climate targets require emissions reductions of 40 to 45 per cent compared to 2005 levels by the end of the decade. However, the CCI said Canada’s emissions are only on track for a 20 to 25 per cent reduction by 2030.
Dave Sawyer's headshot
Dave Sawyer, CCI's principal economist, says the trajectory of national emissions is set to flip from a decline to a rise — primarily driven by the oilsands. Photo courtesy: CCI

“Right now, we are seeing the trajectory of national emissions flip from decline to rise, primarily driven by oil and gas and the oil sands,” said Dave Sawyer, CCI’s principal economist, in a pre-launch briefing with the media. In 2023, national emissions dropped by nearly one per cent compared to 2022, representing an overall eight per cent reduction from 2005 levels.

This won’t come close to meeting the target which would necessitate emissions reductions of roughly 40 Mt a year, said Sawyer.

Climate policy setbacks aplenty

The CCI said the federal repeal of the consumer carbon tax and idling of the country’s EV mandate, along with weakened industrial carbon pricing in several provinces, threaten the “fragile progress” Canada has made to date.

Just two days ago, climate was dealt another blow when Alberta Premier Danielle Smith announced changes to its industrial carbon pricing and credit trading program. The Alberta Technology Innovation and Emissions Reduction (TIER) system requires companies to reduce their carbon-intensity in line with a specified benchmark. It originally offered companies that don’t reduce their emissions two options to ensure compliance: buying credits from companies that successfully reduced their emissions or paying into the TIER fund for excess emissions.

Smith’s proposed changes, announced Tuesday, will let companies avoid buying compliance credits or paying into the TIER fund if they make direct investments in emissions reduction initiatives at their sites. 

“The direct investment option appears to give companies credit for spending rather than results,” Clean Prosperity President and CEO Michael Bernstein said in response to Smith’s announcement.

The changes also allow smaller companies to opt out of the system entirely for 2025 to reduce costs and red tape, according to the province’s news release. Alberta Environment Minister Rebecca Schulz declared it a “significant win for industry,” while critics were quick to point out the loopholes it creates for large emitters.

These changes “open the door to double counting, as well as slashing demand for TIER credits,” warned Chris Severson-Baker, executive director of the Pembina Institute, in a statement. 

“Based on what we’ve heard, … companies will be able to avoid paying a compliance cost at the point of investment in technologies, but then, also generate a carbon credit when their emissions start to be reduced,” Severson-Baker said.

The changes undermine the stability of the carbon credit market and make it less likely that private investment will flow to carbon capture initiatives in the oilsands, including the Pathways Alliance carbon capture megaproject, he said. This comes after Alberta froze its industrial carbon price at $95, a level it intends to maintain through 2026. This puts Alberta at odds with the federal backstop, which rises every year.

At the federal level, the future of the proposed cap on oil and gas emissions is uncertain. With key climate and industrial policies falling like dominoes or stalled out, Sawyer warns that “2025 is Canada’s fork in the road on climate. The choices governments make this year will decide whether we lock in decline or drift upward.”

Both coasts primed for an LNG explosion 

All signs point to even more emissions from the fossil fuel sector in coming years. Alberta’s oil and gas production is expected to hit a record high this year, and federal and provincial governments are backing further oilsands and LNG expansion.

Canada’s doubling-down on LNG as a so-called low-carbon, bridging fuel could be particularly vexatious for emissions reduction targets. The government is ramping up plans to export huge volumes of future LNG production to Asia and Europe — despite forecasts of falling market demand after 2030 and questions around the carbon footprint of shipping LNG internationally.

Clark Williams-Derry is an analyst with the Institute for Energy Economics and Financial Analysis. Photo courtesy of the IEEFA

"Whether Canada will be able to capitalize on the promise of LNG is the question of the hour,” Clark Williams-Derry, an analyst with the Institute for Energy Economics and Financial Analysis, an international energy think tank, told Canada’s National Observer recently.

After a lean period of new supply from 2021 through 2024, the trajectory for the next five years appears to be on track for massive oversupply, impacting promised markets in Asia and Europe for Canadian LNG, he added.

Canada’s current portfolio of LNG export projects will add up to nearly $110 billion in proposed capital spending for a production capacity of more than 50 million tonnes a year. 

This includes LNG Canada phase 2 — a multi-billion-dollar expansion of the existing export complex and BC infrastructure project being fast-tracked under the Liberals ‘nation-building’ project initiative, the $8-billion Cedar LNG terminal, due to start exporting in 2028, and Woodfibre LNG, set to become North America’s first hydropower-backed LNG facility when it starts-up in 2027.

Two weeks ago, a $15-billion project in Newfoundland that would create Canada’s first LNG export terminal on its Atlantic coast was launched by Crown LNG, and even more recently, a $10-billion development in BC, Ksi Lismis LNG, received a key environmental impact assessment greenlight from the provincial government. 

The environmental impact of Canadian LNG exports could be massive at home and abroad, according to recent research from Cornell University in the US that points to LNG having greenhouse gas emissions 33 per cent worse than coal, once processing and shipping is also considered. 

“While every megatonne of emissions reduced is important to avert dangerous and costly climate impacts, missing the 2030 emissions target by a wide margin would leave Canada well off the path to its 2035 and 2050 targets, forcing much deeper and more expensive emissions reductions later,” said Sawyer. 

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