Canada’s Proposed Emissions Cap Likely to Reduce Oil Production, Deloitte Report Says.
Canada’s proposed cap on oil and gas emissions is expected to lead companies to cut production rather than invest in expensive carbon capture and storage (CCS) technology, according to a new report by consultancy Deloitte, released by the Alberta government on Tuesday.
The Liberal government, led by Prime Minister Justin Trudeau, is crafting regulations to require Canada’s highest-polluting sector to reduce emissions to 137 million metric tons by 2030, which is 37% below 2022 levels. Alberta, the country’s primary oil-producing province, and the oil industry argue that the plan effectively acts as a production cap.
Canada‘s largest oil producers plan to rely heavily on CCS to achieve most of their emissions reductions over the next decade. However, Pathways Alliance, a coalition of six major oil sands firms, has yet to make a final investment decision on its C$16.5 billion ($12.03 billion) CCS project, citing the need for more financial support from the government.
The Deloitte report, commissioned by Alberta, suggests that implementing CCS would render high-cost oil sands operations economically unviable. For lower-cost thermal oil sands assets, it would still be more cost-effective to cut production than to invest in CCS technology.
“We do not see any oil sands CCS investments being implemented,” Deloitte stated. The report raises significant questions about the cost-effectiveness of carbon capture technology, as noted by Laura Cameron, an analyst at the International Institute for Sustainable Development climate think-tank.
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Despite industry concerns, Canadian oil production is currently at record highs, bolstered by a new export pipeline and stable oil prices. The proposed emissions cap, introduced by Trudeau in 2021, aims to be finalized ahead of a possible election next year.
According to Deloitte, the emissions cap would result in oil production of 5.6 million barrels per day (bpd) by 2030, approximately 10% lower than without the cap. Gas production would also decrease to around 2.2 billion cubic feet per day, a 12% reduction compared to a scenario without the cap.
The report forecasts significant economic impacts, including the loss of 90,000 jobs and C$282 billion in GDP between 2030 and 2040.
“It’s time to give up on this failed idea,” Alberta Finance Minister Nate Horner said in a statement, reflecting the province’s opposition to the emissions cap.
