Canada’s new federal budget proposes a pathway to potentially eliminate oil and gas emissions, a move that could dramatically reshape the country’s energy sector and its climate change strategy. The budget, released Tuesday, outlines plans for a cap on emissions from the oil and gas industry, wiht the possibility of achieving net-zero emissions by 2050.
The proposed cap aims to accelerate Canada’s progress towards its climate goals under the Paris Agreement, impacting major oil and gas producers and potentially influencing investment decisions in the sector.While details remain to be finalized, the plan envisions a system where companies can trade credits for emissions reductions, or pay into a fund for projects that lower emissions elsewhere. The initiative is expected to face scrutiny from industry groups and provincial governments, especially those heavily reliant on oil and gas revenues.
The budget document states the government will work with provinces, Indigenous groups, and industry to develop the emissions cap regulations by the end of 2024. It also allocates funding for carbon capture, utilization, and storage (CCUS) technologies, seen as crucial for reducing emissions from the oil and gas sector.
“This is a notable step towards demonstrating global climate leadership,” said Environment and Climate change Canada in a statement accompanying the budget release. “We are committed to working collaboratively to ensure a just transition for workers and communities.”
Canada’s oil and gas sector is currently the country’s largest source of greenhouse gas emissions, accounting for 26% of total emissions in 2021, according to Environment and Climate Change Canada. The sector’s emissions have historically proven challenging to reduce, prompting calls for more aggressive policy interventions.
The budget also includes provisions for a tax credit for investments in CCUS projects, aiming to incentivize companies to adopt technologies that capture carbon dioxide emissions from industrial sources and either store them underground or use them in other products. the government estimates these measures will contribute substantially to Canada’s goal of reducing emissions by 40-45% below 2005 levels by 2030.
