OTTAWA — The federal government is proposing to use an industry-specific cap-and-trade system or a modified carbon pricing system to set a ceiling for emissions from the oil and gas sector and drive them down almost 40 per cent by the end of this decade.
The two options are contained in a discussion paper Environment Minister Steven Guilbeault will publish Monday. It is the first glimpse Canadians are getting of how the Liberals expect to implement the oil and gas emissions cap promised in last year’s election.
The oil and gas industry accounts for more than one-quarter of Canada’s total emissions — 179 million tonnes in 2020, or about what an average car would emit driving around the equator more than 17 million times.
“We simply cannot ignore the fact that the oil and gas sector is Canada’s biggest emitter,” Guilbeault said in April during a House of Commons committee meeting studying the proposed emissions cap on oil and gas.
What Guilbeault didn’t say then, and what the discussion paper doesn’t say now, is what the specific emissions cap will be. It’s supposed to start at “current levels” — which going by the data that was available when that promise was made would mean 2019 levels, or 203.5 million tonnes.
Background documents and government sources suggest the cap for 2030 will be very close to the one proposed in the new national Emissions Reduction Plan in March — 110 million tonnes. That’s a 46 per cent cut from 2019 levels, and 32 per cent over 2005.
Canada is aiming to cut emissions across all sectors 40 to 45 per cent from 2005 levels by 2030.
The oil and gas sector has not had emissions that low since 1992. In the last three decades, as production of gas, conventional oil and oilsands soared, emissions from the sector have risen 83 per cent. Overall emissions in Canada are about 23 per cent higher over the same time period.
Input on the options to manage the cap will be accepted until Sept. 21 with Guilbeault aiming to unveil the final plan early in 2023.
The first proposed option involves a new cap-and-trade system on the oil and gas sector in isolation. The total emissions allowed would be divided into individual allowances which will be allocated to specific companies mainly through an auction.
Companies that don’t buy enough allowances to cover their emissions will have to buy allowance credits from other oil and gas companies that bought more than they need.
The funds raised from the auction would be recycled to programs that help the sector cut emissions.
The second option would modify the industrial carbon price already applied to the oil and gas sector, possibly by hiking the price itself if needed, but with the aim of ensuring the emissions from the oil and gas industry itself fall by limiting the trading of carbon credits to the sector.
Companies can currently reduce the carbon price they pay by buying credits from others that produce less than their emissions limit. The modified plan would allow them only to buy credits from other oil and gas companies, not from other industries.
Most of Canada’s oil and gas producers are already cutting emissions due to other regulations and a desire to become a cleaner, more competitive option for global customers.
That has been the Conservative party’s position on the industry for years — using cleaner Canadian fossil fuels to displace dirtier ones produced elsewhere.
The industry has work to do, particularly on the oil side, where Canada’s heavier oils require more energy to extract from the ground than in places like Saudi Arabia. While oilsands emissions per barrel of oil, known as the emissions intensity, is down about 30 per cent since 1990, it’s still higher than many global competitors.
The Oil Sands Pathway Alliance, with six of the biggest oilsands companies on board, is aiming to get emissions to net zero by 2050, mainly through carbon capture and storage projects that trap greenhouse gases before they go into the atmosphere and then store them back underground.
The alliance, whose member companies account for 95 per cent of oilsands production, released a plan this spring aiming to cut 22 million tonnes of emissions from 2019 levels by 2030.
Company leaders have said they’re not opposed to a cap, but insist it must be realistic and based on consultations with industry about what is feasible. Anything more than that would likely drive production cuts and job losses, they have argued.
But the Alliance and government remain far apart on some fundamental issues, such as determining where current emission levels actually stand. The most recent national inventory report says oilsands production and processing emissions were 83 million tonnes in 2019, but the Alliance pegs the figure at 68 million.
A government official, speaking on background because he was not authorized to speak publicly, said if the cap on emissions for the oil and gas sector comes in higher than the Emissions Reduction Plan, it will force other industries to cut more than their share or Canada won’t meet its 2030 targets.
This report by The Canadian Press was first published July 17, 2022.
Demands for government intervention in Air Canada labour talks could negatively affect airline competition in Canada, the CEO of travel company Transat AT Inc. said.
“The extension of such an extraordinary intervention to Air Canada would be an undeniable competitive advantage to the detriment of other Canadian airlines,” Annick Guérard told analysts on an earnings conference call on Thursday.
“The time and urgency is now. It is time to restore healthy competition in Canada,” she added.
Air Canada has asked the federal government to be ready to intervene and request arbitration as early as this weekend to avoid disruptions.
Comments on the potential Air Canada pilot strike or lock out came as Transat reported third-quarter financial results.
Guérard recalled Transat’s labour negotiations with its flight attendants earlier this year, which the company said it handled without asking for government intervention.
The airline’s 2,100 flight attendants voted 99 per cent in favour of a strike mandate and twice rejected tentative deals before approving a new collective agreement in late February.
As the collective agreement for Air Transat pilots ends in June next year, Guérard anticipates similar pressure to increase overall wages as seen in Air Canada’s negotiations, but reckons it will come out “as a win, win, win deal.”
“The pilots are preparing on their side, we are preparing on our side and we’re confident that we’re going to come up with a reasonable deal,” she told analysts when asked about the upcoming negotiations.
The parent company of Air Transat reported it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31. The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
It attributed reduced revenues to lower airline unit revenues, competition, industry-wide overcapacity and economic uncertainty.
Air Transat is also among the airlines facing challenges related to the recall of Pratt & Whitney turbofan jet engines for inspection and repair.
The recall has so far grounded six aircraft, Guérard said on the call.
“We have agreed to financial compensation for grounded aircraft during the 2023-2024 period,” she said. “Alongside this financial compensation, Pratt & Whitney will provide us with two additional spare engines, which we intend to monetize through a sell and lease back transaction.”
Looking ahead, the CEO said she expects consumer demand to remain somewhat uncertain amid high interest rates.
“We are currently seeing ongoing pricing pressure extending into the winter season,” she added. Air Transat is not planning on adding additional aircraft next year but anticipates stability.
“(2025) for us will be much more stable than 2024 in terms of fleet movements and operation, and this will definitely have a positive effect on cost and customer satisfaction as well,” the CEO told analysts.
“We are more and more moving away from all the disruption that we had to go through early in 2024,” she added.
This report by The Canadian Press was first published Sept. 12, 2024.
