Brian Zinchuk is editor and owner of Pipeline Online
Parliament Hill Peace Tower in autumn. Library of Parliament/Gilles Charbonneau
On Sept. 30, Enserva  submitted feedback regarding Environment and Climate Change Canada’s discussion paper on capping and cutting greenhouse gas emissions within the oil and gas sector.
This is the entire statement, verbatim:
Enserva, formerly known as the Petroleum Services Association of Canada, welcomes the opportunity to respond to Environment and Climate Change Canada’s discussion paper on capping and cutting greenhouse gas emissions within the oil and gas sector. Enserva is a national trade association representing the service, supply and manufacturing sectors across all sub-sectors of the energy industry. We represent energy services companies of all sizes.
The energy services sector represents the national supply chain across Canada. In 2020, Canadian oil and gas contributed $105 billion to Canada’s GDP, which then provided funding for public services like schools, hospitals, and roads. There is no question that Canada’s oil and gas sector plays an important role in our country’s economic health, provides energy security at home and to the world, and supports a sustainable energy system.
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The Government of Canada has an ambitious greenhouse gas (GHG) emissions reduction target, aiming to reduce emissions to 40-45% below 2005 levels by 2030 and to be net zero by 2050. As the oil and gas sector’s emissions represent 27% of Canada’s national emissions, the industry is aligned that it must significantly reduce its GHG emissions. As a leader in the secure supply of responsibly produced energy, and in clean technology, environmental protection, and economic reconciliation, the Canadian oil and gas sector is well positioned to collaborate on a path to net zero by 2050. The success of Canada’s fast-paced and high-scale decarbonization strategy will require meaningful partnership between government and industry.
Enserva president and CEO Gurpreet Lail. Handout
In their current form, the options presented in the discussion paper to cap and cut oil and gas sector GHG emissions to achieve 2030 goals and net zero by 2050, [1] a new cap-and-trade system under the Canadian Environmental Protection Act and [2] modification of the current carbon pricing approach under the Greenhouse Gas Pollution Pricing Act, are not supported by the energy services sector. The sector-specific cap and trade system not only does not weigh co-dependencies in generating emissions between all the different sectors of the economy but will effectively act as a production cap. Canada has less than 8 years to finance and build out significant low-carbon infrastructure to meet 2030 goals. There is no time to lose. Enserva encourages Environment and Climate Change Canada to consider the following:
Canada as a global leader
Global oil and natural gas demand will continue to increase to meet the world’s growing need for energy and to support the transition to other forms of energy. Russia’s aggression in Ukraine has put Europe in an energy crisis that is generating strong demand. Anticipated strong demand will also come from the Asia Pacific region and the United States. As oil and natural gas prices surge and the world’s energy security crisis deepens, world leaders are looking to Canada to play a leadership role. Canadian energy products and innovative clean technologies have significant potential to displace carbon-intensive alternatives within international markets, therefore, continued investment in Canada’s oil and natural gas remains critical. The proposed options to cut oil and gas sector emissions will impede the production of Canadian oil and gas resources and will not position Canada to support global decarbonization efforts or to meet growing energy needs. Should Canadian standards be too strict for production, jurisdictions with no or low standards will continue producing and this will lead to increased carbon leakage from energy products. Carbon leakage caused by Canadian policy would create conditions for jurisdictional divestment and in turn decreased Canadian fiscal capacity, weakening multiple net-zero oriented actors and entities. Instead of focusing on domestic reductions, Canada should pursue a net zero strategy that maximizes global decarbonization efforts and is aligned with allied nations’ strategies.
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Investment to support deep decarbonization
Meeting Canada’s ambitious climate targets will require enormous investments. The oil and gas sector welcomes the Government of Canada’s initiatives to support net-zero transitions such as the Net Zero Accelerator, the Canada Growth Fund and input tax credits like the carbon capture technology investment tax credit. However, as noted in Budget 2022, it will take $125 and $140 billion in annual investment to achieve net zero by 2050. More support is needed to achieve deep decarbonization to meet 2030 and 2050 goals. Other countries like the US have surpassed Canada’s efforts to drive the domestic private sector and to attract international private investment in lowering emissions. A recent National Bank of Canada report has found that business investment continues a downward trend. Canada has overwhelmingly relied on punitive measures to achieve decarbonization, while other jurisdictions like the US, have progressively adopted an incentives-based approach to unlock decarbonizing investment. The ability to retain and attract large amounts of capital investment is critical in financing the pace and scale of Canada’s energy transition. The Government of Canada should adopt an incentives-based approach to scale up decarbonizing investments.
Policy stability
Adopting an incentives-based approach will require simplifying the policy landscape. Canada’s policy environment has been far from stable, and there is currently a long list of policy layers to support GHG reductions that affect the oil and gas sector. Since 2015, there have been numerous meaningful changes to federal climate policy. In 2015, Canada committed to an economy-wide 30% GHG reduction target below 2005 levels for 2030, under the Paris Agreement. In 2019, carbon pricing was introduced. In 2020, a new climate plan was introduced with more robust 2030 targets to reduce emissions by 32-40% below 2005 levels. In 2021, Canada announced its new target of 40-45% emission reduction to 2005 levels by 2030 and net zero by 2050. In 2022, the 2030 Emissions Reduction Plan was released and transformed what had been economy-wide emissions reduction targets into sector-specific emissions caps. This paved the way for the proposed oil and gas sector cap of 42% GHG reduction below 2019 levels. In the span of 7 years, Canada’s climate policy has changed rapidly, and each change has increased the policy stringency. This rapid change in GHG reduction targets and the scope to whom they apply has led to a weakened and less dependable policy environment. This sustained policy uncertainty limits the ability of the oil and gas sector to model long-term capital allocation models for green infrastructure projects, and carbon technology. Implementing the oil and gas cap and trade system will add another layer of policy that will further discourage private investment in decarbonization, and lead to broad divestment across Canada altogether, both ultimately harming the Canadian economy and net-zero prospects. The Canadian government should give existing policy mechanisms, like the federal carbon tax time, to expedite decarbonization and signal the de-risking of private sector investment in decarbonizing operations and carbon technologies.
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Regulatory Uncertainty
In addition to the evolving climate policy landscape, several targeted regulatory measures have been introduced concurrently, further adding uncertainty for the oil and gas sector. Canada’s current regulatory system and approval processes are known to be far lengthier than competitor national jurisdictions. Proposed major projects find themselves either withdrawn from the regulatory process and resources redeployed in other countries or projects spend years in numerous regulatory and approval processes. The proposed oil and gas cap and trade system will increase the regulatory burden on oil and gas companies. The administrative cost of compliance will disproportionately impact smaller companies and rural economies. If Canada is to meet its 2030 goals, we can’t afford long delays and roadblocks in deploying and scaling new emission-reduction projects. Canada’s oil and gas regulatory system and approval processes need to change to improve certainty for the industry and investors. Establishing sector-by-sector regulations like the proposed oil and gas emissions cap will have the unintended consequence of further entrenching regulatory uncertainty. Instead of mandating sector-specific decarbonization strategies, the Government of Canada should advance broad policy tools to support economy-wide, and national decarbonization with a framework guiding each sector in developing and implementing its decarbonization strategy.
To conclude, we welcome the Government of Canada’s willingness to work with industry on Canada’s path to net zero. That collaboration needs to focus on establishing long-term certainty to unlock decarbonization investments for the benefit of the Canadian economy, and of the world. A strong investment environment requires stable federal policies, regulations, and programs. The proposed oil and gas cap and trade system will hurt small and large companies within our sector and will make the Canadian economy less productive and competitive globally. We welcome the opportunity to answer further questions.
Sincerely,
ENSERVA
Gurpreet Lail
President and CEO
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