According to analysts, the federal emissions cap on the oil and gas sector will become an effective production cap. Ottawa’s decision to make the industry cut emissions by one-third of 2019 levels by 2030 is being considered ambitious and unrealistic by CIBC. They cautioned that this cap would be highly straining if it were to be enforced. The regulations will follow a cap-and-trade system, where the sector can purchase carbon offset credits to help meet their reduction obligations. The federal government intends to publish draft regulations next year, and the final regulations will be released in 2025.
With the proposed plan, CIBC analysts stated that, while the reduction goals may be feasible, it may not be realistic to expect a significant amount of carbon capture to be operational within five years. This, they warned, would effectively cap production. Natural Resources Minister Jonathan Wilkinson clarified that the cap is specifically related to emissions, not production.
The federal government’s emissions cap was met with resistance from provincial politicians like Alberta Premier Danielle Smith and Saskatchewan Premier Scott Moe, who criticized Ottawa’s intrusion into their provinces’ constitutional rights and the potentially adverse economic impact of the new policy. The Pathways Alliance, a consortium of Canada’s most prominent oilsands companies, criticized the plan for introducing additional regulatory complexity that could impact multi-billion-dollar decarbonization projects in the sector.