Caps on Oil and Gas Industry Will Have Little Impact on Global Emissions: Report

A new report from the Fraser Institute says planned caps on the oil industry will hurt the country's economy. Jeff McIntosh/The Canadian Press

A new report is questioning the federal government’s planned cap on greenhouse gas (GHG) emissions from the oil and gas sector. The report, released on June 1 by the Fraser Institute, says the plan will cost the country billions of dollars in lost revenue and have almost no impact on GHG emissions globally.

The federal plan calls for GHG emissions from oil and gas production to be reduced by 31 percent from 2005 levels by the year 2030.

In his report, Kenneth Green, a senior fellow at the Fraser Institute, says achieving that goal will force the industry to reduce overall production, estimating the loss would be $44.8 billion in 2030 alone.

“The federal government seems determined to inflict severe economic pain on the Canadian economy with almost no environmental benefit in return,” said Green in a news release.

His report adds if Canada eliminated all GHG emissions from the oil and gas industry by 2030, it amounts to a reduction of four-tenths of one percent of global emissions.

“Despite any claims about its environmental impact, Ottawa’s emissions cap will basically have no effect on global greenhouse gas concentrations,” Green said.

‘Carbon Leakage’

The report argues there is another problem, called “carbon leakage.” That means if Canada reduces its production, the oil and gas would simply be produced elsewhere in the world to meet the demand, which would reduce the impact of the emissions cap even more.

On top of that, it says, any reduction in impact will also affect another industry–petrochemicals, which uses oil and gas to make products like plastics and solvents.

“This cap … will likely harm the petrochemical and plastics sectors, which use petroleum as a feedstock for producing their products,” the report says.

In 2020, the petrochemical industry in Canada employed around 4800 people, resulting in some $6 billion in exports. In a discussion paper released in August of 2022, the federal government admits the industry is a major employer.

“In 2020, Canada’s oil and gas sector employed 178,500 direct and 415,000 indirect workers … in addition to the concentration of jobs in oil and gas producing provinces, there are thousands of jobs in manufacturing, environmental, and financial services tied to the oil and gas industry, especially in Ontario and Quebec.”

It adds the industry is also a major wealth generator.

“In 2020, the oil and gas sector generated $118 (billion) in GDP (gross domestic product) and accounted for 16 per cent of Canada’s exports,” said the paper, titled “Options to cap and cut oil and gas sector greenhouse gas emissions to achieve 2030 goals and net zero by 2050.”

However, the discussion paper says the oil and gas industry is the country’s largest single GHG emitter, amounting to about 27 percent of the national total. By comparison, the transportation industry accounts for about 24 percent.

The paper says technological advances have helped the industry reduce its emissions per barrel of oil produced.

“Emissions per barrel in the oil sands have fallen 33 per cent since 1990,” said the report, adding some facilities are among the most efficient in the world.

But it says more needs to be done.

“Reaching Canada’s 2030 climate targets and achieving net-zero will require significant additional reductions, and there is no single or simple solution,” it says. “Multiple pathways will be required.”

Green’s report for the Fraser Institute says it amounts to lost revenue for a result–that even if fully achieved–will do little.

“A reduction unlikely to have any impact on the trajectory of the climate in any detectable manner, and hence, to offer only equally undetectable environmental, health, or safety benefits,” it said.