(Calgary) Canadian oil and gas companies, facing a federally imposed emissions cap, will decide to cut production rather than invest in too expensive carbon capture and storage technology, says a new report from Deloitte.
The report commissioned by the Alberta government – a copy of which was obtained by The Canadian Press – aims to assess the economic impact of the proposed cap.
Its findings contradict the federal government’s position that the proposed cap on greenhouse gas emissions from the oil and gas sector would be a pollution cap, not a production cap. And this supports Alberta’s position that a mandatory cap would result in production reductions and serious economic consequences.
“We expect the cap to require 20 megatonnes of emissions reductions from producers by 2030, which will need to be achieved through CCS (carbon capture and storage) investments or through reduced production,” the Deloitte report said.
“Reducing production would be a more cost-effective option than investing in CCS,” the document adds.
The oil and gas sector is Canada’s highest emitting industry, and increased oil sands production has led to an increase in total sector emissions at a time when many other sectors of the economy are successfully reducing their emissions. global.
Globally, the demand for oil is increasing. The International Energy Agency projects that global oil demand will be 3.2 million barrels per day more in 2030 than in 2023, although the agency also suggests that supply growth will exceed growth in demand during this decade.
Businesses would also have the option to purchase offset credits or contribute to a decarbonization fund that would lower this requirement to just 20-23%.
But the Deloitte report suggests that the country’s oil production could increase by 30% and that of gas by more than 16% between 2021 and 2040. These figures are based on forecasts from the Canada Energy Regulator and on current government policies.
This means that producers will have two choices to meet the constraints of an emissions cap, says Deloitte. They can invest heavily in carbon capture and storage – trapping greenhouse gas emissions from oil production on site and storing them safely underground – or reduce planned production increases.
The oil and gas industry itself promotes carbon capture and storage as the key to reducing emissions combined with increased production. The tar sands industry, which is responsible for the majority of overall emissions from Canada’s oil and gas sector, has proposed spending $16.5 billion on a vast carbon capture and storage network in northern Ontario. Alberta.
But the business group behind the proposal, called the New Ways Alliance, has yet to make a final investment decision, saying greater certainty about the level of government support and funding for the project is necessary.
In its report, Deloitte concludes that the cost of carbon capture and storage is so high that in many cases it is “economically unviable.”
The Deloitte report concludes that a mandatory limit on greenhouse gas emissions from the oil and gas sector would lead to reduced production, job losses and investment, as well as a “significant” drop in GDP in Alberta and the rest of Canada.
The mining, refineries and utilities sector will also see a reduction in real output if emissions are capped, Deloitte says, due to its proximity to the oil and gas sector.
By 2040, according to Deloitte, Alberta’s GDP would be 4.5% lower, and Canada’s, 1% lower, compared to a scenario where no emissions caps were in place.
Federal Environment Minister Steven Guilbeault told reporters in Ottawa on Tuesday that the findings are “disconcerting” given that the government has yet to even release draft regulations on emissions caps.
Mr. Guilbeault added that oil and gas companies themselves, including Alliance Nouvelles Voies, have committed to reaching net zero emissions by 2050.
“All we’re doing with capping oil and gas emissions is taking companies at their word,” he said. They have said they want to be carbon neutral by 2050, and what we are doing with these regulations is making sure that no one will wait until 2048 to start putting the necessary measures in place. »
But Alberta Environment Minister Rebecca Shulz said the report supports what the province has been saying all along.
“We have to use common sense. You have to take socio-economic data into perspective when you’re looking at policies like [an emissions cap],” Shulz said in an interview.
“I don’t think Canadians want to see our country slide further into economic decline,” she argued.
Shulz added that Alberta recognizes that the economics of carbon capture and storage are difficult. She said heavy-handed government policy that makes businesses less profitable will only discourage investment in reducing emissions.
“From a policy perspective, the layering of all these punitive measures continues to drive away the emissions reduction technologies that we really want to see here,” she argued.
The Deloitte report predicts Alberta would have 54,000 fewer jobs in 2030 with an emissions cap compared to a scenario where there would be no emissions cap.