By unveiling his plan to cap greenhouse gas (GHG) emissions from the oil and gas sector, the federal Minister of the Environment, Steven Guilbeault, was very proud to point out that Canada thus becomes the first oil-producing country to act in this way.
None of the world’s biggest players in the field of black gold are thinking of doing the same. Obviously not Russia, whose revenues from oil exports remain the main source of income. Neither does Saudi Arabia, despite its commitment to aim for carbon neutrality by 2060. Not even the United States, which remains the world’s largest oil producer and whose production has reached a record 13.2 million barrels per year. day (Mbj) this year. Nor Norway, which continues to approve new oil and gas projects.
Despite the fact that a good proportion of the 70,000 participants (according to the most conservative estimates) gathered in Dubai for COP28, including Mr. Guilbeault, want the final declaration of the conference to contain a reference to the elimination of fossil fuels In the more or less distant future, global demand for oil will continue to rise. According to the International Energy Agency (IEA), production amounts to 101.8 Mbd this year, up 1.8 Mbd compared to 2022. It forecasts an increase of 1.6 Mbd in 2024.
Most analysts predict that global oil consumption could peak around 2030 — if all countries meet their GHG reduction commitments. That’s a big if. Even those who are in good faith will have great difficulty achieving this. While Mr. Guilbeault is banking on an IEA forecast according to which global oil demand would be between 25 Mbd and 30 Mbd in 2050 in a carbon neutrality scenario, the Organization of the Petroleum Exporting Countries (OPEC) expects demand to reach 116 Mbd in 2045.
It goes without saying that Alberta Premier Danielle Smith prefers to trust OPEC’s forecast rather than that of the man she describes as an “eco-extremist”. His government is currently enjoying a fiscal geyser thanks to record royalties from his province’s energy industry. Obviously, she wants her joy to remain. According to Mme Smith, Mr. Guilbeault’s plan constitutes “a de facto cap on production in Alberta’s oil and gas sector” and “an intentional attack by the federal government on Alberta’s economy.” This ceiling, she continues, would even be unconstitutional because of the right of the provinces to develop their natural resources as they see fit.
In fact, Mr. Guilbeault’s plan provides for “compliance relaxations” that would allow oil and natural gas producers to achieve GHG reduction targets without reducing their production. They could buy carbon offset credits or contribute to a decarbonization fund.
However, achieving GHG reduction targets in this sector, the most polluting in the country, would require massive investments in technologies, including carbon capture and storage, which have still not proven their worth. . Whatever Mr. Guilbeault and certain members of the industry say, the deadline is far too tight for us to be able to count on the capture projects still in the planning stage to achieve our targets in 2030. This is why strict application of the ceiling would be equivalent to a drop in production.
Ms. Smith is not the only one who simply doesn’t believe it. The officials at the Department of Finance in Ottawa know very well that any reduction in production will have significant repercussions on federal finances. Total revenues for Canada’s oil and gas extraction industry reached $270 billion in 2022, driven mainly by the rise in crude prices following Russia’s invasion of Ukraine.
Exports of energy products (almost exclusively composed of oil and gas, with electricity accounting for only about 2.7% of the total) exceeded $211 billion. The amount would be lower this year, but it should still exceed $150 billion. Mr. Guilbeault can say whatever he wants about his “sustainable jobs plan” which aims to “transition” workers in the oil and gas sector to jobs in the green economy. The wealth created by the oil sector is difficult to replace.
By tabling their plan to cap emissions from the oil and gas sector, the Liberals are taking a step toward fulfilling an election promise made in 2021. But the implementation of this plan remains entirely hypothetical. Another federal vote will certainly take place before we know the fate that awaits Mr. Guilbeault’s plan. Between the latter and Danielle Smith, who will be right, do you think?
Based in Montreal, Konrad Yakabuski is a columnist at Globe and Mail.