Kenney and oil patch reaction to Ottawa’s new sped-up emissions targets should come as no surprise

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It shouldn’t surprise anyone that Prime Minister Justin Trudeau would use the international stage of COP26 this week to reiterate a pledge to cap and cut greenhouse gas emissions from Canada’s oil and gas sector.

Everyone paying attention knows this was the plan: That oil and gas production makes up more than one-quarter of the country’s emissions, that Canada is now legally obligated to hit a 2030 reduction target, and a net-zero target by 2050. Also, the major producers that operate about 90 per cent of the country’s oil sands operations – some of the largest emitters – have already said they will work together to achieve net-zero emissions from oil sands operations by 2050 to help Canada meet its climate goals.

It also shouldn’t be unexpected that the industry and Prairie politicians are concerned about how this very big promise will actually play out.

“I don’t know why they would make an announcement like this without consulting with the province that actually owns the overwhelming majority of Canada’s oil and gas reserves,” said Alberta Premier Jason Kenney.

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The devil is not only in the details – such as how the federal government will decide which measurements will be used, what emissions will be counted, or whether individual projects or whole companies will be assessed. The confusion is also in how quickly Ottawa will cap emissions and force reductions.

The immediate concern from the oil sands producers headquartered in Calgary is not so much the 2050 goal – or even 2030 – but rather the new nearer-term targets.

As recently as March, former Environment and Climate Change minister Jonathan Wilkinson said he was reluctant to impose 2025 emission targets. But things moved quickly in the months following, with the Trudeau government in April promising to slash Canada’s greenhouse gas emissions by 40-45 per cent, compared to 2005 levels, over the next nine years. The Prime Minister said in large part owing to a carbon price that will hit $170 per tonne by 2030, Canada was in a position to “blow past” its 30-per-cent reduction commitment under the Paris Agreement.

Then during the federal election campaign, the Liberals announced their climate plan with a new inclusion – that if elected, they would set five-year targets for emissions reductions in the oil and gas sector starting in 2025. That was reiterated in a letter sent this week to the Net-Zero Advisory Body (an expert panel now bereft of Calgary industry analyst and economist Peter Tertzakian, who stepped down last week), which has been tasked with developing the policy particulars.

But the reality of that near-term target is sinking in. Suncor Energy’s Martha Hall Findlay told Reuters, “Honestly, 2025 is going to be tough.”

Rhona DelFrari, chief sustainability officer at Cenovus Energy, another oil sands giant, said the company has not received clarity of any kind from the federal government about what the cap would be set at, or the types of near-term reductions expected.

“It’s absolutely those near-term reduction targets being suggested that will be a challenge if they’re not done correctly,” Ms. DelFrari said in an interview, noting the use of technology such as carbon capture, utilization and storage could take years to develop and consult on.

When the Liberals announced this policy during the campaign in August, Richard Masson, an executive fellow at the University of Calgary who consults with companies in the industry, questioned why targets would be imposed on the sector in 2025, five years before Canada’s legislated emissions targets come into force.

He also reiterated the industry concern that the term “just transition” is code for shutting down the oil and gas sector, rather than allowing the sector to innovate and reduce greenhouse gas emissions.” He added that other oil-producing nations will simply step up their own exports if demand for oil stays high (as it certainly is right now).

On the other side, it’s important to note it’s not just about government actions – it’s about the flow of capital. Climate-conscious investors are also wary about betting on North American oil and gas these days.

And things can change on the energy front much more quickly than people believe. Coal-fired power generation is set to disappear in Alberta in two years – far ahead of schedule, and an unimaginable feat a decade ago (also helped along by many hundreds of millions in provincial and federal dollars).

Simon Dyer, the deputy executive director of the Pembina Institute, said it’s a simple fact that Canada needs to reduce its emissions by 40-45 per cent by 2030 to meet its first international commitment. Canadian oil producers – who have delayed serious action for far too long, he said – should have known this was coming.

“By 2025, we need to be well on our way,” Mr. Dyer said, speaking from COP26 in Glasgow, Scotland.

“In Trudeau’s own comments, he said, ‘Cap today and reduce tomorrow.’ ”

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Yes, there will be politics in all of this. The federal Liberals in Ottawa and the United Conservative Party in Alberta don’t communicate well, to put it mildly. That’s not a great formula for sorting out complicated, high-stakes policy matters.

And in Alberta and Saskatchewan, where the Liberals have no vested electoral interests, many believe Ottawa has no qualms about making the region uncompetitive when compared with other global oil producers.

The 2025 deadline looms. That’s why it’s fair for Mr. Kenney to make a bit of a fuss in reaction to the Prime Minister’s COP26 announcement, and insist the federal government share details of its plan without delay.

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