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Canada Oil and Gas Emissions Cap Likely to Curtail Production, Report Says

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Canada’s proposed oil and gas emissions cap will prompt companies to cut production rather than invest in costly carbon capture and storage (CCS) technology, according to a report by consultancy Deloitte and released by the Alberta government on Tuesday.

Prime Minister Justin Trudeau’s Liberal government is developing regulations to force Canada’s highest-polluting sector to cut emissions to 137 million metric tons, 37% below 2022 levels, by 2030. Alberta, Canada’s main oil-producing province, and the industry oppose the plan, arguing it is a production cap.

Canada’s biggest oil producers are counting on CCS for most of their emissions cuts over the next decade. But Pathways Alliance, a group of six major oil sands firms, has not made a final investment decision on its C$16.5 billion ($12.03 billion) project and says it needs more government financial support.

In a report commissioned by Alberta, Deloitte modelling showed that implementing CCS would render high-cost oil sands mines economically unviable. For lower-cost thermal oil sands assets, curtailing production would still be more cost-effective than investing in CCS.

“We do not see any oil sands CCS investments being implemented,” Deloitte said.

Laura Cameron, an analyst at the International Institute for Sustainable Development climate think-tank, said the report raised questions about the cost of carbon-capture technology.

Canada is the world’s fourth-largest oil producer, turning out around 5 million barrels per day (bpd).

Despite the industry’s fears, production is actually setting record highs due to a new export pipeline and resilient oil prices. Trudeau proposed the cap in 2021 and his government is aiming to finalise it ahead of a likely election next year.

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The emissions cap would likely result in 2030 oil production of 5.6 million bpd, around 10% lower than it would be without a cap, Deloitte projected. Gas production at the end of the decade would be roughly 2.2 billion cubic feet a day with an emissions cap, 12% lower than without one.

That would lead to Canada losing 90,000 jobs and C$282 billion in GDP between 2030 and 2040, the report said.

“It’s time to give up on this failed idea,” Alberta finance minister Nate Horner said in a statement.

Deloitte estimates oil and gas emissions would still exceed the proposed cap by 20 million tons by the end of the decade, even with increasing production efficiency and steps to curb methane emissions.

Asked about the emissions cap on Tuesday, Federal Environment Minister Steven Guilbeault told reporters the government did not have jurisdiction to limit production.

(Reporting by Nia Williams in British Columbia; Editing by Rod Nickel)

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