Linda’s eyebrows furrow as she stops to think about the implications of new regulations that would force oil and gas companies to cap their emissions output.
The 64-year-old retired mom (who asked that we not mention her last name) looks out her kitchen window in Fort Erie, Ontario, to consider how the cap would impact prosperity and the environment.
“I’m having trouble with this question because I’m not sure I know the full impact of saying I support this idea,” she says in a video chat with Canada Powered by Women.
Linda is one of many women in Canada who cares deeply about the environment. But she also wants Canada to be a prosperous nation, so is concerned about Canada’s energy policy (as are many other women we’ve connected with).
“I like the idea of cutting emissions, but I don’t think the government’s plan takes into account the full severity of consequences of cutting how much oil and gas is produced. I don’t think it’s as simple as wishing away emissions — we’d have to give up a lot as a country if we did that, and the things we’d have to give up are not small things.”
To Linda and other engaged women, the emissions cap in particular is an issue because of the negative impact it will have on Canadian prosperity. The proposed framework is being criticized for its complexity, lack of global competitiveness, and unintended consequences.
Let’s break it down.
What is an oil and gas emissions cap?
In December of 2023 the federal government announced a framework that would require a cap on emissions output. “The Canada Cap,” as some have called it, would mean oil and gas production facilities would be prohibited from emitting greenhouse gases unless they are registered under a cap-and-trade system.
The regulator will issue “emission allowances” and the goal is to lower emissions by 35-38% compared to 2019 levels.
At first glance, you may wonder what’s wrong with lowering emissions. We know from our national research that engaged women care deeply about a balanced approach to energy transformation and 82% want a voice in the future of energy because of how it affects their standard of living. So, there’s more to it than simply cutting emissions.
“What’s being touted as an emissions cap on the oil and gas sector has significant potential to become a prosperity cap for Canadians and Indigenous communities,” said Adam Legge, President of the Business Council of Alberta, in a recent article.
“It fails a reasonableness test on sound public policy. But more importantly, it has high potential to create significant unintended consequences on prosperity because instead of capping emissions, it will likely cap prosperity through deterred investment and a potential production cut.”
Energy policy that caps Canadian prosperity is a concern, and we know from our spring omnibus survey that more than one third (34%) of Canadian Engaged Women disagree that Canada has good energy policy. In addition, more than half of engaged women in Canada (57%) recognize the impact energy policy has on economic and personal financial well-being.
The economic consequences of an emissions cap
Canada’s energy sector is one of our largest economic sectors, representing $113.2 billion of our country’s Gross Domestic Product (GDP). GDP represents the total value of goods and services produced within a country and it is used as a measure of economic activity and performance.
The oil and gas sector is also the largest component of our country’s exports, representing about one quarter of the value of all activity. And it accounted for $12 billion in annual federal and provincial revenues between 2017 and 2021, reports the Government of Canada.
The cap is likely to deter investment in the oil and gas sector, as it would almost certainly result in production cuts.
“The inaccurate and unrealistic assumptions used to develop the cap will deter investment given its complexity and uncompetitiveness,” says Legge.
“No other country in the world has placed this kind of limitation on its resource sector. Investment will therefore go elsewhere, and the emissions reductions investments in Canada will not occur, costing jobs, incomes, and tax revenues.”
Job losses as a result of the emissions cap
Canada’s oil and gas sector directly and indirectly employed about 412,000 people across the country in 2022.
An emissions cap would very likely force production to be cut way back, resulting in billions of dollars in losses and thousands of jobs across various sectors being eliminated.
To quantify the impact of production cuts as a result of the cap, the Conference Board of Canada modelled scenarios and found that Canadian economic activity would drop by as much as $40 billion (the equivalent of Nova Scotia and Saskatchewan’s entire provincial budgets, combined).
The model estimated between 82,000 and 151,000 jobs would be lost across many sectors, including forestry, fishing, trapping, mining, manufacturing, and commercial services — to name a few.
“Most importantly for broad prosperity, federal government revenues would decline $82 billion to $150 billion cumulatively between 2030 and 2040,” said Legge. “That means fewer public services, less money for health care, social programs, and the well-being of Canadians. That is how a production cap becomes a prosperity cap.”
Energy transformation is already underway in Canada
Canadian energy is already being transformed — the energy mix is evolving and diversifying, and every form of energy is getting cleaner thanks to technology and innovation.
The federal emissions cap does not appear to recognize that reducing emissions is already part of the oil and gas industry’s focus.
Outside of technology and innovation, the cap is also criticized for adding an unnecessary layer of complexity to Canada’s existing carbon tax that is intended to encourage a reduction of emissions output by encouraging people to change their behaviour. The federal government has also pledged to establish a federal investment tax credit (ITC) for carbon capture developments.
“Existing, economy-wide carbon pricing systems already provide appropriate regulation to drive reductions of our operating emissions toward net zero by 2050,” Mark Cameron, Vice President of External Relations with Pathways Alliance, told Canada Powered by Women in an email exchange.
“Imposing an emissions cap, with additional regulatory complexity, does not advance the certainty necessary for the planned multi-billion-dollar decarbonization projects to proceed. We have set ambitious targets for the oil sands sector to achieve significant CO₂ reductions by 2030, with a goal of reaching net zero emissions from operations by 2050.”
“The Pathways plan continues to build on extensive collaboration between industry, governments, Indigenous groups, community stakeholders, academia, and technology providers with a common goal for Canada to become the global supplier of choice for responsibly produced oil to meet the forecasted ongoing demand.”
We can’t have emissions reduction unless we are prosperous
“I can’t stand behind a cap that would have this scale of consequence for Canada,” Linda says after learning more. “I admit that I am torn because environmental progress is important to me, but given that the industry is already working on this, I don’t see why we would add more complexity and more harm to our affordability crisis.”
So what happens next?
The Canadian government is asking for input so it can develop draft regulations, which are expected in the middle of 2024. From there, regulations would go into place in 2025 and reporting obligations would start in 2026. The emissions cap would come into full effect between 2026 and 2030.
And of course, the next federal election will happen before the fall of 2025, so this framework could change if a different government is voted in.
The views that Linda shared with us are representative of what many engaged women across Canada have told us in our fall research last year, and in our most recent omnibus survey — namely that many want a balanced versus an all-or-nothing approach.
Engaged women are willing to make trade-offs in order to balance cost of living, environmental, and dependable energy supply concerns, and they want a diverse energy mix that includes fossil fuels because a mix offers affordability, reliability, and prosperity.
What do you think about the federal emissions cap? Reach out and drop us a line, or join our community to be notified about our upcoming events to come chat with us in person.