Oil Price
Canada’s oil and gas industry could lose US$55 billion (C$75 billion) in upstream investment by 2035 if the federal government implements a stringent 40% emissions cap from 2030, the Canadian Association of Petroleum Producer (CAPP) says, citing a report by S&P Global Commodity Insights it had commissioned.
At the end of last year, Canada’s federal government introduced a draft framework to cap pollution from the oil and gas sector to reduce emissions.
The plan proposes to cap 2030 emissions at 35% to 38% below 2019 levels while providing compliance flexibilities to emit up to a level about 20 to 23% below 2019 levels.
The industry and the oil-producing province of Alberta slammed the emissions cap proposal, saying it would effectively cap oil and gas production.
This week’s report showed that in the stress case scenario with production under a 40% emissions cap from 2030, the sector would lose US$55 billion (C$75 billion) in upstream investment spend in 2024 to 2035, compared to the Reference Case, in which conventional oil and natural gas production continues under current policy conditions.
The much lower upstream investment would result in US$181 billion (C$247 billion) lower GDP contribution between 2024 and 2035 compared to the Reference Case, according to the report.
“Instead of supporting emissions reduction in upstream operations, a new cap and trade system adds costs and uncertainty, which stifles investment and will force producers to curtail production to reach compliance,” CAPP President & CEO Lisa Baiton said.
“The loss of Canadian oil and natural gas exports will be made up by other nations, who may not share Canada’s high environmental and emissions standards.”
Alberta Premier Danielle Smith also commented on the CAPP-commissioned report by S&P Global.
“It’s time to scrap the cap. Ottawa’s reckless scheme threatens not only Alberta jobs but Canada’s economic future. Billions in investment will vanish, retirement savings will be threatened, and families will feel the pinch,” Smith said in a joint statement with Minister of Environment and Protected Areas, Rebecca Schulz, and Minister of Energy and Minerals, Brian Jean.
“We can reduce emissions and enjoy a thriving economy, but only if Ottawa abandons the proposed oil and gas emissions cap for good.”
By Tsvetana Paraskova for Oilprice.com
Lead image (Credit: Reuters)
