Oil and gas production can meet ‘historical highs’ under emissions cap: PBO

The recent analysis by the Parliamentary Budget Office (PBO) has shed light on the potential impact of Canada’s proposed oil and gas emissions cap on the sector’s production levels. Despite the cap, the report suggests that the fossil fuel industry could still see an increase in production by 11 per cent by 2032.

According to the PBO’s findings, the cap would not restrict the current production levels of oilsands and natural gas. In fact, it predicts that both sectors could experience significant growth in the 2030-32 compliance period. The oilsands could potentially add 500,000 barrels a day, leading to a 15 per cent increase in production compared to 2022 levels. Similarly, natural gas producers could see a 12 per cent increase in production, bringing them close to historical highs.

The release of the draft oil and gas cap regulations by the federal government in November has sparked debate, with some critics labeling it as a production cap rather than a pollution cap. However, the PBO report clarifies that the draft policy does not cap production at current levels.

Despite the potential growth in production, the PBO estimates that Canada’s GDP could take a hit if the emissions cap prevents the industry from reaching its full potential. It predicts a 0.39 per cent decrease in real GDP and a $20.5 billion drop in nominal GDP by 2032. This has led to concerns from political figures, with Conservative Leader Pierre Poilievre linking prime minister-designate Mark Carney to the potential loss of oil and gas growth.

The oil and gas sector is a significant contributor to Canada’s emissions, accounting for 31 per cent of the country’s emissions in 2022. The PBO report highlights the importance of reducing emissions, estimating that the cap could prevent at least 7.1 million tonnes of emissions, equivalent to taking over 2 million cars off the road.

While the report does not factor in the cost of climate change or potential job creation from decarbonization efforts, it does acknowledge the importance of reducing methane emissions and the sector’s historic emissions intensity. It also does not consider specific projects like carbon capture and storage, which could further reduce emissions in the oilsands.

Overall, the PBO report underscores the need for a balanced approach to reducing emissions in the oil and gas sector while considering the potential economic impacts. It is essential for policymakers to weigh the benefits of emission reductions against the potential challenges faced by the industry.