The Government of Canada recently introduced Proposed Draft Regulations to limit greenhouse gas pollution from oil and gas production. The Proposed Oil and Gas Sector Greenhouse Gas Emissions Cap Regulations and Proposed Regulations Amending the Output-Based Pricing System Regulations (the Proposed Draft Regulations) work by setting a cap on greenhouse gas pollution within the sector, equivalent to 35 per cent below 2019 levels.
The Proposed Draft Regulations would create a cap-and- trade system designed to recognize better-performing companies and incentivize those that are higher polluting to invest in making their production processes cleaner. They have been informed by extensive engagement by the Government of Canada with industry, Indigenous groups, provinces and territories, and other stakeholders.
Canada is the world’s fourth-largest producer of oil and the fifth-largest producer of gas. As demand for oil and gas peaks in the coming decade and begins to decline, the fuels extracted with the least amount of pollution will be in highest demand. The oil and gas greenhouse gas pollution cap will help the sector remain competitive as the global economy continues to decarbonize and allow Canada to quickly and effectively respond to shifting global demand.
The oil and gas greenhouse gas pollution cap is part of a suite of measures to cut pollution, including significant financial supports for carbon capture and storage and other clean technologies that also support workers, namely through the federal Canada Growth Fund and new investment tax credits.
The Government of Canada will continue to consult to inform the final regulations, which it plans to publish next year. Written comments in response to the Proposed Draft Regulations can be submitted during the formal consultation period from November 9, 2024, to January 8, 2025.
The Proposed Oil and Gas Sector Greenhouse Gas Emissions Cap Regulations and Proposed Regulations Amending the Output-Based Pricing System Regulations are available for download from the websites of the Government of Canada.
For more information, please call Barbara Hendrickson at BAX Securities Law (647) 403-4606.
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