New cap-and-trade system for oil and gas is not the right direction

Optimizing Canada's existing industrial carbon pricing systems would be a better approach

Photo by Chris Liverani on Unsplash

Clean Prosperity Western Director Adam Sweet made the following statement about the federal government’s new emissions cap for the Canadian oil and gas sector, announced today:

“The federal government’s decision to implement a cap-and-trade system solely for Canada’s oil and gas industry is the wrong policy. This approach creates uncertainty and regulatory complexity that risks slowing down critical emissions reductions. In our view, a better choice would be to optimize Canada’s existing industrial carbon pricing systems to achieve greater reductions.

“Industrial carbon pricing can do even more to reduce emissions right across the economy — including in the oil and gas sector — if the federal and provincial governments work together to tighten the stringency of emissions benchmarks. 

“The federal government should focus on supporting carbon pricing systems that are already working to reduce emissions, and accelerate the delivery of investment supports they have already committed to — such as carbon contracts for difference.”

Clean Prosperity Western Director Adam Sweet

“Instead of pursuing a new policy that creates uncertainty for firms, invites legal challenges, and risks disrupting the functioning of Canada’s industrial carbon pricing systems, the federal government should focus on supporting carbon pricing systems that are already working to reduce emissions, and accelerate the delivery of investment supports they have already committed to — such as carbon contracts for difference.

Carbon contracts for difference, which the federal government recently committed to deploying soon, put a guarantee on the price of carbon credits that trade within provincial industrial carbon pricing systems. Price guarantees can incentivize big investments in low-carbon projects, especially if they’re broadly available to emitters right across the economy. Firms are now looking forward to clarification from the government about how the contracts for difference program will work. 

“Alberta, Canada’s top producer of oil and gas, already has Canada’s largest and longest-running industrial carbon pricing system. With tighter benchmark stringency and guarantees on carbon-credit prices through contracts for difference, Alberta can accelerate emissions reductions from industry while growing a prosperous low-carbon economy. The new cap-and-trade system risks undermining the effectiveness of industrial carbon pricing in Alberta.

“With the federal government now committed to a cap-and-trade system for the oil and gas sector, it will be essential that the government make sure that the rules of the new system are clear to industry, including any interactions between the cap-and-trade system and existing climate policies, especially industrial carbon pricing.”

Contact: media@cleanprosperity.ca

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