Background Information on Canada’s Oil and Gas Industry
Canada is the fourth-largest oil producer in the world, with its oil sands in Alberta making up a significant portion of the country’s oil reserves. These oil sands contain a mixture of bitumen—a thick, heavy oil—and sand, clay, and water. Extracting oil from these sands is an energy-intensive and carbon-heavy process compared to conventional oil drilling. The environmental impact of extracting oil from Canada’s oil sands has become a focal point for climate advocates, particularly due to the high greenhouse gas (GHG) emissions associated with the extraction and upgrading processes.
In 2023, oil sands emissions accounted for roughly 10% of Canada’s total GHG emissions, making it a central issue in any discussions on how the country plans to meet its climate commitments. The extraction process itself uses large amounts of water and energy, often derived from natural gas, leading to higher emissions compared to conventional oil extraction methods. Furthermore, the combustion of this extracted oil when it is used as fuel contributes to further emissions, raising concerns about Canada’s ability to meet its international climate targets.
The oil and gas sector as a whole, including not just oil sands but also conventional oil and natural gas extraction, represents one of the largest contributors to Canada’s emissions. The sector’s economic importance cannot be overstated. It has historically been a major driver of the Canadian economy, contributing billions of dollars to GDP and providing hundreds of thousands of jobs. However, as the world accelerates its shift toward renewable energy, Canada’s dependence on this sector raises questions about how it can navigate a transition while maintaining economic stability.
Canada’s emissions targets are largely framed by its commitments under the Paris Agreement, which Canada ratified in 2016. Under the agreement, Canada pledged to limit global warming to well below 2°C above pre-industrial levels, with efforts to limit the rise to 1.5°C. To meet this goal, Canada committed to reducing its greenhouse gas emissions by 30% below 2005 levels by 2030. The Canadian government also set a longer-term target to achieve net-zero emissions by 2050.
In 2021, the federal government announced its intention to strengthen climate policies with a more ambitious target of reducing emissions by 40-45% by 2030. However, despite these bold commitments, the oil and gas industry’s emissions have remained a major obstacle to meeting these targets. Industry experts and climate activists argue that without significant reforms in the oil and gas sector, Canada’s 2030 climate goals may be out of reach.
One key challenge is the ongoing expansion of oil sands production, which continues to grow despite international calls for climate action. The government of Canada has faced significant pressure from both environmentalists and international bodies to curb the oil and gas sector’s contribution to climate change, while provincial governments, particularly Alberta’s, argue that such actions would harm the economy.
In response, the federal government introduced a series of new policies aimed at regulating emissions from the oil and gas sector, but the effectiveness and enforcement of these policies remain uncertain. These include a cap on oil and gas sector emissions, carbon pricing, and enhanced methane reduction targets. However, implementing these measures will be a complex process, requiring collaboration among federal and provincial governments, businesses, and the public.
Key Challenges in Reducing Oil and Gas Emissions
The road to reducing emissions from Canada’s oil and gas sector is filled with significant challenges. These obstacles can be broken down into three main categories: technical, economic, and political.
1. Technical Barriers
Technologically, reducing emissions from oil and gas extraction is no small feat. Canada’s oil sands are located in remote, often northern areas, where extreme temperatures and logistical difficulties pose additional challenges to developing and implementing low-emission technologies. While carbon capture and storage (CCS) technology holds promise, it is still in its early stages, expensive, and unproven on a large scale.
CCS involves capturing carbon dioxide emissions produced during extraction or refining and storing them underground to prevent them from entering the atmosphere. However, the scalability of CCS is uncertain, and it requires substantial investment in infrastructure. Additionally, it is not a perfect solution, as it does not address all forms of emissions—especially those that occur throughout the supply chain, such as emissions from transportation and end-use combustion.
Methane, another potent greenhouse gas, is frequently released during oil and gas production, particularly in the extraction and transportation phases. While Canada has proposed stricter regulations to cut methane leaks, the technology and infrastructure needed to detect and reduce methane emissions are still developing.
2. Economic Barriers
The oil and gas sector represents a cornerstone of the Canadian economy, contributing significantly to GDP, job creation, and export revenue, especially with Canada’s primary oil customer being the United States. Alberta, home to Canada’s oil sands, has long argued that stringent emissions regulations would cripple the province’s economy, leading to job losses and reduced economic growth.
Despite the growing focus on clean energy and the increasing affordability of renewable energy, the oil and gas sector remains heavily subsidized and entrenched in Canada’s energy policy. Transitioning away from fossil fuels will require significant investments in green technologies and retraining workers in affected sectors. The economic transition away from oil and gas will likely result in some short-term economic disruptions, which could generate resistance from industries and provinces that depend on fossil fuels for their economic survival.
For many Canadians in resource-dependent provinces, such as Alberta, the transition away from oil and gas can feel threatening to their livelihood and community. Government efforts to balance the urgent need for emissions reductions with the need to protect jobs and industry will need to address these economic concerns through support for workers and communities impacted by the transition.
3. Political Barriers
The political landscape surrounding oil and gas emissions is highly contentious. Provinces like Alberta and Saskatchewan are heavily dependent on fossil fuel extraction, and their political leaders have consistently pushed back against federal regulations aimed at limiting emissions from the oil and gas sector. This tension was particularly evident in the opposition to the federal carbon pricing scheme, which was adopted by the Trudeau government but faced legal challenges from several provinces.
In Alberta, oil and gas extraction has historically been the lifeblood of the economy, and any moves to limit production or impose stricter regulations are often met with resistance. The province’s government has argued that Alberta is being unfairly targeted for its oil sands production while other oil-producing regions around the world are not held to the same standards.
Moreover, the political influence of the oil and gas sector in Canada is strong, with industry groups lobbying against policies they perceive as damaging to their bottom line. The oil lobby has a powerful presence, and this often leads to compromises or delays in the implementation of more aggressive climate policies.
Proposed Solutions and Measures to Reduce Emissions
To address these challenges, Canada has proposed a number of measures designed to reduce emissions from the oil and gas sector. These include technological innovation, policy interventions, and targeted financial support for affected industries and workers.
1. Carbon Capture and Storage (CCS)
CCS has been touted as one of the key solutions to reducing emissions from the oil and gas sector. Canada has already invested in a number of CCS projects, including the Quest CCS project in Alberta, which captures and stores over a million tonnes of CO2 annually. However, the scale of CCS required to make a meaningful dent in Canada’s oil and gas emissions is far larger than current capacity.
To achieve real emissions reductions, Canada will need to ramp up investment in CCS, incentivize private-sector involvement, and ensure that CCS technology is integrated across the oil sands extraction process. The government has committed to funding CCS research and development, but the technology will need to be more widely deployed and demonstrated to be both effective and economically viable.
2. Methane Emissions Reduction
Methane is one of the most potent greenhouse gases, and it is emitted throughout the oil and gas production process. Canada has set new targets to reduce methane emissions by 75% by 2030, compared to 2012 levels. This will require tighter regulations and advanced monitoring systems to detect methane leaks.
The challenge here lies in the practicality and enforcement of these regulations. The vast number of oil and gas operations across Canada makes it difficult to monitor and reduce emissions consistently. However, new technologies, such as drones and sensors, are becoming more widely used to detect leaks, and improving enforcement mechanisms will be key.
3. Renewable Energy Transition for Oil and Gas Operations
Another key strategy for reducing emissions is transitioning oil and gas operations to renewable energy sources. Many oil extraction facilities currently rely on natural gas and diesel to power operations. Replacing these fossil fuels with renewable energy sources, such as wind, solar, and hydroelectric power, could significantly reduce the sector’s carbon footprint. This would require significant investment in renewable infrastructure, including energy storage solutions, which are necessary to ensure a consistent power supply.
The potential for integrating renewable energy into oil and gas operations is large, and it could help reduce costs over time. As renewable energy technologies continue to become more efficient and cheaper, this transition is likely to become increasingly feasible.
4. Stronger Carbon Pricing and Emissions Trading
Canada has implemented a federal carbon price as part of its strategy to reduce emissions. Under this system, businesses are charged for the carbon they emit, which creates a financial incentive to reduce emissions. However, the carbon price has faced pushback from provincial governments, especially in oil-producing regions like Alberta.
