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Oil and gas exports could make Canada's emission targets impossible, report shows

A new report on Canada's oil and gas sector calls on the government to kill the Trans Mountain expansion and new LNG projects if the country has a hope of meeting the federal target of net-zero emissions by 2050.
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As of 2019, the most recent year data is available, Canada’s per-capita emissions were 3.4 times higher than the world average.

Plans to increase the export of oil and gas over the next 30 years could sink any hope Canada has of meeting its emission reduction targets, according to a new report.

The latest projections out of the Canada Energy Regulator (CER) indicate the country may “totally blow even an 80% reduction target by 2050.” The current government has pledged to hit a net-zero goal by mid-century. 

That’s according to former Canadian government scientist and energy expert David Hughes, who authored Canada’s Energy Sector, a report co-published Tuesday by the Canadian Centre for Policy Alternatives, Corporate Mapping Project, Parkland Institute and a handful of environmental groups.

“The math doesn’t work,” said Hughes in an interview with Glacier Media. “It’s just a hopeless contradiction between government policies and what the data tells you.”

Jay Averill, a spokesperson for the Canadian Association for Petroleum Producers (CAPP), pushed back against the report’s findings, pointing to LNG’s role in weening countries like China and India off coal-fired power plants.

“Any pathway that calls for the shutting down of Canada's oil and natural gas simply will shift investment and production to countries that do not share Canada's high environmental standards,” said Averill in a written statement.

He added that new technologies have allowed oil producers to make “exceptional progress in reducing GHG emissions intensity” and as reliance on oil sands grows, “every bit of pipeline capacity will be needed for the foreseeable future."

CANADA FALLING SHORT

The report's data paints a grim picture.

Last November, the Canadian government tabled legislation that would set legally binding five-year reduction targets to achieve carbon neutrality by 2050. That’s the minimum but formidable target countries around the world need to hit in order to stave off 1.5 C in global temperature rise from preindustrial levels — the point where scientists say irreversible damage will be done to the Earth’s climate system.

But in analyzing the CER’s own data, along with provincial data and Environment Canada’s annual emissions report to the United Nations, Hughes found that even under the most conservative estimates, the oil and gas sector alone could sink any hope of achieving that goal. 

As of 2019, the most recent year data is available, Canada’s per-capita emissions were 3.4 times higher than the world average.

Despite the unflattering statistic, Canada has increased its emissions by 3.3 per cent, more than any other G7 country since the Paris Agreement was signed in 2016.

Today, 26 per cent of Canada’s emissions come from the oil and gas sector. According to the CER’s evolving scenario, production is projected to peak in 2039 and decline through 2050, when oil sands, the most emissions-intensive source of oil, will make up 71 per cent of Canadian production.

All of the emissions growth will happen in Alberta, where production will grow 13 per cent, and in B.C., where production will surge 146 per cent, according to the report. Much of that B.C. oil will be used to dilute tar sand oil so it can pass through a pipeline to the coast, where it will be exported to Asian markets, said Hughes. 

David Keith, who founded a high-profile direct carbon capture business operating in Squamish, B.C., and works as both an applied physics and public policy professor at Harvard University, said Hughes’ research points out glaringly obvious gaps between the direction Canada's and oil and gas sector is headed and the country’s climate policy.

“This is the great tension at the heart of Canada's politics: the federal government has a climate policy that is great on paper, yet it cannot forthrightly explain the reality of what that means for oil and gas,” he wrote in an email.

LNG MAY WIPE OUT B.C.’S CLIMATE GOALS

Oil is not the only petroleum product throwing off Canada’s emission reduction targets. While Alberta is projected to make up 83 per cent of Canada’s oil production in 2050, B.C.’s production of liquid natural gas (largely methane) is projected to soar.

When Hughes examined government data projecting B.C.’s production of LNG, he found its export will render the province’s CleanBC plan “impossible to achieve.”

Even if every other sector of the economy dropped its greenhouse gas emissions to zero by 2050, the CER evolving scenario forecast for B.C. means the province’s oil and gas sector alone would exceed its reduction targets by 93 per cent.

That’s with the current LNG Canada terminal already approved in Kitimat, B.C. Add the three other terminals also under consideration — including Woodfibre LNG in Squamish and Tilbury LNG in Delta — and B.C. could blow its CleanBC 2050 target by 147 per cent, the report shows.

CONCENTRATED SPOILS OF OIL

Between 2019 and 2050, the CER projects oil exports to grow by 42 per cent and gas exports to grow by 186 per cent.

But in recent years, industry royalties, tax revenue and jobs have all been on the decline, according to the report.

Hughes calculated that royalty revenue is down 45 per cent since 2000, while taxes from oil and gas had dropped to four per cent of the total in 2018 from 14 per cent in 2009.

At the same time, direct employment dropped by roughly 53,000 workers by 2019 from its 2014 peak of 226,000. 

Hughes said that’s driven by technological efficiencies such as automated trucks. The result, he said, is that Canadians are seeing diminishing returns even as oil and gas exports rise to new heights.

Still, said CAPP's Averill, oil and gas remain “a foundational piece of the country’s economy, contributing over $8 billion annually to government revenues while supporting hundreds of thousands of jobs across the nation.”

TRANS MOUNTAIN INVESTMENT MAY NOT BE NEEDED

In 2018, the Canadian government bought the Trans Mountain pipeline expansion project to secure market access for tar sands oil. At the time, the federal government spent $4.5 billion to buy the pipeline from Kinder Morgan; since then, the project's costs have ballooned to $12.6 billion.

And while oil exports are projected to grow, that massive investment, according to Hughes’ report, will not be needed.

“Even if we go with the most conservative CER forecasts, we don't need any new pipeline capacity,” he said.

Between government subsidies for LNG in B.C. and the billions Canada is spending on the Trans Mountain pipeline expansion, Hughes said there’s only one logical course of action: Kill those projects immediately.

SLASH EXPORTS, RESERVE OIL AND GAS FOR CANADIANS

Last month, the International Energy Agency recommended all nations of the world immediately halt the approval of new oil and gas projects. Without such a move, noted the organization, the narrow path toward carbon neutrality by 2050 would be impossible. 

That doesn’t mean Canada is going to be fossil fuel-free anytime soon. Pointing to the IEA's own numbers, Averill said the need for heavy oil will grow by over 20 per cent by 2040, with Canada's oil sands providing up to 79 per cent of that demand.

Hughes, meanwhile, said curbing oil and gas exports needs to come with a massive investment in renewable energy.

For a country like Canada — spread across large distances and regularly plunged into sub-zero temperatures — fossil fuels will be a vital energy source for years to come. All the more reason, said Hughes, to conserve what we have left.

“Industry, by nature, always extracts the cheapest, lowest-cost resources first. So we're basically extracting the best of what we have left, even though we need them at some level down the road,” he said. “And we’re selling them for declining revenue. That whole strategy has to be completely rethought.”

For Canada to reach net-zero by 2050, Hughes said it will inevitably have to ramp up carbon capture. But capturing carbon from the atmosphere and storing it underground requires rolling out new and existing technology at a daunting scale.

By 2050, Canada’s oil and gas sector is forecast to produce 150 megatons of C02 a year; to capture all of that carbon out of the air and bury it in the ground would take roughly five times the entire world’s current capacity, calculated Hughes.

For a country like Canada, north of 50 degrees latitude, "It’s probably a pipe dream,” he said.

“Politicians seem to think that we can have our cake and eat it too: ‘Nobody is going to have to change your lifestyle, we’ll all be driving EVs [electric vehicles].’ But there are some brutal physical realities.”