The Canadian government has unveiled draft regulations aimed at reducing greenhouse gas emissions from the oil and gas sector to 35% below 2019 levels by 2030, sparking backlash from the industry, which argued it would necessitate production cuts. Oil and gas is Canada’s largest-polluting industry, and its rising emissions undermine national progress toward broader climate goals. Canada is currently projected to miss its target of reducing overall emissions by 40-45% from 2005 levels by 2030 unless the oil and gas sector accelerates its decarbonisation efforts.
Federal Environment Minister Steven Guilbeault highlighted that the sector earned C$66.6 billion ($47.95 billion) in profits in 2022, and the government intends to incentivise companies to reinvest in sustainable practices. “This targets pollution, not production,” Guilbeault stated, noting that the government’s proposal reflects what’s technically feasible while holding the industry to its commitment to reach net-zero emissions by 2050.
As the fourth-largest oil producer and sixth-largest natural gas producer globally, Canada expects oil and gas output to grow by 16% from 2019 levels by 2030-2032, with minimal economic impact (a projected 0.1% reduction in GDP). The regulations would establish a cap-and-trade system, rewarding lower-emission companies and encouraging more polluting firms to adopt cleaner methods. Reporting of emissions will begin in 2026, and the first compliance period will span 2030 to 2032, with penalties for non-compliance to be outlined by the government.
Federal Natural Resources Minister Jonathan Wilkinson indicated that methane reduction and an oil sands carbon capture project are anticipated to drive most of the emissions cuts. Prime Minister Justin Trudeau’s government initially proposed a 38% reduction target, later adjusted to 35% following consultations on feasibility.
As Canada nears a federal election, polling suggests Trudeau’s Liberals may be challenged by the opposition Conservatives, led by Pierre Poilievre, who have criticised the cap as detrimental to the energy sector amid economic uncertainty. The Conservatives have pledged to repeal the regulations if elected, contending that the cap jeopardises jobs and economic stability.
Industry groups also voiced concerns, warning that the cap would stifle investment and could reduce tax revenues. Alberta’s government argued it could lead to a production drop of one million barrels per day by 2030. TC Energy CEO Francois Poirier claimed the cap would increase energy costs, negatively impacting Canadian families and businesses.
Climate groups, meanwhile, welcomed the draft but pushed for stricter timelines and cautioned against allowing companies to offset up to 20% of their emissions through a decarbonization program or credits. Environmental Defence urged an accelerated timeline, aligning with Canada’s climate goal of 40-45% emissions reduction by 2030.
Public consultations on the draft regulations will begin on 9 November and run through 8 January, with a final version expected in 2025.
