Federal plans to reduce carbon emissions in the energy sector 42% below 2019 levels have raised concerns among policy experts..A discussion paper released July 18 by Environment Minister Steven Guilbeault proposed a cap-and-trade system or higher carbon levies on heavy emitters. Public consultation will close September 30..Kevin Birn, an analyst with S&P Global, says the energy sector will be cautious until the federal government makes a final decision..“The introduction of an additional carbon metric that runs on top of a distinct existing policy will inevitably introduce additional uncertainty in the sector in the region, which has already been plagued with uncertainty due to the price volatility of the past in it due to the delays in pipeline infrastructure,” Birn told the Western Standard..“It will have, even until it's announced … the effect of slowing and reducing investment in extraction specifically..While a cap-and-trade may be more complicated than a heavy tax, Birn says both would take their financial toll..“Certain options they’re looking at would add additional regulatory complexity versus the other options. I think both have the potential to increase costs in the sector,” Birn said..“Canada has an obligation to meet its own emission ambition reductions … but it has to do this within the realm of understanding the competitiveness of this industry.”.Birn says if federal regulations kill oil and gas development in Canada, other countries will look at home or elsewhere to meet their energy needs. If those sources are more carbon-intensive in their production, the point of lowering worldwide emissions will be lost..“If Canada achieves its ambition by simply redirecting the production and the economic benefits and the emissions go elsewhere in the world, it's not really achieving its goals and contributing to global emission reductions. And I think that's the real tightrope that these policies will get judged upon,” Birn said..Birn says Canadian natural gas production is less carbon intensive than coal-fired plants used in many countries and may even fare better versus other countries’ natural gas — especially after the 75% methane drop occurs that the government is pushing for. .“Canada has a fairly competitive regime, has very aggressive methane reduction targets, which could place the sector in a very good position to compete over a long-term market that will eventually move from gas and coal to gas and gas,” Birn said..Ian Madsen, senior policy analyst at the Frontier Centre for Public Policy, told the Western Standard he is concerned the proposed regulations could siphon money out of the energy sector, leading to many ill effects..“The less money these companies have, the less they will have to reinvest to explore, develop and produce more natural gas to help Europe get off Russian gas and their dependence on vastly undesirable coal-burning plants, to have enough gas surplus to supply the mooted East Coast LNG liquefaction plants, to keep natural gas prices attractive worldwide as an alternative to coal, and to show rates of return to investors and lenders,” Madsen said. .“[Energy companies must] ensure money flows into the industry to keep the well-drilling, developing, completion and production treadmill humming, since the decline rates on fracked wells are anywhere from 20-50% per annum, versus 5-15% for conventional wells.”.Madsen said he believes the federal government has a misguided fixation on greenhouse gases (GHGs) from oil and gas, which accounts for only 27% of Canada’s total. He says the federal government has paid too little attention to the potentially profitable capture of GHGs from landfills and sewage. .“There are quite a few other ways that are relatively low cost that Canada could lower, or reduce the growth of, GHG emissions without recourse to penalizing and debilitating one of our relatively few globally competitive and very clean and ethically operating industries,” Madsen said..“[Oil and gas are] crucial to the climate crusaders' ostensible mission of making an orderly and quasi-rational transition to a less GHG-spewing world.”
