Canada's first emissions reduction roadmap relies heavily on the oil and gas sector to help Ottawa reach its 2030 climate goal, but there is a still a big gap between what industry and government say are achievable cuts.

Oil and gas is Canada's highest-polluting sector, accounting for 26% of total emissions. If Prime Minister Justin Trudeau's Liberal government is to meet its climate target of reducing overall emissions 40-45% below 2005 levels by 2030, the oil and gas industry will need to make drastic cuts.

So far Canada has missed every emissions reduction goal it has ever set and oil and gas pollution has risen 19% between 2005 and 2019. Canada's new Emissions Reduction Plan, announced on Tuesday, aims to cut oil and gas emissions by 42% from current levels by 2030. 

"Ambition is one thing, action is what's required," Suncor Energy Chief Executive Mark Little told a sustainability conference in Vancouver on March 29, adding industry needed to work with government to align climate targets.

The Oil Sands Pathway Alliance, a group of six Canadian oil and gas companies including Suncor, is targeting only a 32% cut by 2030. Their alliance, which accounts for 90% of northern Alberta's oil sands production, is aiming for net-zero emissions by 2050.

"The Pathways Alliance has been clear that the interim goals set for our industry must be flexible, realistic and achievable," Kendall Dilling, interim director of the group, said in a statement.

The Liberal government, which has had a strained relationship with the oil and gas industry since coming to power in 2015, is also developing an oil sands emissions cap as promised in the last election. 

Trudeau said oil and gas leaders themselves recognized the need to get to net-zero by 2050.

"These are plans that are consistent with that objective that they have themselves laid out," Trudeau told a press conference following the ERP release.

Heavy lifting

Ottawa is relying on a handful of levers to slash oil and gas emissions, such as cutting methane output and new technologies including carbon capture and storage (CCS), said Dave Sawyer, principal economist at the Canadian Climate Institute.

CCS involves capturing and permanently sequestering emissions underground, a costly process that the oil and gas sector wants public money to help fund. After months of negotiations Ottawa is expected to announce CCS tax credit in the 2022 budget next week.

"Industry's job is to keep costs down and transfer the risk from their shareholders to someone else, so there's a discussion here around subsidizing emissions reductions," Sawyer said.

That is despite a surge in cashflows from rising crude prices as Russia's invasion of Ukraine disrupts global oil supplies.

Deborah Yedlin, chief executive of the Calgary Chamber of Commerce, a business lobby group in the heart of the oil patch, said high commodity prices were likely to be short-lived and accelerated climate targets will require more spending on commercial demonstration projects.

"Industry will therefore require government investment in technology through public-private partnerships," Yedlin said.

Many environmental campaigners criticized the oil and gas industry for not doing its fair share. The sector is expected to cut emissions 31% from 2005 levels by 2030, far less than the electricity sector's 88% reduction, but still more than transportation's 11% cut.

"We need an all-hands-on-deck-approach to climate action, but according to this plan, some sectors—most notably oil and gas—will not contribute their fair share, letting the burden fall on workers, consumers, and other industries," said Caroline Brouillette, national policy manager for Climate Action Network.

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