Opinion: Canada’s emissions cap shortsighted and punitive

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Believe it or not, I agree with federal Environment Minister Steven Guilbeault. Announcing his updated emissions cap regulations this week, he bragged that “no other major oil and gas producer is doing what we’re doing.” He is right.

But it’s not because countries like Norway and the United States aren’t as “visionary” as our federal government believes itself to be. No, other oil- and gas-producing countries aren’t implementing an emissions cap because they understand the incredible importance of the oil and gas sector to their economies and they’re too smart to shoot themselves in the foot.

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Minister Guilbeault appears to be focused on emissions reduction at the cost of anything else. This shortsighted targeting of one of Canada’s most productive sectors will only hurt Canadians and our economy.

The legislation also doesn’t address global emissions. Even if Canadian energy production goes to zero, global demand for oil and gas will continue to grow. People who rely on it will simply buy it from somewhere else. Canada will export jobs and prosperity to those countries, and our lives will become less affordable. All this at a time when most countries are moderating their net-zero ambitions as they realize the crippling cost and practical impossibility of replacing oil and gas in the near term with renewables and battery technology.

While this legislation is billed as an emissions cap, let’s be clear about its true intentions. This is another addition to an already packed policy agenda of new rules – the clean fuel standard, clean electricity regulations and methane regulations. It will have the spin‐off effect of shutting in production in the world’s fourth‐largest oil- and gas-producing nation.

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If we are producing less oil and gas, then we are exporting less. That will have a negative impact on our economy in general, while specifically affecting the purchasing power of every Canadian. The revenues generated by selling our products beyond Canada’s borders is by far the largest single contributor to our trade balance, in turn supporting the value of our dollar, which is already at its lowest level against the U.S. dollar in more than three years. As economists will tell you, slashing how much we export leads to paying more for items we import – from food to electronics to clothing.

Canada already has an affordability problem – exacerbated by weak productivity growth and falling gross domestic product per capita. It should be of deep concern to all Canadians that Canada has become the second-least productive nation in the G7, and we’re moving in the wrong direction, compared with our
OECD peers. If Minister Guilbeault has his way, the federal government will further hobble one of its most productive sectors, rather than working with us to increase our already significant contributions to Canadians.

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These overlapping policies – which are all stick, no carrot – result in more bureaucracy and paralysis for companies looking to make long‐term, multi‐decade and multibillion‐dollar investment decisions. If forced to decide between building money‐losing projects or investing for a better return elsewhere, investors will take their capital out of Canada.

On the flip side, what are the other oil- and gas-producing countries, the ones not implementing an emissions cap, doing? They are working with industry to incentivize emissions reduction. They understand that the cost of these initiatives require government support to keep the sector competitive and contributing to their economies. Just one example is the U.S. with its simple carbon sequestration incentive, the Inflation Reduction Act, and I invite you to look at how well that economy is doing.

Canada is missing an opportunity to promote regulation that would drive our economy and improve the lives of Canadians. The oilsands companies that make up Pathways Alliance, including Cenovus, have been working tirelessly with both the provincial and federal governments for the past several years to find an equitable funding mechanism to move forward with major emissions reduction incentives once the necessary support is in place. The federal government’s Investment Tax Credit has been a good start but, given its design and limitations, will cover only a fraction of the industry’s capital and operating costs of implementing carbon reduction.

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This emissions cap isn’t necessary. Minister Guilbeault and the Government of Canada need to rethink their position on this legislation and instead work with industry to invest in realistic emissions reduction policy, including a timeline that makes sense for all.

If they can recognize the importance of keeping Canada competitive, productive and affordable, that would be something else I could agree with the minister on.

Alex Pourbaix is executive chair of Cenovus Energy.