Report by Deloitte suggests emissions cap not possible without oil, gas production cuts

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Canadian oil and gas companies facing a federally imposed emissions cap will determine to trim their accumulation alternatively than put successful too-expensive carbon capture and retention technology, a caller study by Deloitte says.

The Alberta government-commissioned study — a transcript of which was obtained by The Canadian Press — intends to measure nan economical effect of nan projected cap.

Its findings contradict nan national government’s stance that its projected headdress connected greenhouse state emissions from nan lipid and state assemblage would beryllium a headdress connected pollution, not a headdress connected production. And it supports Alberta’s position that a mandated headdress would lead to accumulation curtailments and terrible economical consequences.

But nan Deloitte study besides casts uncertainty connected nan thought that wide deployment of c seizure and retention exertion will thrust down emissions from nan lipid and state assemblage successful nan coming years, suggesting that script doesn’t make financial sense.

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“We expect that nan headdress (will impose) 20 megatonnes successful emissions simplification connected producers by 2030, which will request to beryllium achieved by CCS (carbon seizure and storage) investments, aliases done accumulation curtailment,” nan Deloitte study states.

“Curtailing accumulation would beryllium a much cost-effective action compared to investing successful CCS.”

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The lipid and state assemblage is Canada’s heaviest-emitting industry, and rising oilsands accumulation has meant full emissions from nan assemblage are expanding astatine a clip erstwhile galore different sectors of nan system are successfully reducing wide emissions.

Globally, lipid request is growing, pinch nan International Energy Agency forecasting world lipid request to beryllium 3.2 cardinal barrels per time higher successful 2030 than successful 2023, though nan agency besides suggests increasing proviso will outstrip request maturation sometime this decade.

Breaking news from Canada and astir nan world sent to your email, arsenic it happens.

In a draught model released past December, nan national authorities projected mandating a ceiling connected lipid and state emissions successful bid to thief slow ambiance change. The rules would require nan manufacture to trim greenhouse state emissions by 35 to 38 per cent from 2019 levels by 2030. Companies would besides person nan action to bargain offset credits aliases lend to a decarbonization money that would little that request to cutting conscionable 20 to 23 per cent.

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But nan Deloitte study suggests lipid accumulation successful this state could summation 30 per cent, and state accumulation complete 16 per cent, from 2021 to 2040. Those figures are based connected a Canada Energy Regulator forecast and connected existent authorities policies.

This intends that producers will person 2 choices to meet nan constraints of an emissions cap, Deloitte argues. They tin put heavy successful c seizure and retention — trapping greenhouse state emissions from lipid accumulation astatine tract and storing them safely underground — aliases trim backmost connected planned accumulation increases.

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The lipid and state manufacture itself has been promoting c seizure and retention arsenic nan cardinal to reducing emissions while still expanding production. The oilsands industry, which is responsible for nan bulk of Canada’s wide lipid and state assemblage emissions, has projected spending $16.5-billion connected a monolithic c seizure and retention web for bluish Alberta.

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But nan group of companies down nan proposal, called nan Pathways Alliance, has not yet made a last finance decision, saying much certainty astir nan level of authorities support and backing for nan task is required.

In its report, Deloitte concludes nan costs of c seizure and retention is truthful precocious that successful galore cases, it is “economically unviable.”

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It says it is improbable that galore companies would spell that way successful an effort to comply pinch an emissions cap, and would alternatively simply curtail production.

“It is important to statement that erstwhile implemented, nan finance successful CCS is irreversible,” nan study states.

“However, accumulation curtailment tin beryllium reversed. Considering these factors, we do not foresee immoderate oilsands CCS investments being implemented.”

The Deloitte study concludes a mandatory limit connected greenhouse state emissions from nan lipid and state assemblage would consequence successful decreased production, occupation losses and investment, arsenic good arsenic a “significant” diminution successful GDP successful Alberta and nan remainder of Canada.

The mining, refinery products and utilities assemblage will besides acquisition a alteration successful existent output successful nan arena of an emissions cap, Deloitte says, owed to their proximity to nan lipid and state sector.

Alberta’s lipid accumulation successful 2030 would beryllium 10 per cent little pinch a headdress than without one, nan Deloitte study suggests, and its earthy state accumulation would beryllium 16 per cent lower. The headdress would besides mean decreased fossil substance accumulation successful B.C., Saskatchewan and Newfoundland.

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By 2040, Deloitte says, Alberta’s GDP would beryllium 4.5 per cent lower, and Canada’s GDP would beryllium 1 per cent lower, than if nary emissions headdress were successful place.

Alberta Environment Minister Rebecca Shulz said nan study supports what nan state has been saying each along.

“We person to usage communal sense. You person to return socio-economic information into position erstwhile you’re looking astatine policies for illustration (an emissions cap),” said Shulz successful an interview.

“I don’t deliberation Canadians want to spot america propulsion nan state into further economical decline.”

Shulz added Alberta recognizes that nan economics of c seizure and retention are challenging. She said heavy-handed authorities argumentation that makes companies little profitable will only person nan effect of discouraging finance successful emissions reduction.

“From a argumentation perspective, nan layering of each of these punitive measures are continuing to thrust distant nan emissions simplification exertion that we really want to spot hap here,” she said.

The Deloitte study predicts Alberta would person 54,000 less jobs successful 2030 pinch an emissions headdress than without one.

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