Ottawa should scrap its oil and gas emissions cap plan

Ottawa’s proposed GHG cap, which solely targets the oil and gas industry while exempting the remaining 73.4 per cent of the country’s GHG emissions, lacks a scientific rationale.

Once again, Alberta is at odds with the federal government, this time over proposed regulations, which would impose a cap on greenhouse gas (GHG) emissions in the oil and gas sector, with the goal of reducing emissions by 35 to 38 per cent by 2030 (relative to 2019 levels).

The Smith government fiercely opposes these regulations and recently submitted formal feedback to Ottawa. While the federal government says these regulations are necessary to combat climate change, in the reality they will impose significant costs on Canadians without yielding detectable environmental benefits.

Firstly, it’s a universally accepted fact that a unit of carbon dioxide has the same atmospheric effect regardless of its source, be it from an oilsands mine in Alberta, a manufacturer in Quebec or a steel mill in Ontario. CO2 is CO2 is CO2. Therefore, Ottawa’s proposed GHG cap, which solely targets the oil and gas industry while exempting the remaining 73.4 per cent of the country’s GHG emissions, lacks a scientific rationale.

Moreover, Canada already has a national carbon tax aimed at reducing GHG emissions. Stacking a GHG cap on top of the carbon tax contradicts the rationale for a carbon tax and would likely result in emissions reduction at a very high cost. According to a recent economic analysis by the Conference Board of Canada, the cap could reduce Canada’s economy (i.e. GDP) by up to $1 trillion between 2030 and 2040, eliminate up to 151,000 jobs by 2030, reduce federal government revenue by up to $151 billion between 2030 and 2040, and reduce Alberta government revenue by up to $127 billion over the same period.

These new findings echo earlier studies, which show the proposed cap’s large costs and little benefits. For instance, a recent study found that an emissions cap on the oil and gas sector would inevitably reduce production and exports, leading to at least $45 billion in lost economic activity in 2030 alone, accompanied by a substantial drop in government revenue.

Again, these large economic costs come with almost no discernible environmental benefit. Even if Canada were to entirely shut down its oil and gas sector by 2030, thus eliminating all GHG emissions from the sector, the resulting reduction in global GHG emissions would amount to a mere four-tenths of one per cent (i.e. 0.004 per cent) with virtually no impact on the climate or any detectable environmental, health or safety benefits.

Meanwhile, every credible forecast of world energy consumption indicates that oil and gas will continue to dominate the global energy supply mix for decades. Given the sustained demand for fossil fuels, constraining oil and gas production and exports in Canada would merely shift production to other regions, potentially to countries with lower environmental and human rights standards such as Iran, Russia and Venezuela.

Clearly, this is an opportunity for Canada, which possesses abundant reserves of natural gas (a cleaner alternative to coal), to play a pivotal role in reducing global GHG emissions. Countries such as China, which is grappling with rising energy demands, are eager to reduce their heavy reliance on coal. And several countries including Germany want to diversify away from Russian gas for geopolitical and energy security reasons. By expanding our natural gas resources, Canada could unleash significant economic activity (jobs, revenue, etc.) while reducing global GHG emissions and improving global energy security.

The Trudeau government will likely publish a draft version of the regulations, which will include the cap, sometime in the next few months. The cap plan lacks any scientific, economic or environmental rationale so the government should scrap the cap for the benefit of Canadians and the world.

Authors:

Elmira Aliakbari

Director, Natural Resource Studies, Fraser Institute

Julio Mejía

Policy Analyst

Related Topics:#ElmiraAliakbari #FraserInstitute #GHGEmissions #JulioMejía #OilAndGasEmissionsCap #OilAndGasIndustry feature

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Canada Caves: Carney ditches digital services tax after criticism from Trump

Published on June 30, 2025

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By Brett Rowland

Canada caved to President Donald Trump demands by pulling its digital services tax hours before it was to go into effect on Monday.

Trump said Friday that he was ending all trade talks with Canada over the digital services tax, which he called a direct attack on the U.S. and American tech firms. The DST required foreign and domestic businesses to pay taxes on some revenue earned from engaging with online users in Canada.

“Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately,” the president said. “We will let Canada know the Tariff that they will be paying to do business with the United States of America within the next seven day period.”

By Sunday, Canada relented in an effort to resume trade talks with the U.S., it’s largest trading partner.

“To support those negotiations, the Minister of Finance and National Revenue, the Honourable François-Philippe Champagne, announced today that Canada would rescind the Digital Services Tax (DST) in anticipation of a mutually beneficial comprehensive trade arrangement with the United States,” according to a statement from Canada’s Department of Finance.

Canada’s Department of Finance said that Prime Minister Mark Carney and Trump agreed to resume negotiations, aiming to reach a deal by July 21.

U.S. Commerce Secretary Howard Lutnick said Monday that the digital services tax would hurt the U.S.

“Thank you Canada for removing your Digital Services Tax which was intended to stifle American innovation and would have been a deal breaker for any trade deal with America,” he wrote on X.

Earlier this month, the two nations seemed close to striking a deal.

Trump said he and Carney had different concepts for trade between the two neighboring countries during a meeting at the G7 Summit in Kananaskis, in the Canadian Rockies.

Asked what was holding up a trade deal between the two nations at that time, Trump said they had different concepts for what that would look like.

“It’s not so much holding up, I think we have different concepts, I have a tariff concept, Mark has a different concept, which is something that some people like, but we’re going to see if we can get to the bottom of it today.”

Shortly after taking office in January, Trump hit Canada and Mexico with 25% tariffs for allowing fentanyl and migrants to cross their borders into the U.S. Trump later applied those 25% tariffs only to goods that fall outside the free-trade agreement between the three nations, called the United States-Mexico-Canada Agreement.

Trump put a 10% tariff on non-USMCA compliant potash and energy products. A 50% tariff on aluminum and steel imports from all countries into the U.S. has been in effect since June 4. Trump also put a 25% tariff on all cars and trucks not built in the U.S.

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Canadian Oil Sands Production Expected to Reach All-time Highs this Year Despite Lower Oil Prices

Published on June 30, 2025

Todayville

From Energy Now

S&P Global Commodity Insights has raised its 10-year production outlook for the Canadian oil sands. The latest forecast expects oil sands production to reach a record annual average production of 3.5 million b/d in 2025 (5% higher than 2024) and exceed 3.9 million b/d by 2030—half a million barrels per day higher than 2024. The 2030 projection is 100,000 barrels per day (or nearly 3%) higher than the previous outlook.

The new forecast, produced by the S&P Global Commodity Insights Oil Sands Dialogue, is the fourth consecutive upward revision to the annual outlook. Despite a lower oil price environment, the analysis attributes the increased projection to favorable economics, as producers continue to focus on maximizing existing assets through investments in optimization and efficiency.

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While large up-front, out-of-pocket expenditures over multiple years are required to bring online new oil sands projects, once completed, projects enjoy relatively low breakeven prices.

S&P Global Commodity Insights estimates that the 2025 half-cycle break-even for oil sands production ranged from US$18/b to US$45/b, on a WTI basis, with the overall average break-even being approximately US$27/b.*

“The increased trajectory for Canadian oil sands production growth amidst a period of oil price volatility reflects producers’ continued emphasis on optimization—and the favorable economics that underpin such operations,” said Kevin Birn, Chief Canadian Oil Analyst, S&P Global Commodity Insights. “More than 3.8 million barrels per day of existing installed capacity was brought online from 2001 and 2017. This large resource base provides ample room for producers to find debottlenecking opportunities, decrease downtime and increase throughput.”

The potential for additional upside exists given the nature of optimization projects, which often result from learning by doing or emerge organically, the analysis says.

“Many companies are likely to proceed with optimizations even in more challenging price environments because they often contribute to efficiency gains,” said Celina Hwang, Director, Crude Oil Markets, S&P Global Commodity Insights. “This dynamic adds to the resiliency of oil sands production and its ability to grow through periods of price volatility.”

The outlook continues to expect oil sands production to enter a plateau later this decade. However, this is also expected to occur at a higher level of production than previously estimated. The new forecast expects oil sands production to be 3.7 million b/d in 2035—100,000 b/d higher than the previous outlook.

Export capacity—already a concern in recent years—is a source of downside risk now that even more production growth is expected. Without further incremental pipeline capacity, export constraints have the potential to re-emerge as early as next year, the analysis says.

“While a lower price path in 2025 and the potential for pipeline export constraints are downside risks to this outlook, the oil sands have proven able to withstand extreme price volatility in the past,” said Hwang. “The low break-even costs for existing projects and producers’ ability to manage challenging situations in the past support the resilience of this outlook.”

* Half-cycle breakeven cost includes operating cost, the cost to purchase diluent (if needed), as well as an adjustment to enable a comparison to WTI—specifically, the cost of transport to Cushing, OK and quality differential between heavy and light oil.

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SOURCE S&P Global Commodity Insights