Trudeau pledges to cut Canada's oil emissions even as country keeps pumping more

SURGE ENERGY

13/09/2021 17:07

By Rod Nickel
    WINNIPEG, Manitoba, Sept 13 (Reuters) - Prime Minister
Justin Trudeau's promise to reduce Canada's oil sector emissions
starting in 2025 looks unlikely to slow the growth of crude
production, environmental activists and oil companies say,
raising questions about how effectively the pledge will help
meet the country's goals to slow climate change.
    Trudeau is in a close race with the Conservatives, and some
voters are demanding decisive climate action https://www.reuters.com/business/environment/canadas-infernal-summer-puts-climate-change-forefront-election-2021-09-01.
 He promised late last month, if re-elected on Sept. 20, to
immediately cap emissions from the oil and gas sector, which is
responsible for 26% of national emissions, and require lower
emissions in five-year intervals, starting in 2025. urn:newsml:reuters.com:*:nL1N2PV17D 
    The sector's emissions have stayed roughly flat since 2014,
although oil sands emissions have risen.
    The pledge would force the world's fourth-largest oil and
gas producer to shift focus away from curbing emissions mainly
on a per-barrel basis to cutting absolute emissions. Countries
with much smaller production, including Denmark and France, have
banned oil and gas exploration, while Norway's oil industry has
voluntarily pledged to cut absolute emissions 40% by 2030 from
2005 levels.
    The Canadian government has authority to set emissions
levels, but it has less ability to influence oil production,
which Trudeau's pledge does not address.
    Regardless of who forms the next government, Canada is
likely to keep raising oil production to satisfy growing global
demand, while also cutting emissions, said Tim McMillan,
president of Canadian Association of Petroleum Producers. 
    "Canada should play a larger role in global supply," he
said.
    Canadian oil production will expand for nearly two more
decades, the Canada Energy Regulator (CER) forecast last
November.  urn:newsml:reuters.com:*:nL1N2IA1GM 
    Trudeau's pledge comes with numerous unknowns, including the
rate of emissions decline it wants and how the government would
enforce the lower levels.
    "The announcement they made is too vague to really inspire
confidence," said Cam Fenton, Canada team leader at
environmental group 350.org. 
    Curbing emissions from oil extraction while allowing
production to rise would not be meaningful, since most of
crude's associated emissions occur when it is used in combustion
engines, Fenton said.
    Instead, the promise will cause oil companies to increase
pressure on Trudeau to pay for carbon capture facilities, he
said. The federal Natural Resources Department aims to provide
incentives for at least two massive carbon capture projects by
2030.  urn:newsml:reuters.com:*:nL1N2Q11I3
    The Liberals' main rival, Erin O'Toole's Conservatives, have
promised less aggressive national emissions cuts, and not
singled out the oil and gas industry.
    Canadian oil companies are increasing production
incrementally, rather than proposing big projects that receive
greater government scrutiny.
    Surge Energy Inc  SGY.TO  plans to boost production by 3-5%
annually in the next few years, while reducing overall emissions
with projects that it is still evaluating, such as capturing gas
instead of flaring it, said Chief Financial Officer Jared Ducs.
    "We've tried to get in front of this," he said.
    The federal government can regulate emissions more easily
than oil production, which is largely provincial jurisdiction,
said Caroline Brouillette, domestic policy manager at Climate
Action Network Canada.
    "If this is done right, it could be big - but we've heard
big talk from this party before," she said of Trudeau's promise.
    Clamping down on emissions could spur greater investment in
technology firms to curb emissions, but also drive up the cost
of the polluting commodity itself if a shortage emerges, said
Jason Mann, chief investment officer of EdgeHill Partners, which
owns shares in several Canadian oil producers. 
    Coal prices, for example, have shot up, encouraging more
production, he said.
    Adam Waterous, chief executive of Canadian private equity
firm Waterous Energy Fund, said Trudeau's promise may be helpful
to helping the oil industry focus on ways to reduce emissions.
    "If you start making near-term deadlines, then you have a
much more realistic path," Waterous said.

 (Reporting by Rod Nickel in Winnipeg; additional reporting by
Nerijus Adomaitis in Oslo
Editing by Marguerita Choy)
 ((rod.nickel@tr.com; Twitter: @RodNickel_Rtrs;
1-204-230-6043;))