Canada is expecting to increase its oil production by some 500,000 barrels per day, but experts are certain it will not interfere with the nation’s climate targets.
As the world looks for alternatives to Russian oil and gas, a new assessment from the Royal Bank of Canada (RBC) economic research department predicts that Canadian output may expand by up to 500,000 barrels per day over 2021 levels without jeopardizing Canada’s climate targets.
However, the analysis cautioned that even if Canadian barrels effectively displace those of foreign producers, the new production might add 9 million tons of greenhouse gasses per year to Canada’s emissions, costing $1.5 billion to mitigate.
According to the Trudeau government’s first comprehensive emissions reduction plan, which was announced last month, Canada’s oil and gas sector must reduce emissions by 42% from current levels by 2030.
However, the government climate plan was deafeningly silent on the volume of investment required to satisfy the sector’s climate ambitions.
The next decade must focus on a rapid transition to carbon-free energy systems. This would mean investing in solutions that are commercially viable today while piloting emerging technologies that have the potential to unlock significant carbon reduction in the decades to follow.
For example, long-term decarbonization investments include:
- Renewable energy
- Fuel switching
- Methane management
- Nature-based solution
- Energy efficiency
According to the report, the federal government’s recently announced carbon capture, utilization, and storage (CCUS) tax credit is a significant first step, but more needs to be done to ensure widespread adoption of the technology, which is viewed as a flawed but critical component of Canada’s decarbonization project.
De-risking costly carbon capture projects will necessitate greater government assistance, ranging from a possible top-up credit from provinces to more carbon pricing certainty from the federal government.
Carbon capture technology is costly and time-consuming to develop, so the government and industries must ensure that oilsands production remains competitive in the long run in order to justify expenditures.