Fraser Institute study shows 2030 Emissions Reduction Plan will cost Canadian economy $45-billion in 2030 alone, reduce global emissions by 4/10 of a percentage point
By Kenneth P. Green, Fraser Institute, June 1, 2023
In 2021, the Government of Canada enacted the Canadian Net-Zero Emissions Accountability Act, more commonly known as “Net-Zero Emissions 2050.” The Act aims to ensure that by the year 2050, Canada’s emissions of greenhouse gases are balanced by actions within Canada that pull greenhouse gases back out of the atmosphere, or at least, prevent some from entering that would otherwise have done so.
As part of this goal, Canada enacted an interim plan, the 2030 Emissions Reduction Plan, with a sub-component on the greenhouse-gas emissions that come from Canada’s oil and gas sector, a sector mostly found in Western Canada. This sub-component would require “emission reductions [from the oil and gas sector] to 31% below 2005 levels in 2030 (or to 42% below 2019 levels)”, which would build a pathway to net-zero emissions by 2050.
As a rough estimate, eliminating all GHG emissions from the oil and gas sector in 2030 would reduce Canada’s projected GHG emissions by 29 percent. This is not a trivial number, as an absolute value, even for a single sector of Canada’s emitting industries.
However, when seen in a global context, even if Canada eliminated all of its GHG emissions expected in the year 2030 as a result of the new greenhouse gas caps (187 Megatons), the emission reduction would equal four-tenths of one percent of global emissions. A reduction this small will have almost no impact on climate in any detectable manner, and hence, offer only equally undetectable environmental, health, or safety benefits.
A reduction of 4/10 of a percent will have almost no impact on climate in any detectable manner, and hence, offer only equally undetectable environmental, health, or safety benefits.
The calculated environmental benefits are even overestimated due to the risk of carbon leakage: studies have shown that greenhouse-gas emissions move from place to place where regulations allow. A recent study of the issue suggests that nearly 30 percent of any GHG reductions made in Canada with would simply be emitted elsewhere, as the emitting activity moved to more permissive jurisdictions.
In addition, the GHG cap imposed on the sector will inevitably create negative economic impacts due to reduced production and exports. Recent estimates suggest the GHG cap will result in at least $45-billion in revenue losses for the industry in 2030 alone, which would imply a significant drop in government resource royalty and tax revenue. This figure doesn’t include economic losses occurring in each year leading up to 2030 as GHG emissions are gradually reduced.
The GHG cap will result in at least $45-billion in revenue losses for the oil and gas industry in 2030 alone, which would imply a significant drop in government resource royalty and tax revenue.
But Canada does more with oil and gas than simply using it for heat, fuel, mobility, and so on. Canada’s oil and gas sector provides feedstocks into a very promising part of Canada’s economy, which is its growing petrochemical sector.
This sector makes products such as plastics, solvents, and hundreds of other intermediate and end-user goods, many of which are not easily replaced. In 2020 Canada’s petrochemical industry created some 4,800 jobs; exports were worth nearly $6-billion. The resins, rubbers, and fibres sub-sector of Canada’s economy, again in 2020, employed nearly 5 million workers, and produced exports worth $7.8-billion.
Overall, the GHG cap imposed on the oil and gas industry will result in significant economic losses without generating material environmental benefits. This cap, which will inevitably curtail oil and gas production in Canada, will likely also harm the petrochemical and plastics sectors, which use petroleum as a feedstock for producing their products.
This is an edited summary of the Fraser Institute report. For the full report, click here.