Pembina Institute report warns ‘no clear path’ forward to hit climate commitments for some Albertan oil producers

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Alberta’s oil sands operators will need to face higher carbon taxes, stricter regulations and implement technologies that don’t exist yet if Canada is going to meet its climate commitments, warns a new report from the Pembina Institute.

Prime Minister Justin Trudeau’s goal of making Canada carbon neutral by 2050 poses a significant challenge for Alberta’s oil patch, where emissions have increased rapidly over the past decade as bitumen production has soared. Investors around the world are offloading carbon-heavy assets such as the oil sands and current policies from the governments in Ottawa and Alberta won’t be enough to reduce the sector’s emissions, according to the Calgary-based environmental think tank.

Not all companies will face the same challenges in the coming decades. The oil patch is split between large mines that use shovels the size of houses and most new production that comes from smaller but generally more carbon-intensive facilities that rely on steam.

“The reality that the oil and gas industry faces today is that there is a pathway for some oil from the oil sands. But we’re not going to see the emissions reductions we need from those companies voluntarily; it’ll require a much higher price on carbon, as well as other regulations,” said Chris Severson-Baker, the Alberta director for Pembina.

“For some sources of oil, there is no clear path, they’re going to need to invent something. I think the oil and gas companies understand that’s the challenge they face,” he added.

The federal cabinet is reviewing an application from Teck Resources Ltd. for an oil sands mine. The company announced in early February that it aims to become carbon neutral by 2050. “We will pursue the technologies and measures necessary to reduce carbon emissions across our business,” Teck chief executive officer Don Lindsay said in a statement.

According to Mr. Severson-Baker, pledges from companies such as Teck are proof that they are willing to spend more to lower emissions.

Pembina’s report calls on governments to provide more incentives for technological breakthroughs that reduce emissions, stricter emission targets for the oil patch and more transparent reporting on emissions.

The centrepiece of Alberta Premier Jason Kenney’s climate plan is a $30-per-tonne carbon tax on large industrial emitters. Proceeds from the technology innovation and emissions reduction (TIER) system are earmarked for green-technology research, reducing the provincial deficit and $30-million in annual funding for the government’s “war room."

Mr. Severson-Baker called TIER a “good start,” but said it needs to go much further. “It’s not the end point. It won’t get us to our 2030 and 2050 targets. Those are the kinds of things we’re going to need to strengthen,” he said.

Mr. Kenney’s government has also endorsed an emissions cap on the oil sands, limiting the sector to 100 million tonnes of greenhouse gases annually. However, the government has yet to introduce regulations to enforce the cap. Alberta and Ottawa disagree about what levels of emissions are being produced under the cap’s definition.

Mr. Kenney’s office projects the oil sands to be emitting about 67 to 68 megatonnes of greenhouse gases under the definitions set by the cap. The federal government says the province is emitting roughly 87 megatonnes.

Pembina says Alberta needs rules to enforce the cap. Following that, it needs to reduce the limit annually after 2030 so companies cut their emissions further.

Alberta Environment Minister Jason Nixon was unavailable for an interview. His office did not directly respond to the report’s conclusions in a statement.

“We fully expect industry to continue lowering its carbon intensity, as many companies have already taken a leadership role on a drive to net-zero resource extraction,” said Jess Sinclair, Mr. Nixon’s spokeswoman. “At its foundation, the 100-megatonne limit is a backstop policy to prevent unconstrained emissions growth without technology improvement.”

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