Oil sector: a cap on GHG emissions that would exclude refineries?

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Oil sector: a cap on GHG emissions that would exclude refineries?

The Montreal refinery -East, in Pointe-aux-Trembles

The federal government, which is evaluating two scenarios to limit greenhouse gas emissions from the oil and gas sector, has not yet determined whether a cap will be imposed on gas pipelines and petroleum refineries – facilities that are on the list of the largest GHG emitters in the country.

That's one of the big questions: are we going to include [them] in a capping system? And if so, will they be subject in the same way as oil producers?, summarizes Simon Langlois-Bertrand, energy transition specialist and researcher at the Trottier Energy Institute.

From extraction to distribution, the oil and gas sector is the largest emitter of GHGs in the country. In 2020, it accounted for nearly 179 megatonnes (Mt), or 27% of global emissions.

Although the majority of Canadian industry's emissions (84%) come from upstream activities, such as oil sands production, some oil refineries are among the most GHG-emitting facilities in Canada.

In 2020, refineries produced 18 Mt of CO2 equivalent, or 10% of the sector's total emissions, while transmission pipelines contributed 10 Mt, or 6 % of balance sheet.

Imposing an emissions cap on such facilities will affect the complexity of regulatory design, notes the Department of Environment and Climate Change, which announced consultations on capping emissions on Monday. oil and gas industry.

Other considerations include the fact that some of Canada's petroleum refineries are integrated with chemical manufacturing operations or focus on the production of asphalt or lubricants, rather than gasoline. or other petroleum products, it says.

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A Liberal campaign promise that Prime Minister Justin Trudeau reiterated to COP26 delegates in Glasgow, capping GHG emissions from the fossil fuel sector must enable Canada to meet its climate targets.

Before achieving carbon neutrality in 2050, the government expects by 2030 to have reduced its overall GHG emissions by 40-45% from 2005 levels.

To do this, the oil and gas sector alone will need to reduce its emissions by 31% from 2005 levels, to reach a total of 110 Mt in 2030, according to documents filed Monday.

If we do not reduce [oil and gas sector emissions] significantly, we will not be able to reach a target like that of 2030, argues Simon Langlois-Bertrand.

The Ministry is considering two scenarios to limit and reduce the impact of industry: either a cap and trade system for emission rights, like the carbon market Quebec, or the implementation of a carbon tax specific to the oil and gas sector.

We looked at the two mechanisms that are most used in the planetary scale to try to reduce emissions from the industrial sector, explained the Minister of Environment and Climate Change, Steven Guilbeault, in an interview with RDI.

Implementing a new cap and trade system under the Canadian Environmental Protection Act would require producers to purchase units. At the end of a given period, each facility would be required to return one unit for each tonne of emissions produced.

Producers who find themselves with excess units could then resell them to facilities that have exceeded the allowable limit.

Over time, the total number of units allocated would decrease, reducing opportunities for companies that failed to meet the emissions cap.

In principle, these markets also provide an escape valve for producers who are in default, such as paying a fine, Langlois-Bertrand points out. We like that the fine is very severe, like that, it encourages actors to manage to do otherwise, he says.

Will a company choose to limit its production so as not to exceed the permitted level? Probably not […] if the penalty is not severe. Actors may consciously choose not to comply, he adds.

In a report published last March, the Trottier Energy Institute estimated that the measures put in place by Ottawa at present would not allow the achievement of climate targets. Among his proposed course-correcting measures was the application of a hard cap on emissions through a cap and trade mechanism specific to the oil and gas sector.

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In the case of the second option being considered by the government, the federal carbon pricing model would be revised to establish price-based limits specifically for the oil and gas sector, according to the consultation documents.

We would do a calculation to determine what would be [the price] equivalent to the ceiling that we will have chosen, explains in other words Mr. Langlois-Bertrand.

Since a price is fixed rather than an emissions limit, it would then be a more artificial ceiling, agrees for his part Steven Guilbeault. From a certain threshold, the price per ton [of emissions] would increase significantly, so as to discourage companies from exceeding the thresholds that are allowed to them.

The Minister of Environment and Climate Change is seeking input from provincial and territorial stakeholders, Indigenous communities, members of the petroleum industry and environmental groups in determining which model will become the preferred regulatory framework by 2030.

“We are the only major oil producer in the world to have a system like this in place.

— Steven Guilbeault, Minister of Environment and Climate Change

The government does not intend to lose sight of another commitment it has made: update its methane regulations to set a target of reducing emissions from the oil and gas sector by at least 75%. by 2030, compared to 2012 levels.

In Canada, the oil and gas sector is the largest emitter of methane. While the majority of industrial GHG emissions are attributable to CO2, methane is no less harmful. Especially since the emissions of this hydrocarbon by industry are often underestimated.

During extraction operations in oil wells, huge amounts of methane emissions escape into the atmosphere. This is called fugitive emissions, says Simon Langlois-Bertrand.

In order to avoid these leaks, companies are used to burning methane on site in order to to transform it into CO2, hence the flame that sometimes overhangs the installations, continues the researcher.

We seem to have agreed on the fact that a reduction target will be needed separate and much tougher on methane, he says. We must ensure that methane does not get lost in the larger discussion of carbon pricing or capping emissions.

Canadians who wish to participate in the consultation, who s& #x27;structured around twenty questions, have until September 21 to submit their answers.

A first version of the rules should see the light of day at the start next year, according to Minister Guilbeault. The government is expected to adopt its final version by the end of 2023.

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