The federal government’s plan to cap and cut emissions from the oil and gas sector comes with big risks.
Reducing the industry’s emissions by a massive 42 per cent in less than 10 years is seen as unrealistic without cutting production – while Canada’s allies and people around the world are in a growing crisis without enough oil and gas supply.
It’s not a short-term challenge, as global demand is expected to stay strong for decades. This creates a wealth of opportunity for Canada – one of the world’s largest oil and gas producers, whose industry is committed to reducing emissions.
To understand what’s at stake with policies that would require shutting in production, look no further than the federal government’s discussion paper on the emissions cap itself.
“Canada’s oil and gas sector is an important energy source for Canadians and the world,” the paper says.
“[It] plays an important role in the Canadian economy, in the lives of Canadians, and to the energy security of our trading partners.”
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According to the federal government, the oil and gas sector supported nearly 600,000 jobs across Canada in 2020. This includes 178,500 “direct” jobs with oil and gas companies and 415,000 “indirect” jobs in supporting industries like engineering and manufacturing.
“In addition to the concentration of jobs in oil and gas producing provinces, there are thousands of jobs in manufacturing, environmental, and financial services tied to the oil and gas industry, especially in Ontario and Quebec,” the paper says.
Canada’s oil and gas sector is also an important and growing employer of Indigenous people, it says.
Since 2014, Indigenous employment in Canada’s oil and gas sector has increased by more than 20 per cent, reaching an estimated 10,400 jobs in 2020.
Spending with Indigenous-owned businesses is also rising. In 2019, oil and gas companies spent more than $2.6 billion in procurement with about 250 Indigenous businesses, an increase of over 70 per cent compared to 2017 ($1.5 billion).
The government also noted that in 2018 and 2019, $55 million in oil and gas-related revenues were collected on behalf of First Nations in Alberta, Saskatchewan and British Columbia by Indian Oil and Gas Canada.
“The oil and gas sector is a major contributor to Canada’s economy,” the federal government paper says.
In 2020, the oil and gas industry generated $118 billion in gross domestic product (GDP). Canada’s total GDP in 2020 was $1.65 trillion, meaning the oil and gas sector accounted for about 7.2 per cent of the country’s economic activity.
At the same time, Canada’s oil and gas exports in 2020 were valued at $86 billion, or 16 per cent of the country’s total. Of those exports, 95 per cent went to the U.S.
“The Canadian and U.S. oil and gas sectors are highly interconnected, providing flexibility, market competition, and continental energy security,” the paper says.
Deborah Jaremko is director of content for the Canadian Energy Centre, an Alberta government corporation funded in part by taxes paid by industry on carbon emissions.
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