A new report from the Pembina Institute, Getting on Track: A primer on challenges to reducing carbon emissions from Canada’s oil sands, calls on Canada’s oil sands producers to put forward a plan that will reduce greenhouse gas (GHG) emissions to a level that aligns with Canada’s commitment to lower emissions by 40 to 45 per cent by 2030.
Pembina says a reduction of this size is, at a minimum, required to put Canada on track to achieve the target of net-zero emissions by 2050 that the world has agreed is necessary to limit global warming to 1.5 degrees Celsius.
Last year, the companies responsible for 95 per cent of oil sands production in 2021 released the Oil Sands Pathways to Net Zero, which lays out a number of operational changes and technologies that they claim could enable the sector to lower absolute GHG emissions by 68 Mt CO2e by 2050 from 2018 levels.
“Currently, the net-zero commitment that has been made by oil sands companies assumes that substantial progress on emissions reduction will not occur for another decade or more,” said Chris Severson-Baker, Regional Director with Pembina Institute.
In its report, the Alberta-based Pembina Institute looked at the challenges facing oil sands producers to decarbonize while remaining competitive in global markets that are moving away from energy systems dominated by fossil fuels. Notwithstanding current volatility in energy markets, if the world achieves net-zero emissions by 2050, the International Energy Agency (IEA) models oil demand dropping to 24 million barrels per day in 2050, down from 98 million barrels per day in 2019.
Even in a scenario in which the world fails to achieve net zero by 2050, demand for crude is expected to decline in key markets such as Canada, the United States and Europe, where the use of electric vehicles and other zero-emission means of transportation is growing rapidly.
The oil and gas industry has been the fastest growing source of greenhouse gas emissions in Canada. Between 2005 and 2019, emissions from the oil sands soared by 137 per cent as production increases outpaced reductions in per-barrel emissions intensity. Responding to pressure from investors, stakeholders, and government, companies representing approximately 95 per cent of Canada’s oil sands producers have embraced a commitment to net-zero in a joint initiative called the Oil Sands Pathways to Net Zero (June 2021).
While a commitment to net-zero emissions by 2050 is welcome, the Pembina Institute says that credible follow up on this promise will require participating companies to deliver a more detailed plan that is in line with Canada’s 2030 climate goal.
Severson-Baker said “An oil and gas sector cap that compels the industry to meet their target would help put the entire sector on a pathway aligned with Canada’s 2030 target.”
The report suggests that the federal government’s announced intention to establish a cap on oil and gas emissions will help drive oil sands companies to take advantage of opportunities that currently exist in the oil and gas sector as a whole to substantially lower carbon emissions between now and 2030. Depending on how it is implemented, an emissions cap has the potential to provide producers with different options to comply with the new regulation in ways that can accelerate reductions.
As a major employer, exporter and source of government revenue, the oil sands industry’s performance on national and global decarbonization goals has significant ramifications that extend far beyond Alberta to every corner of the country. In a post-2030 world, where competition between producers to deliver the lowest-cost and lowest-carbon barrel of oil will intensify, the report finds that meeting the net-zero target will be highly challenging for Canada’s oil sands producers. However, given the available technologies for GHG reduction that have already proven to be viable at a commercial scale, it also raises the possibility that Canada’s oil and gas sector – with the oil sands as a substantial subsector – is better positioned than other parts of the economy to meet or exceed Canada’s 2030 emissions reduction targets.