On The Right Path, Canada Still Faces Energy Industry Emissions Challenges To Net Zero: IEA

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While lauding many of Canada’s measures to set and reach greenhouse gas emissions reduction goals, the International Energy Agency said Canada needs to leverage its clean electricity to undertake steep emissions reductions in the transport, industry, and oil and gas sectors going forward.

In a policy review by the IEA released today, the Paris-based organization said Canada will have to increase efforts to electrify the economy while reining in oil and gas emissions, the country’s biggest source of GHGs.

It recommends the federal government define clear targets for emissions reductions in the oil sector to align with stated plans to continue oil and gas exports beyond 2050 with net zero ambitions, and incentivize and monitor the reduction of environmental impacts, including GHG emissions in the oil sector.

Canada’s Strengthened Climate Plan that introduced new GHG reduction measures to exceed Canada’s 2030 emissions reduction goal and set Canada on a path to achieve net zero emissions by 2050 could result in the oilsands sector facing more stringent GHG regulations, it said.

Despite improvements in emissions intensity, absolute oilsands emissions have increased due to expanding production. GHG emissions from oil and gas production went up by 26 per cent between 2000 and 2019, largely from increased oilsands production, particularly in situ extraction. “Canada will need to reconcile future growth in oilsands production with increasingly strict GHG requirements.”

As more and more countries state net-zero targets, the emissions intensity of oil production will come into the spotlight, the IEA said. Future Canadian oil production and exports will depend in part on the premium that oil consumers will put on oil production with low emissions intensity. In situ oilsands operations are on the higher end of the carbon intensity spectrum, it noted.

“When global oil demand starts to decline, this intensity — combined with Canada’s stability and broader environmental, social and governance performance — may become a factor in consumer preferences. Canada intends to continue its oil production and exports well beyond 2050 and should therefore prepare for a situation in which such preferences impact demand for its products.”

Canada’s Energy Future 2020 “Evolving Scenario” foresees peak crude oil production in 2039, peak natural gas production in 2040 and an increase in LNG exports until 2040. However, given that GHG emissions from oil and gas production are a significant contributor to Canada’s overall emissions, addressing the sector’s role in a net zero future will be necessary, said the IEA.

The government projects that without Canada’s climate plan, emissions from the oil and gas sector would reach 213 megatonnes by 2030. However, with existing policies in place and regulations, they are expected to remain at current levels of 194 Mt in 2030.

However, additional reductions of 56 Mt/year by 2030 are required across the economy to exceed Canada’s previous target of reducing emissions by 30 per cent from 2005 levels by 2030, and still greater reductions are needed to meet Canada’s new target of achieving a 40-45 per cent reduction.

“Though notable gains have been made in improving efficiency and lowering emissions from upstream production to date, sizeable additional gains will be needed in a net zero future.”

Canada’s plans for hydrogen production from natural gas, coupled with CCUS technology, could help reduce the carbon footprint of this and other sectors. Biofuels can also play an important role, said the IEA.

Canada should pay close attention to shifting demand for oil and gas globally, as countries around the world undertake their own energy transitions and put in place net zero targets, it adds. Canada must focus on significantly decarbonizing its oil and gas sectors while at the same time ensuring competitiveness in increasingly well-supplied world markets.

“While Canada scores well on overall ESG indicators relative to many other oil and gas producers, the environmental profile of oilsands production, in particular, will become a greater focus for importing countries and warrants action.”

Overall, Canada has shown “impressive leadership” on clean and equitable energy transitions in recent years, Fatih Birol, IEA executive director, said in a statement.

“Canada’s wealth of clean electricity and its innovative spirit can help drive a secure and affordable transformation of its energy system and help realize its ambitious goals. Equally important, Canada’s efforts to reduce emissions — of both carbon dioxide and methane — from its oil and gas production can help ensure its continued place as a reliable supplier of energy to the world,” Birol said.

Note: A separate article will be posted later reporting on a press conference being held in conjunction with the release of this IEA report.

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