Regulatory Framework To Cap Oil and Gas Sector Greenhouse Gas Emissions

The Government plans to implement a national emissions cap-and-trade system through regulations to be made under the Canadian Environmental Protection Act, 1999 (CEPA). This will establish a technology-neutral market-based instrument that supports cost efficient emissions reductions, while ensuring that the GHG emissions from the sector do not go above a set level and decline over time. The purpose of the proposed regulations is to reduce GHG emissions from the oil and gas sector through the establishment of a national emission cap-and-trade system. The regulations will establish reporting and verification requirements and a legal upper bound on GHG emissions. Consideration will be given to how to phase in the system between 2026 and 2030. In a cap-and-trade system the regulator issues a quantity of emission allowances that define the emissions cap and some compliance flexibilities allow emissions to exceed the emissions cap up to a legal upper bound. Regulated entities are prohibited from emitting GHGs without remitting one emission allowance or other eligible compliance unit for each tonne of GHG emissions up to the legal upper bound. Emission allowances and some other types of compliance units can be bought and sold on an emissions trading market, prioritizing lower-cost abatement opportunities.