Ottawa set to announce cap-and-trade framework to reduce emissions in oil and gas sector

The federal government will unveil its oil and gas emissions cap framework on Thursday, senior government officials have told CBC News.

The framework will be implemented through a cap-and-trade system, the officials said.Draft regulations will follow by the middle of 2024, one source said.

Environment Minister Steven Guilbeault and Natural Resources Minister Jonathan Wilkinson will jointly announce the cap plan. The news was first reported by theGlobe and Mailand theCanadian Press.

A cap-and-trade system would allow companies to buy and trade a limited number of emissions allowances or permits. The number of those permits could decline over time to reflect the emissions cap. The other option Ottawa was contemplating was an enhanced carbon price for the oil and gas sector.

Court cases forced Ottawa to revisitemissions cap

The government officials didn't say where the cap will be set in megatonnes. One source said it will be lower than the original 2030 target of reducing emissions in the sectorby 42 per cent below 2019 levels. Another source said the new plan will establish a range, rather than a single cap.

One source said that the government is aiming for a lower target to avoid legal and constitutional fights with provinces. Last week, Guilbeault saidtwo recent court decisions forcing Ottawa to tread more carefully on climate policy affecting provinces pushed the federal government to reconsiderits emissions cap plan.

The first was a Supreme Court decision that said a federal law governing environmental impact assessments stepped into provincial jurisdiction by applying to some projects that should have been outside of Ottawa's control.

The second was a Federal Court decision that struck down Environment Canada's designation of all plastic manufactured items as "toxic." The court said the category of plastic manufactured items was too broad for a single designation. The decision also touched on federal-provincial distribution of powers.

"We were being told by our tribunals that the federal government can certainly intervene when it comes to matters of pollution, and including climate pollution, but that we have to be very careful not to impede on provincial jurisdictions," Guilbeault said last week.

The plan will include a number of compliance options, including the purchase of carbon credits and participationin a decarbonization fund. Companies will pay into thatfund if they exceed their emissions caps. The money could then be used to fund green transition projects, one government official said.

WATCH | Natural resources minister says emissions cap coming soon:

Wilkinson says emissions cap framework on the way

9 months ago

Duration 1:01

Energy and Natural Resources Minister Jonathan Wilkinson says the emissions cap framework is coming quite soon and oil and gas companies will need time to adjust.

Speaking to reporters ahead of Wednesday's question period, Wilkinson said the system won't be implemented right away and the government will give industry time to adjust.

"There will be some time for adoption but there will be a significant reduction in greenhouse gas emissions from the oil and gas sector by 2030," he said. He didn't offer any further details about the plan.

Guilbeault is currently in Dubai at the 2023 United Nations Climate Change Conference, better known as COP28.

The federal government has vowed to cut carbon emissions by at least 40 per cent below 2005 levels by 2030. The federal environment commissioner said last month that Ottawa is not on track to meet that target.

Alberta premier says feds asked her to sign NDA

Alberta Premier Danielle Smith, meanwhile, says the federal government asked her and her team to sign a non-disclosure agreement before examining a preview copy of Ottawa's plan.

"They asked us if we'd be prepared to sign a non-disclosure agreement and then tell us what they're going to impose on us," Smith said in an interview airing Wednesday on CBC News Network's Power Politics.

"Does that sound like cooperative federalism to you? Because it sure doesn't sound like it to me," she told host David Cochrane.

A federal government official told CBC News it's normal government practice to ask stakeholders to sign non-disclosure agreements before allowing them to examine anything as significant as the emissions cap plan.

Smith who is also in Dubai for COP28 told CBC News she didn't sign the agreement. Asked why she thought she was asked to sign the agreement, she said Ottawa "doesn't respect our jurisdiction."

"This is something that is so important, has such a major impact on the development of our resources, that they should be working collaboratively with us," she said.

Smith has said in the past her government plans to oppose Ottawa's pending regulations. She said Ottawa's plan won't allow the industry to adapt in time without forcing production cuts.

One federal government source said the capOttawa plans to announce is the "maximum amount that is technically achievable without affecting production."