Canada plans to unveil a cap and trade system starting in 2026 for limiting emissions from the oil and gas sector, a government source said on Wednesday, a step toward fulfilling one of Prime Minister Justin Trudeau’s key climate policies.
The framework for the cap and trade system will be announced on Thursday at the United Nations COP28 climate summit in Dubai, ahead of draft regulations being released next year.
Oil and gas is Canada’s highest-polluting industry and produced 189 megatonnes of emissions in 2021, according to the federal government’s national inventory report, more than a quarter of the country’s total.
Trudeau’s Liberals have pledged to cut emissions 40-45% below 2005 levels by 2030. Projections from the federal government’s Emissions Reduction Plan (ERP) shows oil and gas emissions should drop to 110 megatonnes by the end of the decade to help Canada stay on track for that target.
The government source did not say what level the emissions cap would start at, but said it would not be the 110 megatonne number that was in the ERP.
Any oil and gas producers that exceed the cap will have the option, up to a certain point, of buying carbon credits to offset their emissions or paying into a decarbonization fund, the source added.
Trudeau first proposed an cap on oil and gas emissions during his 2021 election campaign. The long-awaited policy has drawn strong opposition from Canada’s main oil-producing province Alberta.
(Reporting by Nia Williams Editing by Chris Reese and Nick Zieminski)