It’s too bad most Canadian business leaders and politicians still don’t understand how Cap-and-Trade (C&T) works even though it’s been successfully operating in Canada and the US, otherwise they’d see the federal government’s proposed cap on the oil and gas sector’s greenhouse gas (GHG) emissions is a godsent, especially when president-elect Donald Trump is threatening a 25% tariff on all Canadian goods, including oil and gas. C&T offers businesses improved productivity, growth, and efficiency that reduces emissions in a transparent and accountable system at no cost, along with the opportunity to make money from good behaviour. The proposed cap would apply to Alberta, the biggest emitter, British Columbia, Saskatchewan, Manitoba, and Newfoundland and Labrador. The cap will help businesses weather Trump’s threat and other fast-moving changes.
Vilified, the Minister of the Environment and Climate Change, Steven Guilbault has been treading carefully in proposing to cap the oil and gas emissions by 35% below 2019 levels by 2030 – a modest effort for Canada to meet its 2015 Paris commitment. The legislated cap is needed because the industry is the biggest emitter in Canada, and it has done virtually nothing to voluntarily curb its emissions, and has had no intention to ever do so. The equipment to capture the methane gas from the oil and gas operations has been readily available. A low-hanging fruit, if this equipment was installed, it would cut their emissions by 45%.
The question is if the oil and gas operators didn’t buy this equipment when they’ve had record profits the last few years, why would they be buying it when their profits go down?
Oil and gas extraction is a significant source of revenue for both Canada and Alberta, but until recently there was only one buyer: the US who buys it at a discount, and then refines the oil and converts it to value-added products and jobs. Alberta’s dependency on this single customer was what the federal government wanted to redress when it bought the Trans Mountain Pipeline on the premise that it would open the Asian markets for Alberta oil.
The environmental damage from the oil and gas industry’s increasing emissions from existing practices is no longer the cost of doing business, but is becoming an unpredictable significant cost that is growing. More often, Alberta and other provinces are declaring a “state of emergency” for the federal government to help them with floods, wildfires, droughts, hurricanes, and other severe weather events that are more intense, more frequent, and more costly that are difficult to budget.
KPMG released in July 2024 a survey of 250 business owners and executives that found 92% feared their companies would be impacted by severe weather events, and about half said their operations and productivity have already been negatively impacted from disrupted employee productivity and supply chains. Of the respondents, 88% were supportive of investing to meet climate-related goals, but 80% said it wasn’t a priority so there wasn’t a budget.
In other words, businesses are just starting to consider their exposure to climate risks, but if there is government help, they’d do it. The cap on the oil and gas sector is the perfect tool to address this shortfall.
Oil and gas, and other mining companies have a history of declaring bankruptcy once there is nothing left to take, leaving their mess for taxpayers to clean up. The current remedial costs of the 170,000 abandoned oil and gas wells in Alberta is estimated to be between $60--$260 billion. These costs do not include the numerous abandoned mines and tailing ponds.
Tailing ponds are disasters waiting to happen. The remedial costs of the worst mining disaster in British Columbia hasn’t even started ten years after the tailing pond’s dikes broke, and the cascading toxic wastewater killed the Hazeltine Creek and Quesnel Lake.
The most worrisome looming disaster for taxpayers are the leaking tailing ponds for the Alberta tar sands that are about three times the size of Vancouver. If they break, which is not unlikely, decades of profits will be negated. One thing for sure is that the Americans will not be helping to pay the clean-up costs.
Shareholders of these companies should consider what happened to BP’s stock price after the Deepwater Horizon disaster on April 20, 2010. Before the event, BP’s share price was roughly US$59 compared to today’s price of roughly US$28. The stock price hasn’t recovered after more than 14 years.
Trump’s tariff’s threat at the start of his presidency has put the spotlight on Canadian-American relations -- what they really think of us, and how dependent Canadian businesses are on American customers. Are they really our friends?
When considering retaliatory actions, Alberta exported 89% of it’s oil production to the US in 2023, which could be lower in 2024 because the Trans Mountain pipeline is operating, but Premier Steele is proposing to counter with an increase in exports to the US. In contrast, Premier Ford is threatening to cut off electricity exports from Ontario which were 9% in 2023. Quebec’s net electricity exports were 6%.
Trump’s timing is good for Canadian businesses to adopt the emissions cap to help them modernize the oil and gas sector towards a low-carbon economy because the status quo is no longer affordable. Considering that the first C&T program was designed and implemented by Canadian politicians and business leaders, the proposed emissions cap that will operate as a C&T program is the best way to achieve these goals.
Sharolyn Mathieu Vettese
President
SMV Energy Solutions
www.smvholdings.com
SMV Energy Solutions provides simple smart solutions that conserve energy