Canada’s Oil and Gas Sector: The Road to Net Zero and Regional Fairness

The Canadian Climate Institute proposes a four-part policy framework to decarbonize Canada's oil and gas sector while addressing regional fairness. The sector is identified as Canada's largest and fastest-growing source of emissions, contributing 189 Mt of greenhouse gases in 2021 (28% of the national total). To balance climate targets with economic stability, the report recommends stringent methane regulations, targeted public support for carbon capture and storage (CCS), a sector-specific emissions cap, and a government-backed transition investment taxonomy. This approach aims to ensure that oil and gas-producing regions contribute their fair share of reductions while protecting the trade balance and mitigating the risk of stranded assets as global demand for fossil fuels declines.

• Oil and gas production is Canada's largest and fastest-growing source of greenhouse gas emissions, accounting for 189 Mt in 2021, or 28 per cent of the national total. While emissions intensity per barrel has improved, these gains have been offset by overall production increases.
• The report proposes four complementary policies to align the sector with net zero: stringent methane regulations to reduce leaks and flaring by 75% by 2030; public financial support for carbon capture and storage (CCS) via Investment Tax Credits and carbon contracts for difference; a sector-specific emissions cap; and a government-backed transition investment taxonomy.
• Methane reduction is identified as a low-cost, high-impact priority. Implementing the federal goal of 75 per cent reductions could cost approximately $11 per tonne of CO2e and could provide one third of the emissions reductions needed to align the sector with Canada's climate targets.
• Public support for CCS is necessary to mobilize private investment, but carries risks of over-subsidization, opportunity costs given declining global demand, and the potential to lock in more emissions. The report suggests using carbon contracts for difference to reduce policy uncertainty and ensure projects are economically viable.
• An emissions cap is recommended to create regulatory guardrails and ensure the sector meets its 2030 and 2050 targets. This mechanism prevents firms from using CCS subsidies to offset increased unabated production and ensures the sector bears some technological risk.
• Regional fairness is presented as a critical but often avoided dimension of Canadian climate policy. The report argues that ignoring how emissions reductions and costs are distributed across provinces—particularly in Alberta and Saskatchewan—creates political opposition that threatens the durability of climate policies.
• Global energy transition risks threaten the long-term competitiveness of Canadian oil and gas. Projections from the IEA, BP, and the Canada Energy Regulator suggest global demand will plateau and decline; in one CER scenario, Canadian oil and gas production falls by 22 per cent and 37 per cent, respectively.

APA

Canadian Climate Institute (2023). Canada’s Oil and Gas Sector: The Road to Net Zero and Regional Fairness. https://climateinstitute.ca/publications/canadas-oil-and-gas-sector-the-road-to-net-zero-and-regional-fairness/

Chicago

Canadian Climate Institute. Canada’s Oil and Gas Sector: The Road to Net Zero and Regional Fairness. 2023. https://climateinstitute.ca/publications/canadas-oil-and-gas-sector-the-road-to-net-zero-and-regional-fairness/.

Wikipedia

{{cite report |author=Canadian Climate Institute |title=Canada’s Oil and Gas Sector: The Road to Net Zero and Regional Fairness |date=20 September 2023 |url=https://climateinstitute.ca/publications/canadas-oil-and-gas-sector-the-road-to-net-zero-and-regional-fairness/ |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{canadianclimateinstitute2023canadas, author = {{Canadian Climate Institute}}, title = {{Canada’s Oil and Gas Sector: The Road to Net Zero and Regional Fairness}}, institution = {Canadian Climate Institute}, year = {2023}, month = sep, url = {https://climateinstitute.ca/publications/canadas-oil-and-gas-sector-the-road-to-net-zero-and-regional-fairness/}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }