Oil and Gas Greenhouse Gas Regulations: The implications of alternative proposals

This policy brief by the International Institute for Sustainable Development (IISD) analyzes four proposed regulatory scenarios for greenhouse gas (GHG) emissions in Canada's oil and gas sector. The authors evaluate the trade-offs between emission-intensity targets and price ceilings, concluding that a 40 per cent intensity standard with a two-tiered price ceiling offers a balanced approach to environmental performance and economic competitiveness.

• The proposed regulations for the oil and gas sector combine an emission-intensity improvement target with a price ceiling per tonne of carbon dioxide equivalent (CO2e). The intensity target aims to reduce emissions per barrel of oil or unit of natural gas by 2020 relative to a historical base year, while the price ceiling limits the maximum cost for emitters and protects competitiveness.
• IISD analysis suggests that achieving more than a 20 per cent intensity improvement by 2020 is unlikely unless costs reach $100 per tonne. Consequently, the price ceiling is a critical mechanism because it provides cost certainty for firms but introduces uncertainty regarding the actual quantity of emission reductions achieved.
• Compliance can be achieved through several pathways: direct in-sector reductions, purchasing emission reductions from other facilities, buying approved offsets from unregulated sources, or making payments into a technology investment fund. The effectiveness of the technology fund depends on whether payments are used for long-term research, development and demonstration (RD&D) or short-term emission reductions in other sectors.
• A hybrid scenario featuring a 40 per cent intensity standard and a two-tiered price ceiling ($30 for the first tier and $60 for the second) is identified as a balanced option. This model could deliver 42 megatonnes (Mt) of compliance in 2020 at an average cost of $28 per tonne, or $0.42 per barrel of oil produced.
• The 40/40 proposal (40 per cent intensity target and $40 price ceiling) provides an incentive to abate that is comparable to or higher than other major GHG policies, such as British Columbia's $30 carbon tax, California's $13 carbon permits, and European Union permits trading at $3.75 as of April 2013.
• The proposed regulations are expected to have low competitiveness impacts because they only charge for the cost of complying with the intensity standard, rather than taxing all remaining emissions. If the 40/40 proposal were implemented as a carbon tax similar to British Columbia's, the cost to firms in 2020 would be three times higher.

APA

Sawyer, D., & Beugin, D. (2013). Oil and Gas Greenhouse Gas Regulations: The implications of alternative proposals. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/oil_and_gas_ggr.pdf

Chicago

Sawyer, Dave, and Dale Beugin. Oil and Gas Greenhouse Gas Regulations: The implications of alternative proposals. International Institute for Sustainable Development, 2013. https://www.iisd.org/system/files/publications/oil_and_gas_ggr.pdf.

Wikipedia

{{cite report |last1=Sawyer |first1=Dave |last2=Beugin |first2=Dale |title=Oil and Gas Greenhouse Gas Regulations: The implications of alternative proposals |publisher=International Institute for Sustainable Development |date=May 2013 |url=https://www.iisd.org/system/files/publications/oil_and_gas_ggr.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{sawyer2013oil, author = {Sawyer, Dave and Beugin, Dale}, title = {{Oil and Gas Greenhouse Gas Regulations: The implications of alternative proposals}}, institution = {International Institute for Sustainable Development}, year = {2013}, month = may, url = {https://www.iisd.org/system/files/publications/oil_and_gas_ggr.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }