Canadian Oil and Gas Production in the Global Clean Energy Transition

The report finds that Canada is highly exposed to economic risks due to overinvestment in oil and gas relative to the global energy transition. Using IEA demand scenarios, it estimates that between 5% (Stated Policies Scenario) and 66% (Net Zero Emissions scenario) of projected capital investment from 2025 to 2040 could be stranded. The analysis indicates that Canadian oil is among the world's most expensive to produce, making it particularly vulnerable to price drops. The report argues that restricting the development of new fields and engaging in international diplomacy to reduce global supply could protect the industry's overall value and increase government revenues by preventing oversupply and price deflation. It also notes that U.S. tariffs on energy imports would likely amplify these risks by making Canadian production less competitive.

• The proportion of projected capital investment in Canadian oil and gas (2025-2040) expected to be stranded varies by climate scenario: 5% under current policies (STEPS), 39% under announced net-zero pledges (APS), and 66% in a 1.5C aligned scenario (NZE).
• The net present value (NPV10) of future Canadian oil and gas production is projected to be nearly USD 480 billion in the industry base case, but this drops by 19% under STEPS demand, 77% under APS demand, and becomes negative under NZE demand.
• Annual average government revenues from oil and gas (2025-2040) are projected to be comparable to 2022-2024 levels under STEPS, but 68% lower under APS and 96% lower under NZE demand.
• Developing new oil and gas fields is considered value-destructive at average oil prices below USD 62/bbl; at APS and NZE demand levels, the aggregate NPV10 of all undeveloped fields is negative.
• Stopping the development of new fields in Canada could improve the industry's NPV10 and government revenues across all demand scenarios by reducing oversupply and raising equilibrium prices.
• Canadian oil is among the most expensive globally to produce and transport, which increases its vulnerability to price drops compared to lower-cost producers.
• U.S. tariffs on energy imports are expected to make Canadian production less competitive and increase the risk that investments will not achieve commercial returns.

APA

Muttitt, G. (2025). Canadian Oil and Gas Production in the Global Clean Energy Transition. International Institute for Sustainable Development. https://www.iisd.org/system/files/2025-06/canada-oil-gas-clean-energy-transition.pdf

Chicago

Muttitt, Greg. Canadian Oil and Gas Production in the Global Clean Energy Transition. International Institute for Sustainable Development, 2025. https://www.iisd.org/system/files/2025-06/canada-oil-gas-clean-energy-transition.pdf.

Wikipedia

{{cite report |last1=Muttitt |first1=Greg |title=Canadian Oil and Gas Production in the Global Clean Energy Transition |publisher=International Institute for Sustainable Development |date=June 2025 |url=https://www.iisd.org/system/files/2025-06/canada-oil-gas-clean-energy-transition.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{muttitt2025canadian, author = {Muttitt, Greg}, title = {{Canadian Oil and Gas Production in the Global Clean Energy Transition}}, institution = {International Institute for Sustainable Development}, year = {2025}, month = jun, url = {https://www.iisd.org/system/files/2025-06/canada-oil-gas-clean-energy-transition.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }