Capping Potential Blowouts

The document examines the proposed regulatory framework to cap GHG emissions in Canada's oil and gas sector. It argues that existing carbon pricing is insufficient to incentivize decarbonization, as profit margins for production remain higher than those for emissions reductions. While the cap is deemed necessary for Canada to meet its Paris Agreement goals, the author warns that a 25-million-tonne 'compliance flexibility' cushion—comprising a Decarbonization Fund, domestic offsets, and Internationally Transferred Mitigation Outcomes (ITMOs)—could dilute the cap's impact by up to 25%. The brief specifically cautions against the use of ITMOs for LNG exports, citing risks of double counting, lack of additionality, and potential fossil fuel subsidies.

• Existing climate policies and carbon pricing are failing to incentivize decarbonization because investing in production is more profitable than investing in emissions reductions.
• The proposed emissions cap includes a 'compliance flexibility' cushion of 25 million tonnes (Mt) of emissions, which represents an expansion of allowable emissions by nearly 25% and could weaken the overall cap.
• The proposed Decarbonization Fund would weaken the cap because emissions reductions funded by it would be double-counted as both a means of achieving the cap and a way to balance the 25-Mt cushion.
• Domestic offsets, particularly nature-based or forestry credits, are considered risky due to uncertainties regarding additionality, leakage, and permanence, especially given Canada's wildfire risks.
• Internationally Transferred Mitigation Outcomes (ITMOs) are identified as the riskiest flexibility measure, as they may not represent real emissions reductions due to lax rules under Article 6.2 of the Paris Agreement.
• Using ITMOs to credit LNG exports is specifically criticized because it is difficult to prove that gas exports actually replace coal, and such deals could act as a taxpayer-funded subsidy for fossil fuel producers.

APA

Cosbey, A. (2024). Capping Potential Blowouts. International Institute for Sustainable Development. https://www.iisd.org/system/files/2024-10/capping-potential-blowouts-canada.pdf

Chicago

Cosbey, Aaron. Capping Potential Blowouts. International Institute for Sustainable Development, 2024. https://www.iisd.org/system/files/2024-10/capping-potential-blowouts-canada.pdf.

Wikipedia

{{cite report |last1=Cosbey |first1=Aaron |title=Capping Potential Blowouts |publisher=International Institute for Sustainable Development |date=October 2024 |url=https://www.iisd.org/system/files/2024-10/capping-potential-blowouts-canada.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{cosbey2024capping, author = {Cosbey, Aaron}, title = {{Capping Potential Blowouts}}, institution = {International Institute for Sustainable Development}, year = {2024}, month = oct, url = {https://www.iisd.org/system/files/2024-10/capping-potential-blowouts-canada.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }