IISD: flexible GHG regulations for Canada's oil and gas sector are an opportunity for cost-effective federal policy

WINNIPEG—October 3, 2012—New research by the International Institute for Sustainable Development suggests that new oil and gas regulations can be designed to make a substantial contribution to Canada's greenhouse gas (GHG) emission reduction targets.

IISD climate, energy and partnerships vice-president David Sawyer said Canada's emerging federal oil and gas GHG regulations should include flexibility within the sector and beyond to temper the risks from rigid, prescriptive and potentially high-cost policy.

The oil and gas sector is expected to see rapid production and emissions growth, resulting in a substantial contribution to national GHG emissions.

"Flexibility could reduce overall costs of compliance for this rapidly growing sector and increase the level of ambition as reductions are sought outside of the regulated oil and gas sector," Sawyer said.

"Canada's GHG regulations already include flexibility, as both the light-duty vehicle regulations and the proposed heavy-duty vehicle federal regulations allow firms to make cost-effective choices to reduce emissions."

Alberta's Specified Gas Emitter Regulations (SGER) is an example of a program designed to reduce the cost of compliance. Within the SGER, firms can make their own reductions, obtain transfers from other facilities, or contribute to technology development.

"But to align with federal GHG targets, the emission reductions required will need to be greater," said Sawyer. "Flexibility can make more ambitious policy possible and also less expensive."

To reduce emissions in the longer term, the sector will need incentives to innovate. "Innovation is critical to driving down the costs of future reductions.

"Canada must not seek only to achieve its 2020 targets at the lowest cost, but also to keep deeper, longer-term reductions in its sights as well," he said.

Flexible mechanisms also have the benefit of providing strong incentives to develop the next generation of low-carbon technologies.

The paper, Flexibility and Federal Oil and Gas Greenhouse Gas Regulations: Containing costs while increasing ambition, is part of IISD's Regulating Carbon in Canada series.

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For more information please contact David Sawyer dsawyer@iisd.ca or Nona Pelletier, IISD manager, public affairs at +1 (204) 958-7740, mobile: +1 (204) 962-1303, or email npelletier@iisd.ca