The Liberal government’s proposed regulations capping greenhouse gas emissions from the oil and gas sector could lead to the loss of 54,400 jobs and 0.39 percent off Canada’s GDP by 2032, according to a new Parliamentary Budget Office (PBO) report.
The regulations would establish a national cap-and-trade system for the sector, putting emissions at 27 percent below the reported emissions levels in 2026, with an ultimate goal of lowering the country’s greenhouse gas emissions to net-zero by 2050.
The PBO said to achieve this, oil and gas production would need to fall by 4.9 percent from 2030 to 2032. The report said this would lead to nominal GDP falling by $20.5 billion, economy-wide employment falling by 40,300 jobs, and full-time equivalents declining by 54,400.
The federal government has said the cap and trade policy will lower pollution levels and help fight climate change, while also encouraging clean innovation and the adoption of technologies like carbon capture, utilization, and storage. When announcing the policy back in December 2023, Environment Minister Steven Guilbeault said the government is seeking to “ensure Canada’s well-earned reputation for energy innovation remains our strong suit for the 21st century.”
Alberta Premier Danielle Smith responded to the report by calling it “scathing” and saying Ottawa cannot claim to support the energy sector in the country’s trade war with the United States, “while undercutting it at the same time.”
“The federal government’s proposed emissions cap is unconstitutional, bad for the economy and bad for Canadians,” she said. “We urge the next elected prime minister to abandon this extreme and ideological cap.”
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The Alberta government has said it will legally challenge the regulation, saying it is unconstitutional and would cripple the province’s oil and gas economy.
The Conservative Party also reacted to the PBO report by highlighting the energy sector’s contributions to Canada’s economy, which included employing nearly 1 million people and providing $45 billion in revenue to the Canadian government in 2022. The party also took a shot at Prime Minister-designate Mark Carney, saying he would “devastate the energy sector, destroy jobs, and make life more expensive for Canadians at the worst possible time” through his energy policies.
Carney previously said during an interview with CBC News that the oil and gas sector produced more than a quarter of Canada’s emissions, and that the country “can’t meet our ultimate objectives, which is to get to net zero emissions.”
In his speech after winning the Liberal leadership, Carney vowed to use both “clean and conventional energy” and to replace the federal carbon tax with a new policy that would reward Canadians for making greener choices and make big industry polluters pay. He has also criticized Conservative Leader Pierre Poilievre’s signature “Axe the Tax” policy, saying the leader was not focused on the Canada Carbon Rebate cheques disappearing, or about businesses “becoming more competitive.”
On March 13, the PBO published a factual update explaining that its analysis had not underestimated emissions reductions that could be achieved by scaling-up carbon capture and storage. The report had stated that advances in carbon capture and storage and other related technologies would reduce emissions by 16.7 megatonnes by 2030, which was around 10 megatonnes lower than what Ottawa has said is “technically achievable.”
The PBO said this discrepancy came from the report excluding the reductions in emissions attributable to the Pathways Alliance CCS foundational project, which has not been approved yet.
This update came after Energy Minister Jonathan Wilkinson criticized the report, saying the PBO had “wasted their time and taxpayers dollars by analyzing a made-up scenario that the government of Canada is not even remotely proposing.”
“By suggesting the only way to achieve emissions reductions in the oil and gas industry is to cut production, the PBO is once again misleading the public and ignoring reality,” he added.
