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On Thursday, December 7, 2023, Environment Minister Steven Guilbeault announced the draft Regulatory Framework for an Oil and Gas Sector Greenhouse Gas Emissions Cap at COP28 in Dubai.

The framework outlines a set of regulations - promulgated pursuant to the Canadian Environmental Protection Act, 1999 - that will establish a cap-and-trade program for Canada’s oil and gas industry, with a sectoral limit 35-38% below 2019 levels.

The cap will progressively lower each year, requiring oil and gas companies to keep reducing emissions, until the sector hits the federal government’s 2050 net zero goal. Polluters who exceed their annual emission limits will have the option of buying and trading emission allowances from parties emitting below their cap, buying carbon offset credits, or simply paying into a decarbonization fund.

The proposed program was developed following years of “extensive engagement with industry, Indigenous groups, provinces and territories, and stakeholders,” according to the government’s press release. Nonetheless, the framework’s announcement was (predictably) met with immediate disparagement by said industry, while environmentalist reactions ranged from “reasonable and necessary” to “tepid…weak”.

The framework’s modest targets – dropped from a planned 42% below 2019 levels by 2030 – have been attributed to the federal government’s desire to “avoid legal and constitutional fights with provinces,” particularly in light of recent court decisions that Minister Guilbeault said were “forcing Ottawa to tread more carefully on climate policy.”

Please contact our firm at 647-725-4308 or info@greeneconomylaw.com for legal assistance in connection with Canadian environment and energy policy matters.