Carbon capture and storage costs are too high for some firms
Oil and gas firms in Canada may opt to cut back on production instead of investing in costly carbon capture and storage (CCS) technology amid the proposal of a federally imposed emissions cap, according to a new study by Deloitte, as reported in an article by BNN Bloomberg.
In the report, Deloitte stated that as the proposed cap on the greenhouse gas emissions from the oil and gas sector aimed to lessen the carbon footprint of firms, it may also lead to the curtailing of production.
“We expect that the cap (will impose) 20 megatonnes in emissions reduction on producers by 2030, which will need to be achieved by CCS (carbon capture and storage) investments, or through production curtailment,” Deloitte’s report read.
The report further said that firms were most likely to prefer cutting back on production as it was more cost-effective in comparison to investing in CCS. Deloitte had also pointed out that with the irreversibility of investing in CCS upon its implementation, production curtailment is more preferable for firms as it can be reversed.
Deloitte’s report also stated that the mandatory limit on emissions for oil and gas firms would also cause a decrease in production, loss of jobs and investments, and a decline in GDP in Alberta and the rest of the country. With the industry of mining, refinery products, and utilities’ proximity to the sector, the emissions cap will also cause decreases in its real output.
The report further said that should there be an emissions cap in place by 2040, Alberta’s GDP would be 4.5% lower while Canada’s would be 1% lower.
The report had been criticized by Federal Environment Minister Steven Guilbeault as the findings were made without the published draft of the regulations for the emissions cap.
“How can they come up with these scenarios about production cuts when all they have seen is basically a white paper, defining contours of what the regulations could be?” Guilbeault questioned.
“What we're doing with these regulations is making sure nobody waits until 2048 to start putting in place the measures that are necessary,” he added.
However, Alberta Environment Minister Rebecca Shulz said that the report supported what the province had been trying to convey regarding the emissions cap as it made firms less profitable and will only result in discouraging investments in reducing emissions.
“From a policy perspective, the layering of all of these punitive measures are continuing to drive away the emissions reduction technology that we actually want to see happen here,” said Shulz.
Deloitte’s report was commissioned by the Alberta government in order to assess the proposed emissions cap’s possible impact on the economy.
