The oil and gas sector is central to Canada’s wellbeing and the federal government’s proposed emissions cap would inflict severe damage on the economy.
That was the stark warning the Business Council of Canada issued in a letter to key deputy ministers in charge of implementing the Liberal government’s policy.
Michael Gullo, the council’s vice-president of policy, emphasized that such a measure doesn’t consider the current status of the economy and would exacerbate existing challenges like inflation.
“Imposing an emissions cap will likely force operators to involuntarily curtail their production. This would effectively reduce the overall capacity of the most productive segment of Canada’s economy at a time when investment and growth is desperately needed,” warned Gullo.
“Some of Canada’s most reputable economists believe that an emissions cap would exacerbate the country’s inflation and affordability problems by applying a broad-based economic shock that will reduce tax revenues and add pressure to the federal deficit.”
Gullo reiterated the organization’s concerns regarding the regulatory framework released by the government in December, highlighting the significant departure it represents from the current approach to reducing emissions.
The council argues that the cap, if implemented, could destabilize crucial carbon pricing mechanisms and jeopardize the competitiveness of the oil and gas industry.
“Investments are not made on speculative legislation. It is simply unrealistic to assume that projects, technologies and decarbonization strategies will be deployed, permitted and operational in four years,” wrote Gullo.
The council also underscored the uncertainty surrounding the compatibility of the emissions cap with existing federal and provincial emission reduction programs.
There are concerns about the regulatory overlap and the potential for legal challenges from provincial governments, further complicating the economic landscape.
Moreover, the council highlighted the risk of diverting capital away from meaningful emission reduction strategies, which could impede the sector’s ability to transition to a low-carbon economy.
“The government’s inability to clearly describe each compliance option threatens to delay final investment decisions and exacerbates the conditions for capital flight by companies and their respective investors and shareholders,” wrote Gullo.