Trudeau to order Canada’s oil and gas producers to cut emissions by 35%

Prime Minister Justin Trudeau’s government will require Canada’s oil and gas industry to cut emissions by 35% from 2019 levels, a policy that is set to inflame tensions with the country’s western provinces.

The plan will be implemented through a cap-and-trade system that sets a legal limit on the sector’s emissions and then allows companies to buy and sell a limited number of emissions allowances, Environment Minister Steven Guilbeault said in a news release on Monday.

Companies that reduce emissions will be able to sell more allowances, rewarding those who innovate to cut pollution. The government is expected to begin enforcing the cap in 2030 and gradually lower it until Canada’s economy reaches net zero in 2050.

“We are asking oil and gas companies who have made record profits in recent years to re-invest some of that money in technology that will reduce pollution in the oil and gas sector and create jobs for Canadian workers and businesses,” Guilbeault said in the release.

The minister released draft regulations on Monday after presenting an early framework last year. Guilbeault said the government will continue to consult on the final regulations before they’re published next year.

The framework last year said producers would be allowed to buy carbon offsets or contribute to a decarbonization fund to cover a portion of their emissions.

The premier of Alberta, home of Canada’s oil sands, has previously said there’s no doubt the policy will end up in court, while the Canadian Association of Petroleum Producers has said the measure is effectively a cap on production that could result in “significant curtailments.”

Canada is the world’s fourth-largest oil producer and the fifth-largest gas producer. The emissions cap is expected to apply to a broad range of activities, including oil sands extraction and the small but growing liquefied natural gas sector. Trudeau’s government is looking to speed adoption of carbon capture technology.

The government already mandates a national price on carbon, while offering a public backstop for that price known as a “carbon contract for difference,” as well as investment tax credits. Pathways Alliance, a group of six Canadian oil sands producers, is planning one of the world’s largest carbon capture facilities, but has yet to hammer out a project-specific agreement with the Canadian and Alberta governments.

The shelf life of the emissions cap is in doubt, however, as Canada is due for a federal election by late October 2025. Conservative Leader Pierre Poilievre is ahead by double digits in most polls and has promised to scrap many of Trudeau’s climate policies.