One of Trudeau’s most important climate policies is on the chopping block. Can Ottawa's Plan B get buy-in?

Four years after unveiling plans for a limit on all oil and natural gas industry emissions in Canada, the federal government is — in all likelihood — scrapping the cap.

The previous Liberal government said that its proposed oil and gas emissions cap, a centrepiece of its climate policy, was integral to this country hitting its climate targets. 

But after years of arguments with industry and premiers over the policy, the latest federal budget says that, actually, Canada can get to net-zero by other means. 

The country can instead “create the circumstances whereby the oil and gas emissions cap would no longer be required,” through a combination of effective carbon markets, oil and gas methane regulations and greater deployment of carbon capture and storage, Tuesday’s budget said. 

That means the proposed emissions cap could die before it ever takes effect, a move celebrated by those in Western Canada who feared it was already killing investment and would limit the expansion of not only the oil industry, but the nascent liquified natural gas sector, too.

The pivot on the emissions cap also reinforces that Prime Minister Mark Carney is drawing a line in the sand between himself and his predecessor, Justin Trudeau, by putting more emphasis on economic growth and less on climate action — while still trying to achieve some sort of consensus around climate policy.

The emissions cap was first announced by then-Prime Minister Trudeau four years ago at the UN climate summit in Glasgow, followed by the unveiling of key policy details at the summit in Dubai two years ago.

In Dubai, Steven Guilbeault, the environment minister at the time, said the cap was necessary because the oilpatch wasn’t moving fast enough to cut emissions. Of all the environmental policies unveiled by Trudeau, Guilbeault described the emissions cap as one of the most important.

But leaders in the Alberta oilpatch have said the policy unfairly targets the industry responsible for this country’s top export and a key economic driver for Canada as a whole.

“It does make people nervous around investing. It also didn't help that it was proposed so you could never work out exactly what it would be,” said Tristan Goodman, CEO of the Explorers and Producers Association of Canada. 

“I think the government has sort of said, ‘Look, we need some certain things done and that will get us to where we want to be without having an emissions cap.’ — that's a positive step in the right direction.”

By indicating a willingness to scrap the cap, Carney is reinforcing that his top priority is the economy, said University of Calgary economist Trevor Tombe.

He’s also responding to changing priorities of Canadians. 

During the 2021 federal election, climate change was listed as one of voters’ top priorities and all major parties had said they were committed to pursuing a net zero emissions target.