Carbon Emissions and the Canadian Oil & Gas Sector

November 18, 2015

As Prime Minster Trudeau and Alberta’s Premier Notley prepare for the Paris Climate Change conference in the coming weeks, it cannot be lost on them that Canada’s carbon emissions have either more or less levelled off or are only marginally increasing in every sector of the economy except one: oil and gas. The oil and gas sector is now the largest source of carbon emissions in Canada and emissions from oil and gas activities have been growing faster than in any other sector.

The following table sets out Environment Canada’s summary of carbon emissions in Canada by sector, as at the base year (2005) and projected for the target year (2020) for measuring carbon emissions under the Copenhagen Accord.

Sector

Emissions

Change

 

2005

2020

2005-2020

 

Mt

Mt

Mt

Oil & Gas

159

204

45

Transportation

168

167

(1)

Buildings

84

98

14

Emissions Intensive

89

90

1

Electricity

121

71

(50)

Agriculture

68

70

2

Waste & Other

 47

 47

(1)

 

736

747

10

Source:  Environment Canada - Canada’s Emissions Trends (2014).  Numbers may not sum due to rounding.

This table shows a breakdown of the carbon emissions from various categories of the oil and gas sector.

Category

Emissions

Change

 

2005

2020

2005-2020

 

Mt

Mt

Mt

Oil Sands

34

103

69

Conventional Oil Production

32

29

(3)

Natural Gas Production and Processing

54

40

(14)

Oil and Natural Gas Transmission

16

9

(7)

Downstream Oil and Gas

24

21

(3)

LNG Production

  0

  3

 3

 

159

204

45

Source:  Environment Canada - Canada’s Emissions Trends (2014). Numbers may not sum due to rounding.

Virtually all of the growth in carbon emissions from the oil and gas sector comes from increased activity in the oil sands.  That growth effectively offsets all of the reductions made in the other parts of the oil and gas sector as well as all of the reductions made in the other sectors of the economy. 

The following table breaks down the sources of carbon emissions from oil sands activities as at 2005 and projected in 2020.

 

Emissions

Change

2005

2020

2005-2020

Mt

Mt

Mt

In Situ

11

53

42

Mining

9

23

14

Upgrading

13

 27

14

 

34

103

69

Source:  Environment Canada - Canada’s Emissions Trends (2014). Numbers may not sum due to rounding.

According to Environment Canada’s Emission Trends Report for 2013 and 2014, this increase in carbon emissions from the oil sands is tied principally to past and projected increases in production.  To at least some extent, the growth in emissions as at 2020 from the oil and gas sector may be lower than projected, due to recent declines in global demand and the cancellation or deferral of a number of oil sands projects.  But the overall trend is likely to remain broadly consistent with the projections from Environment Canada.

Environment Canada also suggests there may also have been some levelling off of historical trends that have traditionally led to a steady decline in the carbon intensity of the oil sands.  This could be due to some technical factors, such as a gradual decrease in reservoir quality in the traditional mining facilities around Fort McMurray and increased use of natural gas to produce steam at the growing number of in situ facilities.

A few broad conclusions suggest themselves:

  • In every economic sector – other than oil and gas - carbon emissions in Canada have either more or less levelled off or are declining. In some sectors - like electricity, the declines have been material.
  • In the oil and gas sector, carbon emissions have either levelled off or are actually declining in almost every category other than the oil sands, as conventional oil fields are depleted or as decreases in the demand for Canadian natural gas reduces production.
  • In the oil sands, growth in carbon emissions is linked principally to a growth in production itself and while there are good opportunities to decrease the carbon intensity of the oil sands, it is not immediately apparent how we can materially decrease carbon emissions while materially increasing oil sands production.

More reductions of carbon emission will be required in every economic sector if Canada is to meet its current and anticipated commitments.  One of the most significant challenges in this process will be to determine how carbon emissions from the oil sands can be mitigated without impairing the viability of the oil sands generally and while continuing to enjoy their current and future economic benefits.  While oil and gas producers have always been innovative, it will also take innovation on the part of our policy and law-makers to achieve an appropriate balance in the interests of all Canadians.

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