The federal government in Ottawa plans to use a cap-and-trade system to lower oil and gas emissions by 40%.
The proposed cap-and-trade system was outlined in a discussion paper published by the federal Environment Ministry.
The Liberal government of Prime Minister Justin Trudeau pledged to implement the oil and gas emissions cap in last year's election, vowing to cut emissions across all sectors 40% to 45% from 2005 levels by 2030.
The oil and gas industry accounts for more than 25% of Canada's total emissions. In the last 30 years, as production of oil and gas has ramped up, emissions from the sector have risen 83%. Overall emissions in Canada are 23% higher over the past three decades, according to government data.
Most of Canada's oil and gas producers are already cutting emissions due to other federal regulations. The Oil Sands Pathway Alliance, which includes Canada’s six biggest oil producing companies, aims to get emissions to net zero by 2050.
The first proposed cap-and-trade option put forward by Ottawa would see total emissions allowed divided into individual allowances and allocated to companies using an auction. Companies that don't buy enough allowances to cover their emissions would have to buy credits from other companies that bought more than they needed.
The second option would modify the industrial carbon price applied to oil and gas companies with the goal of ensuring that emissions fall by limiting the trading of carbon credits.
The Environment Ministry said it plans to unveil the final cap-and-trade system early next year.
