Navigating Canada's greenhouse gas policy landscape: a comparison of carbon market mechanisms in the oil and gas sector

Abstract

Canada has the third largest oil reserves in the world and its production is expected to grow to 4.9 million barrels per day by 2020. As energy production and greenhouse gas (GHG) emissions grow, Canada's provincial governments are implementing policies that utilize market-based mechanisms to mitigate GHG emissions. The oil and gas sector should seek to understand this fragmented policy landscape as there is significant business risk that the policy and legal environment will change quickly, imposing incremental costs to regulated emitters. Market-based regulations also give oil and gas producers the opportunity to gain a competitive advantage by developing new forms of revenue from commoditizing GHG emission reduction projects. This research compares carbon market mechanisms across and within jurisdictional boundaries using seven criteria: facility type, project type, baseline, additionality, crediting period, measurement, monitoring and verification, and credit value. These criteria are used to compare existing and emerging carbon market mechanisms in the provinces of Alberta, British Columbia, and Saskatchewan, as well as GHG fuels standards. Results show variability in rules for commoditizing GHG emission reduction projects. The study highlights significant differences between carbon market mechanisms and offers key design features for effective market-based GHG policy in Canada's oil and gas sector.