Breadcrumbs
Gas brings a risky future for Canada
Canada is pushing ahead with new gas extraction and LNG export terminals. This strategy comes with risks even beyond those associated with the climate, including future gas demand, energy price uncertainty and the high potential for stranded investment assets.
Increased LNG production is not aligned with either global or Canadian climate goals. The impact of increased greenhouse gas emissions is one of the reasons why the Biden administration has suspended approvals for LNG exports from the US. The Canadian federal government is considering labelling gas as a ‘climate transition’ investment under its new taxonomy, and industry experts have expressed concern that this could seriously undermine its domestic and international credibility.
Canada’s planned new LNG terminals will predominantly be supplied by fracked gas from British Columbia, which is particularly damaging to the climate due to fugitive methane emissions. In 2023, methane accounted for around two-thirds of total global gas and LNG greenhouse gas emissions. As part of its Inflation Reduction Act (IRA), the US has set a methane intensity limit of 0.2% for its facilities. Research from the Energy and Emissions Lab at Carleton University suggests that the methane intensity of B.C.’s gas is 0.4%. While this is lower than the extremely high methane intensities of Saskatchewan (2.6%) and Alberta (1.8%), it is still double the limits being set by the EU and US.
The Global Methane Pledge, launched at COP26, has over 155 country signatories and aims to reduce emissions by at least 30% by 2030 (from 2020 levels). The EU Methane Regulation will introduce monitoring, reporting, verification (MRV) and mitigation obligations for EU producers and those that export coal, oil and gas to the EU. The legislation will also set maximum methane intensity limits on producers supplying the EU, and it is anticipated that this will be the same as the US’s IRA at 0.2%.
Canada also has its own regulations to reduce methane emissions in the upstream oil and gas sector by 40-45% by 2025 and 75% by 2030. Most of the gas produced and consumed in Canada comes from fracking at the Montney Formation of British Columbia (~50%) and Alberta.
There will be substantial costs associated with emissions mitigation. Canada’s Minister for Energy and Natural Resources has told the domestic LNG industry that it should not expect the government to hand out inefficient fossil fuel subsidies and instead called for fossil fuel subsidies to be phased out. This could quickly render gas infrastructure and power plants economically non-viable.
These inherent risks associated with gas could all result in costly stranded assets and a waste of both public and private funds that could instead be invested in cleaner, cheaper and faster-to-deliver energy solutions such as increased wind and solar deployment.
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Acknowledgements
Julie Segal, Environmental Defence Canada
Chelsea Bruce-Lockhart, Ember
Claire Kaelin, Ember
Image creditRamon Cliff / Alamy Stock Photo
Canada has introduced climate legislation for a greenhouse gas emissions reduction target of 40-45% below 2005 levels by 2030, and its Clean Electricity Regulations mean a fully decarbonised power system by 2035. Delivering on these policies requires a cut in both fossil fuel production and consumption.
Despite this, the country is pushing ahead with new gas extraction and LNG export terminals. This strategy comes with risks even beyond those associated with the climate, including future gas demand, energy price uncertainty and the high potential for stranded investment assets.