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Canada’s Emissions Cap for Oil & Gas: Will It Cut Carbon or Curb Production?

Canada’s upcoming emissions cap on the oil and gas sector aims to cut greenhouse gas emissions by 37% by 2030 from 2022 levels. However, the energy industry and provinces like Alberta are strongly opposing it. 

The plan, unveiled Monday, introduces a cap-and-trade system designed to encourage higher-polluting firms to invest in emissions-reduction projects while recognizing better-performing companies. The intent to cap the oil and gas industry was first revealed during the COP28 last year in Dubai. 

Beyond Black Gold: A Green Transition?

Environment Minister Steven Guilbeault clearly emphasized the importance of this move, stating that:

“Every sector of the economy in Canada should be doing its fair share when it comes to limiting our country’s greenhouse gas pollution, and that includes the oil and gas sector. We are asking oil and gas companies who have made record profits in recent years to reinvest some of that money into technology that will reduce pollution in the oil and gas sector and create jobs for Canadian workers and businesses. ”

Canada’s oil and gas sector contributed 31% of the country’s total emissions in 2022, per the latest National Inventory Report. It is the largest emitting sector, followed by the transportation and buildings sectors.

Canada GHG emissions by sector 2022

High Stakes in the Oil Sands

In 2022, Canada’s oil sands led to oil and gas emissions of 87 megatonnes or 40% of the sector’s total. The sector’s emissions have largely been driven by increased production. 

Since 1990, Canada’s total crude oil output surged by 193%, primarily fueled by oil sand operations, which grew over 800% and accounted for 80% of this production increase. This growth underscores the oil sands’ significant impact on Canada’s total emissions.

change in Canada oil and gas sector GHG emissions
Source: National Inventory Report

These major carbon emitters are largely concentrated in the provinces of Alberta and Saskatchewan, where oil sands and natural gas production are prevalent. Here are a few key players, with their latest GHG emissions reported and net zero goals. 

Suncor Energy Inc.

One of Canada’s largest integrated energy companies, Suncor operates in Alberta’s oil sands, where its extraction and processing activities generate significant emissions. The oil major’s GHG emissions totaled almost 35 million metric tons of carbon dioxide equivalent (MtCO₂e) in 2022. 

Suncor aims to achieve net zero in its operations by 2050 and cut emissions by 10 megatonnes across the value chain by 2030. The company has been actively pursuing emissions reduction initiatives, including investments in carbon capture and renewable energy.

Canadian Natural Resources Limited (CNRL)

CNRL is among Canada’s top oil sands producers and one of the largest carbon emitters in the country, releasing over 23 million MtCO₂e in 2022. They are a key member of the Pathways Alliance, along with Suncor, which aims to build carbon capture and storage (CCS) networks to reduce sector emissions.

The energy firm commits to reducing its carbon footprint by 40% in Scope 1 and 2 GHG emissions by 2035m compared with the 2020 baseline. It also targets to reach net zero emissions by 2050. 

Imperial Oil Limited

A major player in the oil sands and petrochemical industries, Imperial Oil operates facilities with large carbon footprints, including open-pit mining and in-situ extraction operations. It has also partnered with CCS initiatives to cut emissions.

The oil major aims to hit net-zero scope 1 and 2 emissions, from operated assets by 2050. Its emissions totaled 8.9 million MtCO₂e in 2021.

Cenovus Energy Inc.

Known for its oil sands and conventional oil operations, Cenovus has significant emissions, especially from its steam-assisted gravity drainage (SAGD) operations. Cenovus is also part of the Pathways Alliance, focusing on long-term decarbonization.

The company aims to slash GHG emissions to net zero by 2050, with 18.2 million MtCO₂e produced in 2022. 

How Canada’s Emissions Cap Could Redefine Oil & Gas

Canada’s proposed emissions cap for the sector focuses on emissions rather than limiting production. These regulations are informed by discussions with industry, Indigenous communities, provinces, territories, and other stakeholders and are designed to align with achievable technical measures, per the government’s statement. This approach allows for production growth, with Environment and Climate Change Canada projecting a 16% production increase by 2030-2032 from 2019 levels, assuming companies implement decarbonization measures.

The pollution cap will regulate upstream oil and gas facilities—including offshore and liquefied natural gas (LNG) production—which account for roughly 85% of the sector’s emissions. Activities covered include: 

  • oil sands extraction and upgrading, 
  • conventional oil production, natural gas processing, and 
  • LNG production. 

As the world’s 4th-largest oil and 5th-largest gas producer, Canada aims to stay competitive in a decarbonizing global market. With demand for low-pollution fuels expected to grow, the emissions cap is positioned to help Canadian oil and gas producers adapt to shifting global demand while supporting national emissions targets.

As Canada targets a 40-45% emissions reduction below 2005 levels by 2030, it’s clear that the energy sector, which accounts for over a quarter of all emissions, is key to achieving its climate goal. 

Tug of War Over Emissions Limits

The cap on emissions, however, is being criticized by Alberta and the Canadian Association of Petroleum Producers (CAPP), who argue it’s essentially a production cap. They contend the policy could drive up prices, eliminate up to 150,000 jobs, and cost Canada’s economy up to C$1 trillion (US$720 billion). 

Alberta’s opposition reflects broader industry concerns that Canada could become the only major oil and gas-producing country capping emissions. They noted that this could potentially harm the nation’s competitiveness.

Greenpeace Canada’s Keith Stewart expressed that oil companies haven’t invested enough in pollution-reducing measures, underscoring the need for a strict cap. Conversely, Deloitte’s June analysis suggests that the cap may drive companies to cut production rather than adopt costly technologies like CCS, a solution proposed by some as a way to curb emissions without reducing output.

As the debate intensifies, it highlights the tension between ambitious climate policies and economic impacts on the energy sector and provincial economies. The final plan and its reception will be pivotal in shaping Canada’s climate and energy future.

The post Canada’s Emissions Cap for Oil & Gas: Will It Cut Carbon or Curb Production? appeared first on Carbon Credits.

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The Strategic Case for Nature-Based Carbon Investments

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Nature-based carbon investments deserve consideration when they address a specific business dependency and produce outcomes you can measure. Imagine Moonbucks, a global coffee roaster planning next season’s espresso blend. It is considering natural Grade 4 coffee from Jimma, in southwestern Oromia, Ethiopia. Its sourcing decisions affect the roasting schedule and the cash tied up in coffee purchases. Moonbucks needs to understand which measures could protect that supply, what they would cost and how it would judge the results.

1. Define the sourcing problem before choosing a project

Moonbucks needs a dependable component for its espresso blend. Its procurement team wants continuity of volume and an agreed cup profile. Replacing a shipment at short notice could require new sample approval and changes to the blend, and given the schedules for cultivation, processing, and freight delivery, is practically impossible. Moonbucks needs to get this right, and its initial concern is inconsistent deliveries. It commissions an assessment of the supplying farms and post-harvest chain. The questions cover land condition, harvest availability and whether drying or storage problems are affecting saleable lots.

This distinction changes the investment brief. A tree-planting proposal cannot be assumed to fix drying problems. Better storage cannot restore eroded land. The team must establish which problem exists before selecting the response.

CCC’s guide to finding nature-based solutions in your supply chain explains where to look. Here, the next task is to turn a broad concern into a testable proposal.

2. Develop nature-based carbon investments around the actual supply chain

The assessment would trace Moonbucks’ purchases back through the exporter and supplying producer groups. Which farms supply the contracted lots? Who controls land-management decisions? How long does the buyer expect to maintain the purchasing relationship?

Furthermore, Jimma natural Grade 4 cannot be treated as interchangeable with every Ethiopian coffee. Moonbucks would need to test any substitute against its own blend and quality requirements.

Suppose Moonbucks’ assessment identifies an opportunity to maintain shade trees and restore vegetation along exposed streambanks. The IPCC describes agroforestry as a way to store carbon in vegetation and soil, with potential benefits for erosion control and water quality.1 Moonbucks would need local advice on species, growing conditions and maintenance before deciding how these measures fit its sourcing plan.

The proposal now has a defined sourcing connection and a candidate intervention. The next steps are to test its effect on production, assess carbon eligibility and build the financial case.

3. Compare the proposal with other ways to protect supply

WBCSD’s Nature-based Solutions Blueprint recommends comparing nature-based options with other responses across their benefits and costs.2 For Moonbucks, that means evaluating the landscape proposal alongside drying improvements, storage controls and alternative sourcing arrangements.

The product’s natural-process designation matters. Moonbucks should examine the drying and dry-milling chain alongside land conditions. Its team would check storage practices, contamination risks and incoming-lot quality to see whether problems arise before or after the coffee leaves the farms.

The revised proposal might combine land stewardship with separate post-harvest controls. Each component needs its own purpose and budget. A sustainability label should not obscure which activity is expected to solve which problem.

The project develops as the evidence improves. Its scope should follow the diagnosis rather than preserve the first idea unchanged.

4. Establish what the carbon outcome could count toward

Moonbucks’ sustainability team now tests the proposed carbon case separately from the sourcing case. Is the objective a measurable change in Moonbucks’ value-chain emissions, verified credits for separate voluntary use, or distinct outcomes under carefully defined arrangements?

Scope 3 covers value-chain emissions. A purchasing relationship alone does not prove that a farm intervention can be included in Moonbucks’ inventory. The team needs an applicable accounting method, defensible boundaries and evidence supporting attribution.

SBTi’s FLAG Guidance (forest, land and agriculture), version 1.2, says purchased credits used as offsets cannot meet near-term FLAG or energy and industry targets. Eligible land-based removals are subject to accounting requirements.3 Moonbucks needs to test its proposal against those rules before including an outcome in its targets.

For Moonbucks’ Jimma proposal, maintaining existing trees and establishing new vegetation could involve different carbon questions. Specialists must examine the baseline and additionality, meaning what changes because the project proceeds. They must also assess measurement and the risk that stored carbon is lost. CCC’s MRV and additionality article introduces those tests.

Until that work is complete, Moonbucks should not budget an assumed Scope 3 reduction or credit-sale receipt. Direct emissions reductions remain the priority.

5. Build a financial case that survives weaker assumptions

Moonbucks’ finance team would now build a multi-year budget. UNEP’s State of Finance for Nature 2023 compares current finance with the investment needed to meet climate, biodiversity and land-restoration goals.4 The company would cost its proposed activities, farmer participation and ongoing monitoring. Verification, where required, is a separate expense. Maintenance and responsibility for replacing failed plantings must remain visible after the initial establishment budget ends.

Operational benefits need equally careful treatment. If fewer rejected lots reduce emergency purchasing, count that saving once. Do not add “supply resilience” as another financial benefit when it represents the same avoided cost.

Moonbucks should compare a base case with slower benefits, higher implementation costs and no carbon revenue. It should also distinguish production outcomes from quality and shipment outcomes. A single good harvest would not prove that the landscape intervention caused better delivery performance.

A project can remain worth funding even when its carbon case needs more work. That decision must rest on the operational evidence and the company’s objectives, without unsupported environmental claims.

6. Fund a pilot with a clear expansion decision

Moonbucks’ first approval would fund a bounded pilot, rather than commit the entire sourcing program. Before spending, Moonbucks would agree on participating farms, responsibilities and the evidence needed at review.

Its scorecard could track farmer participation, implementation costs and plant survival, alongside accepted coffee volumes and lot-quality results. Carbon measurements would follow the selected method. Farm-level traceability must connect the intervention to the actual sourcing relationship.

Suppose Moonbucks’ review later finds that storage changes explain most quality improvements, while the land measures need longer observation. Those findings would shape the next decision: expand the proven component, adjust the landscape work or pause further spending. They would not justify crediting all improvements to tree planting.

This gives nature-based carbon investments a practical place in a multi-year strategy. Funding increases as the evidence supports it, and the project can change direction before a larger commitment.

Discuss a sourcing opportunity with CCC

Carbon Credit Capital’s nature-based supply-chain investment service uses its Dual-Value Model to examine supply-chain economics alongside potential sustainability outcomes.

Schedule a consultation to discuss your sourcing exposure and the questions to resolve before allocating capital.

Sources

  1. Intergovernmental Panel on Climate Change (IPCC), Climate Change 2022: Mitigation of Climate Change, Chapter 7, Agriculture, Forestry and Other Land Uses, section 7.4.3.3 (Agroforestry).
  2. World Business Council for Sustainable Development (WBCSD), Nature-based Solutions Blueprint, 5 June 2024.
  3. Science Based Targets initiative (SBTi), Forest, Land and Agriculture Science-Based Target-Setting Guidance, version 1.2, March 2026, section 3.1.4, pp. 37–38.
  4. United Nations Environment Programme (UNEP), State of Finance for Nature 2023, 2023.
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Carbon Footprint

How to buy plastic credits, and what to check before you do

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A plastic credit funds the collection of plastic waste in places where no formal system exists to collect it. Each credit represents a measured, independently audited quantity of plastic taken out of the environment or returned to use, tracked on a public registry.

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Carbon Footprint

EU carbon credit claims after 27 September 2026

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EU carbon credit claims changed on 27 September 2026, the day the Directive (EU) 2024/825 began to apply across the European Union. The change is narrow. It changes how a company can talk about the credits it buys. A product can no longer be called neutral on the strength of compensation alone; however, every specific, evidenced statement about what a company measured, reduced, and funded stays fully available.

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