Thank you, Chair.
It is a pleasure to be here today on the unceded traditional territory of the Algonquin people to discuss two different approaches to climate policy by Canada and the United States.
I'm here representing the Explorers and Producers Association of Canada. EPAC represents over 80 Canadian upstream oil and natural gas producers that produce more than 60% of Canada's natural gas and more than 30% of the country's oil, primarily from conventional resources.
EPAC members are reducing their GHG emissions, as evidenced by the national inventory report. Specific efforts include significant reductions in methane emissions, the operation of existing and advancement of future CCUS projects, and diversification into hydrogen and renewable resources.
Canada has taken a compulsory policy approach to climate ambition that includes a price on carbon, prescriptive regulations for methane, the clean fuels regulation and a proposed emissions cap on the sector. On the other hand, the United States Congress has failed to pass meaningful climate policy and is instead providing billions of dollars in cash and tax incentives through the Inflation Reduction Act, or IRA, to achieve reductions. The Supreme Court of the United States has also consistently undercut the ability of the President to regulate the oil and natural gas sector through executive order. The contrast in approaches has made it more challenging to attract investment into Canada for the deployment of emissions reductions technology, and it undercuts the clean-tech ecosystem that traditional industries have spurred here in Canada.
As the Deputy Prime Minister has acknowledged, Canada must correct this cross-border disadvantage by shifting its focus from a pure sticks approach to one that includes more carrots in order to maintain the country's climate leadership. EPAC has proposals to address two specific gaps created by the IRA in CCUS and methane mitigation.
First, regarding CCUS, members should know that EPAC represents the operators of three of the four largest operating CCUS facilities in the country and has other members that are actively investing in new CCUS projects and technologies. The government should be congratulated for its CCUS investment tax credit, or ITC, which helps make these projects more economical. However, with the IRA including a guaranteed tax credit of $85 per tonne of carbon sequestered, capital for CCUS projects has shifted from Canada to the United States. As publicly stated by Entropy, a subsidiary of EPAC member Advantage Energy, this is because enhancements through the IRA have created a stronger CCUS incentive market in the United States with significantly more carbon pricing certainty.
The government can close the gap created by the IRA in three ways: by introducing a production tax credit in line with the IRA, which would be EPAC's preferred approach; increasing the inclusion rate of the current ITC; and guaranteeing a floor price on carbon through a version of carbon contracts for difference.
Second, Canada is a world leader in methane emissions reductions and is set to lower these emissions from oil and gas by 40% by 2025. Canada risks losing its leadership position because of the $850 million the IRA provides to the U.S. oil and gas industry for methane monitoring and mitigation. However, Canada can maintain its leadership position and further reduce emissions provided government maintains a reasonable regulatory approach and provides targeted supports to reach the most difficult emissions. To this end, EPAC recommends that government repurpose unallocated money from the emissions reduction fund, which is money already committed to industry to help monitor emissions, advance needed technological development and further gas conservation efforts.
Thank you to members for the time.