Thank you.
I am Chris Severson-Baker, the Alberta director of The Pembina Institute. I'm based in Calgary, on the traditional territories of the Blackfoot Confederacy in the Treaty 7 region of southern Alberta. Joining with me today is Jan Gorski, oil and gas director with the institute, who will be helping with your questions today.
As you've heard many times in the testimony over the last four sessions, the oil and gas sector is the largest emitting sector in the economy, and these emissions have risen by 20% since 2005, at a time when most other sectors have reduced emissions, with transportation being a notable exception to that. Therefore, there are significant opportunities to reduce emissions from oil and gas.
Companies have been investing in innovation, driving down the cost of abatement for some time, even though there have not been significant investments in the commercial scale application of many of these technologies. Companies have implemented cost-saving measures that have reduced emissions intensity even while absolute emissions have risen significantly, but many of the really big opportunities to reduce emissions are awaiting clearer policy and a clearer price signal.
Canada will be hard pressed to meet its target of an ambitious 40% to 45% reduction without an ambitious cap on oil and gas emissions. We therefore recommend a cap of emissions at 2019 levels for the oil and gas sector, declining by 45% from 2005 levels by 2030 with five-year milestones starting in 2025, all the way to net zero in 2050.
Reducing emissions from the sector is necessary, not only to meet our targets but also to remain competitive in a world that is placing increasing value on GHG performance. You've heard that the IEA is predicting the demand for oil will decline after 2030, and Canada's oil sands companies have recognized that the world is acting on climate change by committing to net zero.
These companies have published a vision statement that includes a 22-megatonne reduction by 2030 and a conceptual plan beyond that. That conceptual plan doesn't credibly get you to 2050, but the first chunk of emissions reductions to 2030 appears valid and is likely to require more policy stability and a higher carbon price as well. A cap on oil and gas emissions is a way to hold these companies accountable to their net-zero targets.
The oil and gas sector is well placed to make investments to reduce emissions. Peter Tertzakian, a respected voice in oil and gas, has pointed out that the sector's revenues in 2021 and 2022 are going to achieve record levels due to rising oil prices, lower costs and other factors. Companies are well placed to make investments, and there are plenty of low-cost emissions reductions available but, again—and it's been pointed out many times—they are awaiting a higher price on carbon, and stability in the carbon pricing policy in Canada.
One really significant opportunity is methane emissions. We can cut methane emissions by almost 90% for less than $25 a tonne by 2030. There are also efficiency gains and process improvements available in the oil sands and natural gas production sectors. There's a large opportunity to electrify natural gas production in B.C. with hydro power. Taken together, these emissions reduction opportunities are substantial and are based on current technology.
Finally, it is reasonable to expect that emissions reductions will also occur as a result of facilities reaching the end of their economic life between now and 2030, and then beyond of course.
Canada has the foundational policy pieces needed to achieve significant emission reductions in the oil and gas sector, and we recommend immediately strengthening Canada's industrial carbon pricing system during the review that is happening right now. This would require existing intensity benchmarks to decline by at least 4% per year so that all emissions from oil sands and other large emitters are fully priced by 2050.
At the same time, the government should develop a cap-and-trade system for the oil and gas sector, but we recognize that this takes time, and early-term reductions in emissions will only be achieved through tightening existing policy.
Strengthened methane regulations can also achieve significant reductions early on, well before 2030. The federal government has already committed to reducing methane emissions from oil and gas by at least 75% by 2030.
Thank you very much.
I look forward to your questions.