Thank you for inviting me and giving me the opportunity to provide information on this very important topic. I hope you'll find it useful as you consider this measure.
I will be making my opening statement in English, but I'll be happy to answer questions in the language in which they are asked.
The remarks I'm making here are based on two sets of work. The first is the extensive modelling work we did as part of our Canadian energy outlook, which we publish every few years. It assesses trajectories to meet differentiation reduction targets, including the current 2030 and 2050 targets. The second set of work is sectoral analysis that we do for the shorter term, including more recent trends and how actors are moving at the moment.
When considering the cap, to get to the 2030 GHG reduction target of 40% to 45% compared with 2005 levels, which is to say, roughly, today's emissions levels, Canada needs 5% year over year reductions for the entire economy. To achieve this short-term target, it's necessary to focus on sectors where deep emission reductions are possible in the shorter term, while at the same time, initiating changes in other sectors where short-term reductions are more challenging.
Meeting the 2030 target means that the government must focus on sectors that can transform deeply in less than a decade. At the same time, they can delay starting the broader changes needed for the 2050 net-zero goals in sectors that will move more slowly. The correlator to this is that for some sectors, it's very difficult to foresee a 40% to 45% reduction by 2030. This can be due to cost, for instance, in sectors where technology is in earlier stages of development, like heavy transport. This can also be due to technological challenges such as in some industrial processes where no carbon alternative exists at the moment.
For these reasons, the 2030 short-term target must be considered with care and implies the identification of these differences across the entire economy. With this in mind, most substantial reductions to achieve the 2030 target should come from the oil and gas sector. This is both the cheapest way to meet a country-wide target and the most straightforward. In our modelling, we estimate the need at more than 60% of emissions reduction for the sector compared with today's levels, and that's assuming that all other sectors are perfectly successful in their own reductions.
Although these reduction levels are certainly massive, it's important to note that not reducing emissions from oil and gas production by that extent means that other sectors will have to compensate in order for the economy to meet the 2030 target, which means that more expensive and, in some cases, more technologically challenging transformations will be needed elsewhere, for instance, in other industries, in the transport sector and so on. This is not to say that deep and rapid reductions in emissions from oil and gas production can substitute for substantial measures as part of the policy portfolio for other sectors. Rather, it's essential to understand that the 2030 target cannot be achieved without a deep transformation in the oil and gas sector.
In terms of the cap, a hard cap on emissions for the sector could be implemented in a variety of ways and can lead to transformations of different forms, as previous speakers have noted. It includes limits to production levels and, of course, also a very rapid ramp-up in improvements to emissions intensity, carbon capture and storage where it may be economical, and so on. The important thing to remember is that imposing this cap for the industry, through a cap and trade system for instance, could let producers and refiners decide how to meet their obligations.
Importantly, the theoretical effect of the cap is to drive innovation and investment—at least that's the idea—but whatever the means to meet the cap, CCS or whatever else, as long as the reductions are there, perhaps that's the most important thing.
Perhaps as importantly, the imposition of a cap with a clear schedule for reductions has the benefit of contributing to eliminating one of the key barriers to transformation across all industries, which is the policy uncertainty surrounding the climate pledges. To initiate the investments and encourage the innovation needed to achieve our climate targets, industry actors need a stable investment environment, and a stringent cap on emissions from the most emissions-intensive sector would certainly be an important stepping stone in doing this.
Although it's not limited to choosing to impose a cap or not in order to reduce emissions, given the depth of the transformation that we're talking about here and the fact that part of this industry may need to reduce production to meet the cap, any measure should be accompanied by support to offset any negative economic impacts from decarbonization on communities and workers, proportional, hopefully, to the economic disruption caused by meeting specific targets.