PODCAST: COP 26, climate and Canadian oil and natural gas

Canadian oil and gas companies commitment to reduce emissions and meet reduction targets.

As delegates gather for COP 26, the UN climate summit in Glasgow Scotland, Energy Examined host Holly Quan chats with Patrick McDonald, climate director at CAPP.

McDonald highlights the work being done by Canadian oil and gas companies to reduce emissions and commitments to meet reduction targets. He also discusses how a small country like Canada could play an outsized role in reducing global emissions through something being discussed at this year’s summit, Article 6.

Transcript of podcast:

Holly Quan: Welcome to another edition of Energy Examined the podcast aimed at discussing issues facing Canada’s oil and natural gas sector. I’m your host, Holly Quan, and today we’ll be talking about something most people have heard of, but few understand: the Paris Agreement. This is a timely discussion, as delegates from around the world gather in Glasgow, Scotland for COP26 to further refine aspects of the Paris Agreement, such as Article Six, which we’ll get into shortly. Joining me today is Patrick McDonald, the director of climate at the Canadian Association of Petroleum Producers. Patrick’s been working closely on this file for quite some time. Thanks for joining us today, Patrick.

Patrick McDonald: Hey, my pleasure. Holly, thanks for having me on the line.

Holly Quan: So, Patrick, today we’re going to discuss some of the complexities of the Paris Agreement and what it means to Canada’s natural gas and oil sector. But let’s start with an overview. What is the Paris Agreement? What’s the objective?

Patrick McDonald: Well, Holly, the Paris Agreement again, is it really sets out a global framework to avoid the impacts of climate change by limiting global warming that’s occurring to well below two degrees and then pursuing efforts to further limit those to one and a half degrees. So, it’s called the Paris Agreement because it was signed at the Conference of the Parties, the 21st and that conference took place in Paris. And so that’s where we got the name, the Paris Agreement, and it includes, you know, a number of nations that are within the United Nations and it really essentially prescribes the need for the signatories to provide commitments to reduce their emissions and provides pathways for these developed nations to assist the developing nations to further climate mitigation and adaptation efforts, all in the goal of pursuing this, you know, well below two degrees and even the one point five degree limits to the global temperatures.

Holly Quan: So, it’s my understanding, then, that the Paris framework or the Paris Agreement, I should say, also provides a framework for things like emissions monitoring, reporting, tracking, different signatories’ climate goals and how they’re performing against what they’ve said they would do. So, are there specific emission targets like under the Paris Agreement? Are there specific emission targets by country?

Patrick McDonald: Specific emission targets by country – yes. So, I guess that’s really the short answer. So, within the Paris Agreement, there is this provision called nationally determined contributions or NDC for short. And really the signatories are required to provide these essentially targets for their countries. And how they’re going to reduce, you know, how the emissions are going to be reduced in their country to meet the overall objectives of the Paris Agreement. And for example, Canada just recently updated their NDC to a forty- to forty-five percent reduction of emissions by 2030. And that’s based on, you know, looking at 2005 as kind of a baseline year. So again, the answer is yes, there are targets. And you know, those targets over time are actually, you know, become more ambitious and as more is understood about what is required to meet the overall framework that Paris is trying to achieve.

Holly Quan: So those emission reduction targets in Canada. That sounds pretty ambitious, and the timeline is short, it’s like 2030, but it’s also my understanding that Canada contributes less than two percent of all global emissions, as opposed to much larger emitters like China and the U.S. So, what can Canada do? How can we influence a positive outcome for reducing global emissions when even if we hit our own targets, it’s less than two percent of overall global emissions? What can we do about that?

Patrick McDonald: Yeah, it’s definitely — thanks for that, Holly. It’s definitely, you know, a challenge, right? And I think, you know the levers that Canada can pull to help, you know, progress and to these global emission reduction frameworks are, there is multiple levers. So you know, one piece that you know is currently occurring is just the way that we operate and deliver within Canada. So, you know, we’ve been historically very much a leader on responsibility, for responsible production of our resources, whether that be, you know, venting and flaring regulations. And now, over the past decade, we’ve been coming through carbon pricing frameworks that have been moving through. So, you know, as far as one piece, you know, we’ve definitely been leading in terms of ensuring that the resources that we deliver as a nation are low emitting. And I’d say the second, you know, the second big piece here is that in terms of, with those responsible resources, you know, we are in a position to help reduce global emissions. There’s been a very big push over the past number of years to offset coal usage in terms of electricity generation in and within a number of countries. And a lot of that, a lot of that coal can be reduced, can be replaced with natural gas. And so Canada, being one of the countries with the low emitting net opportunities for low emitting natural gas production can play a pretty significant role. And in working with those countries to help offset some of those emissions and get, still deliver the energy that the world is demanding. But at a lower emission, a lower amount of emissions. And I’d say the same piece goes for the oil production. You know, we’ve been seeing, continued need and continued demand for oil over the long term, you know, the International Energy Agency has in their forecast has very much predicted that there’s going to be a continued need for both natural gas and oil. And so, we’ve seen that, you know, our emissions intensity reductions within our sectors have, you know, as we continue to implement new technologies and innovate, have been quite substantial over the last decade. And you know, as we can continue to incorporate that, we’ll just continue to perform better and really have an ability to provide low emission energy into that mix.

Holly Quan: So, I think then this leads into a discussion about Article Six, so how would Canada get credit for doing all the things that we’re doing domestically, reducing emissions intensity, being a leader in innovation and technology and also helping other countries reduce their emissions by displacing coal or higher emissions fuel sources with our own responsibly produced energy. How does Canada get credit? Because the really, it seems to me there would be a much bigger contribution to worldwide emissions reduction than we can achieve within our own borders. But there’s got to be some mechanisms, and I understand it’s Article Six to allow for credit trading or to show some means of we’re working globally to address global emissions. Can you talk a little bit then about Article Six?

Patrick McDonald: Yeah, you bet. You bet, Holly. And Article Six, again, you know, was included in the initial Paris Agreement that was signed in 2015. But to date, the details of how that mechanism could really be developed and implemented hasn’t been finalized yet. And so, while there was the recognition and the forethought that you know, this is something that’s going to be really important that needs to be captured within the agreement, the parties really recognize that there was more work and there’s a need to spend a bit of time just to ensure that the accounting and all those mechanisms are in place so that it can be done effectively. So, that’s why, you know, leading up to COP26, there is a lot of kind-of anticipation because Article Six kind-of the potential finalization of that is one thing that’s on the potential agenda for there. And so, what it does is it really creates a mechanism of more of a global carbon credit market. And so, within this, countries would be enabled to trade emissions between themselves in an effort to really to be able to take the actions that are necessary to make more progress on emission reductions. So it’s, again, still under negotiation, but you know, kind-of the short strokes of it are, you know, if an action in one country taken delivers an emission reduction in another country, there’s an ability for those two countries to work together to say, “OK, well, how can we share crediting for this emission reduction, given that it would not be possible without the participation of both nations?” And to your earlier note, you know, because sometimes getting to a huge reduction in one country may result in a slight increase in the country delivering the goods or assets or technology that is required to facilitate that. So, you know, when we are really looking through this, there’s definitely a huge opportunity for a country as Canada being a fairly heavy exporting nation so that we can kind-of utilize that to build on.

Holly Quan: So, Article Six, I mean, this sounds, it sounds great, it sounds like it would be very beneficial to Canada and ultimately to global emissions reduction. It also sounds really complicated, and there’s a lot of making sure that emissions tracking is transparent, that reporting is transparent, that there is no double counting. It’s almost an exercise in tracking and accounting, monitoring and reporting. Are you optimistic that Article Six will, the negotiations will bear some fruit this year?

Patrick McDonald: Definitely optimistic on that one, Holly. You know this COP26, is actually, you know, deferred from a year ago when you know, it wasn’t able to take place due to the global pandemic. And, you know, so I think there’s a lot of anticipation and ambition and desire for the folks coming to the table to be, you know, to work through these negotiations in a manner that delivers, you know, delivers these outcomes that have been kind-of not able to be resolved in the past couple of conferences. And so really, you know, really hopeful because I think, you know, again, these are going to be critical components to enable the best outcome globally when we’re looking at the emission reductions. And I’d say just the last piece, you know, in terms of Canada’s ability and you know, the complications that you mentioned, you know, as a jurisdiction that is very transparent and includes a high level of rigour on all of our accounting and reporting and details, we are well-positioned as a country in terms of meeting those requirements that, you know, that are likely to be included in that just being just by nature of the way that we undertake our business. And, you know, the fulsomeness of the regulatory frameworks that exist in Canada.

Holly Quan: It also sounds like we might be able to help other countries in those terms about how to monitor, report, track and be transparent about it. We have other expertise as well. So, you mentioned a few initiatives earlier in our discussion about what’s going on in Canada to reduce our emissions intensity. And I know that there are a few more initiatives and technologies on the horizon. Can you talk a little bit about that? What are the ongoing efforts in Canada to reduce emissions?

Patrick McDonald: Yeah, well, I don’t know if our podcast is long enough to go through all of them Holly, but maybe we can just key in on a couple, just because again, I think that by nature of our sector, you know, we’ve been very active in this space and, you know, a great amount of the environmental innovation funding within Canada is a result of the oil and natural gas sector. And I’d say that, but the pieces that are, you know, being looked at very closely right now would be inclusion of CCUS or carbon capture and underground storage or sequestration. You know, this is something that’s definitely being explored in spaces that have, you know, more stationary, more stable emissions. And, you know, while it’s, you know, it is possible in smaller and smaller groups and with smaller sources, you know, it’s being looked at for those larger sources. And Canada’s, you know, has been a leader and has a number of active CCUS projects in operation right now. So, I’d say that’s one big area. And you know, there’s, even looking at government policy to enable further adoption of some of that technology, and it’s definitely something that’s looking at being looked at in the oil sands sector with some recent developments of oil sands operators that have been utilized or likely to use CCUS as a key lever to meet their pathway to net zero that was recently announced. I’d say the next piece in terms of methane reduction, that’s definitely something that we, Canada has been a leader on, on the regulation side. And, you know, in terms of targets, very few, if not, I don’t think any head of countries that are exporting within our sector are, you know, have a methane target except for Canada and specific to the sector. And you know, we’ve been taking some very proactive action in that space to reduce those methane emissions associated with production, whether it be, you know, whether it be using compressed air instead of gas to run pneumatics or, you know, ensuring that we have low flare volumes and minimize kind-of the venting, the venting component within operations. And then I’d say the other area that Canada is uniquely positioned in, is related to the opportunities of just production given the ability to electrify. And so, in a lot of, not in all jurisdictions, but in some of the jurisdictions, you know, we have a great deal of hydro-powered electricity and so very low emitting electricity sources and utilizing these sources enables the oil and gas projects to be very low emissions in terms of the ultimate delivery of the product. And so, you know, there’s a great deal of opportunity there. And you know, as such, we’ve been utilizing those over the past decade to reduce emissions intensity as well as to be well-positioned to deliver this needed production in the future.

Holly Quan: You know, listening to you talk about these innovations and technologies, things that are not just being looked at in the industry, but we’re actually doing them, I share your optimism about Canada being a leader in this space. And I also share your optimism about negotiations on Article Six over the coming couple of weeks at COP26. It sounds like something that will benefit Canada and the global community to start pushing that emissions curve down. So, Patrick, thank you so much for your insights today.

Patrick McDonald: Yeah, really appreciate the opportunity to be here, Holly.