The International Energy Agency (IEA) is urging the Canadian government to require “deep decarbonization” in the country’s oil and natural gas industry. 

“Global markets will progressively demand cleaner fuels and will discriminate in favor of more carbon-competitive products,” said the global energy watchdog in a 261-page report.

“Canada is the fourth largest producer of oil and natural gas and home to the world’s third-largest oil reserves,” IEA said. “But simply having those resources will not be enough to compete in rapidly transforming global energy markets.”

Canada Prime Minister Justin Trudeau already has targeted the country’s oil and gas industry for more stringent regulations to reduce emissions. Many initiatives are underway, with industry support. 

The IEA said upstream exploration and production accounts for about 22% of Canadian greenhouse gas (GHG) emissions. Canada’s annual total, 730 million tons or 1.6% of global emissions, excludes oil and gas export customers.

An energy transition policy in consumer countries would affect about 44% of Canadian fossil fuel that is primarily exported to the United States. However, liquefied natural gas exports are predicted to expand overseas with the buildout of facilities and pipeline projects, IEA noted.

“Canada needs clear policy signals to help attract energy sector investments that align supply capacity with demand trends,” the Paris-based agency said. 

“Policies must also take into account Canada’s plans to become a major producer of clean electricity and clean fuels to support global energy security during the transition.”

The IEA noted that since its last Canada review in 2015, the national Liberal government has made a start on greening energy policy. Included are:

  • National carbon tax that increases every April;
  • Corporate tax deductions for carbon capture and storage projects;
  • Proposed clean fuels rules;
  • Hydrogen supply strategy;
  • Requiring all new vehicles to be electric as of 2035;
  • Commitments to phase out coal-fired power generation; and
  • 75% reduction in methane emissions.

The IEA acknowledged that the national government will give performance reports on its energy cleanup strategy under its 2021 Canadian Net-Zero Emissions Accountability Act. The agency also noted that the law allows a flexible approach to GHG measurement.

“Net zero means remaining emissions produced will be fully absorbed by nature – for example tree plantation – or technology such as carbon capture and storage systems, or offset via GHG trading regimes.”

The IEA called for translating Canadian official green energy goals into practical standards for the top and fastest-growing source of GHG emissions –  thermal oilsands production in northern Alberta.

The agency recommended government action to “define clear targets for emissions reductions in Canada’s oil sector to align with stated plans to continue oil and gas exports beyond 2050 with net zero ambitions.”

The IEA said actions should “incentivize and monitor the reduction of environmental impacts, including GHG emissions in the oil sector, and promote the research, development and uptake of clean and innovative technologies by industry, including energy efficiency technologies.”

Canada’s Natural Resources Minister Jonathan Wilkinson described the IEA report as recognizing “Canada’s ambitious efforts and historic investments to develop pathways to achieve net-zero emissions by 2050 and ensure a transition that aligns with our shared objective of limiting global warming to 1.5 degrees C.

“These are pathways that make the most sense for our people, our economy and our country and will also yield technology, products and know-how that can be exported and applied around the world.”