In October 2021, an alliance of Canada’ oilsands producers announced its “Pathways to Net Zero initiative,” and it hopes the provincial and federal governments will help fund its steep bill (about $75 billion over 30 years). Unfortunately, this initiative is nowhere close to best practices and is not going to help seriously reduce greenhouse gas (GHG) emissions.

The plan captures only the group’s GHG emissions from oilsands production ─ primarily from the energy burned onsite to extract the oil, and the grid electricity used for that extraction (scope 1 and scope 2 emissions, respectively). These emissions are a small fraction of its total value-chain emissions (scope 3 emissions), which for oil and gas are primarily downstream at the point of consumption (e.g., refineries, industry, building heating, and vehicle owners).

Based on the most recent data available from the Oil-Climate Index for Canada (2015), Athabasca’s crude oil (the oilsands) production emissions represent less than one-third of its total value-chain emissions.

The territorial and provincial governments need to mandate best practices for corporate net-zero plans so that the public and investors are not inadvertently funding increases in national emissions. This is particularly important for the nation’s primary source of emissions: its oil and gas producers.

The global economy is in the process of transitioning to minimize climate change ─ a transition away from fossil fuels as a primary source of energy, among other things. A corporate net-zero target and pathway is meant to be an acknowledgment to investors, regulators and the public that the corporation knows it needs to reduce its GHG emissions profile to remain viable and profitable, and is beginning to work toward that goal.

The overwhelming consensus regarding best practice in net-zero plans is that they should include total value-chain emissions, especially for the oil and gas sector. The minimum best practice in corporate GHG reporting is set by the Greenhouse Gas Protocol ─ a standard-setting organization set up by the World Resources Institute and World Business Council for Sustainable Development ─ which states that scope 3 emissions are optional but best practice for companies seeking to address their net-zero transition risks and opportunities.

The Science-Based Targets initiative (SBTi) is a partnership between CDP, a not-for-profit charity that runs the global disclosure system for investors, companies, cities, states and regions to manager their environmental impacts; the United Nations Global Compact; the World Resources Institute (WRI); and the World Wide Fund for Nature (WWF). The SBTi argues that any company whose scope 3 emissions represent more than 40 per cent of its total emissions should include them in their net-zero target and pathway. Its  corporate manual specifically uses oil and gas as a prime example of a sector where this would be necessary.

Similarly, corporate net-zero guidance provided by the asset-owner-led Institutional Investors Group on Climate Change (IIGCC) and the Transition Pathways Initiative (TPI) ─ each representing trillions of dollars in assets under management or advice ─ recommend including scope 3 emissions. The IIGCC argues that a good net-zero plan for the oil and gas sector requires clear and transparent discussion of how its products will have fewer or no emissions by 2050. According to the IIGCC, this may involve some combination of:

  • diversifying into new areas of business and renewables;
  • working through value chains with customers to reshape demand for oil and gas;
  • offering solutions to reduce mid-stream and downstream emissions; and
  • ceasing exploration and running existing assets down to return cash to investors.

To add some context to the fourth bullet, the International Energy Agency reported in May 2021 that there should be no new oil and gas development if the world is to reach net-zero GHG emissions by 2050. Finally, the Task Force on Climate-Related Financial Disclosures (TCFD), which is increasingly becoming mandatory for publicly listed companies globally, advises oil and gas companies to disclose their GHG emissions related to their revenue, i.e., their scope 3 emissions

Fortunately, we are starting to see some oil and gas companies develop net-zero pathways that do reflect these global best practices. A prime example is Equinor (previously the Norwegian State Oil Company), the 11th largest oil producer in the world. It has developed a 2050 net-zero pathway that addresses its total value-chain emissions. Its plan involves shifting its portfolio away from fossil fuels toward more renewables, and relies on carbon capture and storage (CCS) for only a fraction of its total GHG reductions. (By comparison, the  Pathways to Net Zero Initiative relies on CCS for the majority of its reductions).

The French multinational Total Energies, the sixth-largest oil producer in the world, acknowledges in its 2020 climate report that scope 3 emissions typically represent 85-90 per cent of an oil product’s emissions. The company has set a total value-chain net-zero target by 2050, including an interim 2030 target of a 30 per cent reduction in its scope 3 emissions in Europe (the region represents the majority of the company’s scope 3 emissions today), against a 2015 base year. Its strategy for reducing these emissions includes shifting its portfolio away from fossil fuels and working with customers to reduce their emissions.

Other oil and gas companies are not quite targeting the same level of ambition, but they are at least being more transparent about how their net-zero plans address their full value chain.

For example, the British multinational BP, the ninth largest oil producer in the world, clearly differentiates its operational net-zero target from its 50 per cent product-emissions intensity-reduction target, as well as from its associated plan to increase investment in non-fossil-fuel energy. American Occidental Petroleum (or “Oxy”) includes scope 3 emissions in its climate plan, but in a rather superficial, afterthought manner. From 2040 through to 2050, the company expects carbon capture and storage technologies to resolve its significant value-chain emissions.

Yes, decarbonization of any amount is good, and an imperfect plan is much better than no plan at all. However, knowing what we know today about the severity of the climate crisis and best practices in corporate net-zero pathways, net-zero plans should not be considered sufficient or worthy of investment unless they align with, or show a stated near-term intention to align with, global best practices.

The net-zero transition is particularly important for the Canadian oilsands, which are the most carbon-intensive source of oil in the country. In 2019, oilsands production emissions alone represented 11 per cent of Canada’s total emissions. Fossil fuel combustion is the primary source of GHG emissions in Canada, at more than 80 per cent of total emissions in 2019.

Ideally, the Canadian Securities Administrator (CSA), an industry forum comprising all of Canada’s territorial and provincial securities regulators, would mandate that the oil and gas sector meet net-zero planning best practices, rather than rely on corporations to do the right thing. With the recent proposal from the CSA to mandate TCFD climate-change disclosures by the end of 2022, Canada has the opportunity to do just that. As long as we don’t allow industry to unduly weight the scales, 2022 could see the transition to meaningful oil and gas net-zero plans in Canada.

Do you have something to say about the article you just read? Be part of the Policy Options discussion, and send in your own submission, or a letter to the editor. 
Kyra Bell-Pasht
Kyra Bell-Pasht is a decarbonization consultant with a background in environmental law. For more than seven years she has been advising governments on how to reduce their carbon emissions and increase energy efficiency.

You are welcome to republish this Policy Options article online or in print periodicals, under a Creative Commons/No Derivatives licence.

Creative Commons License

Related IRPP Research

The Superclusters Initiative: An Opportunity to Reinforce Innovation Ecosystems

By Catherine Beaudry and Laurence Solar-Pelletier October 8, 2020

Hausser l’âge d’admissibilité aux prestations du Régime de rentes du Québec ?

By Pierre-Carl Michaud, Yann Décarie, Franca Glenzer, François Laliberté-Auger and Stefan Staubli August 25, 2020

Related Center of Excellence Research

Federal transfers to provinces: public preferences

By Charles Breton and Andrew Parkin May 10, 2022

Provincial/Territorial Governments and the Negotiation of International Trade Agreements

By Christopher J. Kukucha October 18, 2016