Week 7

Source
1. https://www.cbc.ca/news/politics/oil-gas-emissions-cap-early-election-1.7372512
Problem
1. The undertaking is balancing emissions reduction in Canada's oil and gasoline area with economic impacts. Proposed caps intention to reduce emissions by 35% from 2019 degrees, risking job losses and financial stress in fossil gasoline-based regions, at the same time as environmental groups argue the plan falls brief of meeting Canada’s 2030 climate goals. Prof: I would define the problem has finding a way to reduce emissions from the oil and gas sector while minimising the negative economic impact.
Summary
1. The federal government of Canada recently introduced draft regulations to limit stove-related emissions in the oil and gas sector. It aims for a 35% reduction by mid-2019. The plan involves the use of the system. cap-and-trade To create incentives to reduce greenhouse gas emissions But it does not directly limit the level of oil and gas production. Initially, the goal was a 38% reduction by 2030, but the updated project leaves this specific target open. The greenhouse gas emissions cap is part of Canada's broader commitment to reduce greenhouse gas emissions by 40-45% by 2030, but environmental groups have criticized the plan for not doing enough to meet that goal. The policy has provoked strong reactions. This is especially true in Alberta and our other oil-rich regions, where there is concern about the potential economic impact and business losses. Industry representatives argued that the limits could hurt the local economy. which relies heavily on fossil fuel production Environmental advocates, meanwhile, argue that the policy is a necessary step toward meaningful climate action. and criticized the policy for not being aggressive enough. The public comment period for the draft regulations will run from November 9, 2024 to January 8, 2025 to allow stakeholders and the public to express their opinions. Final regulations are expected by 2025. The challenge for the Canadian government will be how to manage these conflicting pressures. Balancing environmental responsibility with economic stability while working to meet the nation's climate goals.
Economic concepts
1. Incentive-Based Regulation: This approach uses rewards and penalties to encourage firms to reduce or increase a desired behavior. This tool is often used by governments to control the private sectors behavior, producing environmental, social, or economic benefits. There are different methods that governments can use to implement IB regulation. The theoretical pros and cons of Incentive based regulation are:
  1. Pros:
    1. A IB system will enable more cost effective or positive results in the short run.
    2. In the long run IB systems incentivize firms to search out for technology or new operating systems that will allow the company to reach the governments goals.
    3. Regulators only need to specify the tax level or quantity of permits provided to firms. Then the firms can decide how to make profit with the new systems
  2. Cons:
    1. Monitoring and enforcing take a lot of resources especially to large industries like oil and gas.
    2. A firm must be committed to achieve further results in the future, otherwise more regulation will have to be imposed over time
  3. There are many different methods to implement incentive based regulation. The goal is to incentivize firms to generate solutions to implement or change a behavior without disrupting the economy as a whole. Prof: more precisely, the goal is to achieve the desired reduction in emissions in the most cost effective way possible.
2. Cap and trade systems: This is a method of incentive based regulation that Introduces a trading system to reduce emissions by setting a limit on the total amount of pollution that can be emitted by firms. Firms can buy and sell these permits to emit more pollution. This allows firms that find technology and systems that reduce their emissions to benefit by selling their permits to firms that do not find it feasible to integrate new systems into their company. This approach combines regulatory control with economic incentives to achieve environmental goals.
3. a brief description of the two concepts, that can be understood by someone who has completed high school but not taken any economics classes.
4. 400 word maximum! Prof: Be good to proof read and remove these guidelines before finalising your contribution.
Application of concepts
1. Incentive-Based Regulation - The federal government's proposed emissions cap uses an incentive-based regulation approach which allows oil and gas firms to cut emissions while hopefully maintaining their production. Through a cap-and-trade system, companies can buy and sell emissions permits, providing a more cost-effective way to reduce their environmental impact. This system rewards firms that implement emission reducing technologies by allowing them to profit by selling permits to other firms, while firms that have to continually buy these permits will likely look towards adopting these new technologies so they are not forced to pay for permits.
2. Cap and Trade System - The cap and trade system outlined in the article sets an emissions target of 35% below 2019 emissions levels by 2030 while offering a way for companies to meet it. Oil and gas companies that reduce emissions faster can sell their permits, creating a market-driven incentive for innovation in the industry. Through a 16% increase in production by 2030-32 through emission-reduction methods, this system ensures that economic growth continues in Canada while meeting environmental targets set by the government. This approach hopefully prevents production cuts while pushing the industry towards long-term environmental stability. Prof: An important part of this program is linking the allowable emissions for a firm to their level of output, not their level of emissions. It is an 'output based' system. Thus, firms that are able to reduce emissions per unit of output faster than the average firm receive credit, and can sell this credit, these allowances, to firms whose emissions intensity remains higher than the industry average. Overall, the cap is intended to be reduced over time, although as noted, the path for doing so has not yet been set out.
Conclusion

Canada’s proposed emissions cap for the oil and gas sector highlights the complex challenge of balancing environmental goals with economic stability. By using an incentive-based regulation model, specifically a cap-and-trade system, the government aims to reduce emissions while encouraging innovation and minimizing economic disruption. This approach provides companies with the flexibility to meet emission targets by adopting new technologies or purchasing permits from those who reduce emissions more quickly. However, concerns about the plan's sufficiency in meeting Canada’s 2030 climate goals, alongside the potential economic impact on oil-dependent regions, underscore the ongoing debate about how best to address climate change without sacrificing economic health.