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PBO releases impact assessment of proposed oil and gas emissions cap regulations

Ottawa (Ontario), March 12, 2025

The Parliamentary Budget Officer (PBO) today released an assessment of the potential economic impact of the Government’s proposed regulations to cap greenhouse gas (GHG) emissions from the oil and gas sector.

Under the proposed regulations, the cap would be set at 27% below reported emissions levels in 2026 for the first compliance period of 2030 to 2032, with a limit of 20% in compliance flexibility (that is, eligible offset credits and decarbonization units). Taken together, the cap and limited compliance flexibility form an effective legal upper bound that is, the maximum allowable emissions for the upstream oil and gas sector. Based on updated historical emissions data and the most recent projections of oil and gas sector emissions and production from Environment and Climate Change Canada and the Canada Energy Regulator, PBO’s baseline scenario indicates that upstream oil and gas emissions will exceed the legal upper bound of 160 megatonnes (Mt) by 7.1 Mt annually, on average, over the 2030-2032period.

“To achieve the legal upper bound, we estimate that production in the upstream oil and gas sector will need to be reduced by 4.9% over 2030 to 2032 relative to projected levels in our baseline scenario,” said PBO Yves Giroux.

PBO estimates that the required reduction in upstream oil and gas sector production levels will lower real gross domestic product (GDP) in Canada by 0.39% in 2032 and reduce nominal GDP by $20.5 billion. Further, achieving the legal upper bound over the first compliance period will reduce economy-wide employment in Canada by 40,300 jobs and full-time equivalents by 54,400 in 2032.

“Our estimate of the emissions reduction in the oil and gas sector required to achieve the legal upper bound falls within the range of external estimates. Similarly, our estimates of the corresponding reduction in projected oil and gas production levels and economy-wide real GDP impact are within the range of external estimates,” said Mr. Giroux.

In keeping with the PBO’s mandate and previous reports on carbon pricing and the Clean Fuel Regulations, the assessment of the potential economic impact of the oil and gas emissions cap does not account for the benefits of reducing Canada’s GHG emissions.

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That said, under the proposed regulations production is projected to be 11.1 per cent higher, on average, over 2030 to 2032 compared to current levels.","fr":"Pour atteindre la limite sup\u00e9rieure l\u00e9gale, le DPB estime que la production du secteur p\u00e9trolier et gazier en amont devra \u00eatre r\u00e9duite de 4,9 % sur la p\u00e9riode de 2030 \u00e0 2032 par rapport aux niveaux projet\u00e9s dans le sc\u00e9nario de r\u00e9f\u00e9rence. Cela dit, selon le projet de r\u00e8glement, la production serait sup\u00e9rieure de 11,1 % en moyenne sur la p\u00e9riode de 2030 \u00e0 2032 comparativement aux niveaux actuels."}},{"content":{"en":"PBO estimates that the required reduction in upstream oil and gas sector production levels will lower real gross domestic product (GDP) in Canada by 0.39 per cent in 2032 and reduce nominal GDP by $20.5 billion. 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