Carrots, sticks, oil and gas: the VGR Protocol and COP26
Two very different announcements were made this week regarding emissions from the oil and gas sector in Alberta. One got lots of international and national press attention; the other is quietly making the rounds among professionals involved in reducing provincial emissions from the sector. Both are important to Canada’s ability to meet its stated emissions targets.
The big announcement was from the Federal Government at COP26 which, as reported by CBC, has promised to put an absolute cap on emissions from the oil and gas sector and “ensure they decrease tomorrow at a pace and scale needed to reach net-zero by 2050”. This on top of October’s promise to reduce oil and gas methane emissions by 75% below 2012 levels by 2030.
A quieter release yesterday (November 3rd) was the publication of the final Vent Gas Reduction (VGR) Protocol by Alberta Environment and Parks. In an earlier blog post, I outlined how the mechanics of this Protocol work. The final version keeps the fundamental mechanics the same and allows oil and gas producers to generate offset credits from reducing vented gas below the levels required by AER’s Directive 060, either by implementing a conservation project, or by implementing a destruction project.
Conservation projects include capturing the vent gas and injecting it into a sales gas pipeline or capturing it for beneficial use as fuel for heat or power; destruction projects include disposal of the vent gas in an incinerator, enclosed combustor or via a tie-in to an existing flare stack (note that using a new flare stack isn’t an eligible activity for offset creation).
Conservation is encouraged by allowing these projects to generate credits for a full crediting period (normally 8 years, with a 5-year extension opportunity), as opposed to destruction projects that are limited to creating credits up to September 30, 2025. As conservation projects are often more expensive to implement, this helps to ensure that the incentive structure of the Protocol is geared towards the best environmental outcome.
So, at the same time that a big, Federal emissions reduction stick has been announced, the Province is dangling a juicy GHG carrot in front of the industry. The signals to the industry couldn’t be clearer: reducing emissions is an opportunity to generate revenue, but this will be a time-limited opportunity. So the faster companies move to implement vent gas reduction projects, the better. And that’s a win for the environment as well as industry.