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A hypothetical scenario in which Canada phases out its oil production would end up costing it some $74 billion (C$100 billion), with Alberta bearing the brunt of that blow, a new report has suggested.
Produced by a non-partisan think tank, the Public Policy Forum, the report looked at two scenarios for Canada achieving a net-zero status with regard to carbon emissions.
One of the scenarios envisaged energy policies that targeted the oil industry with stricter emission regulations but without resorting to a production cap or a phaseout. The think tank called that scenario the “aggressive decarbonization model”.
The other scenario, which the Public Policy Forum dubbed the “accelerated phaseout model”, involves a phaseout of oil production.
“Both pathways arrive at net zero but with unequal economic impacts along the way,” the authors reported.
Under the accelerated phaseout scenario, Canada’s economy would grow at a rate 0.1% slower than the growth rate under the aggressive decarbonization scenario.
“This apparently small difference compounds over time, leading to $100 billion excess lost GDP in 2050, a three percent contraction of the overall economy,” the think tank also said.
“This essentially amounts to a deep recession without a recovery ever materializing. The lost output carries forward each year in perpetuity.”
The bulk of those hypothetical losses would naturally fall to Alberta given its role in Canada’s oil production. Yet, as some commentators have noted, there are no plans for a phaseout of Canada’s oil production.
"There's no phase-out going on there. There's no phase-out of the oil and gas sector either. They're talking about an emissions cap, not a production cap. And it's disappointing to see that conflated in this report," one economics professor told CTV News.
Indeed, there is no production cap on the table for now but the federal government of Canada has been squeezing the oil industry with reams of regulations aimed at making them reduce their emissions, which may at some point involve a production cut in the same way that Shell would have to cut its oil and gas output to achieve the emissions cut it was ordered to effect by court.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.