Carbon policy and impacts on Suncor
Following ratification of the Paris Agreement, the focus of governments globally is on the technology pathways and policy frameworks required to achieve a stable and responsible transition to a low-carbon energy system at the same time as meeting rising global demand for energy. Suncor is preparing for that transition in multiple ways.
Our business planning process includes carbon prices that incorporate existing regulations and their expected trajectory, as they apply to our business. All investments are also sensitivity tested under a range of carbon assumptions specific to that investment.
In 2018, Suncor took a further step to embed a low-carbon scenario into our business and capital investment planning process to ensure all future business plans and investments are resilient under an accelerated energy systems transition.
Canadian Federal Government
A proposed federal government Pan-Canadian carbon price framework would require each province to implement a carbon price regulation with an overall stringency equivalent to a minimum price of $10/tonne, rising to $50/tonne over the next five years. Provinces may use the revenue as necessary for the unique circumstances of the region, including protecting carbon-intense, trade-exposed industries.
In Alberta, the current economy-wide price of $30/tonne on carbon is intended to influence demand for carbon based energy. To protect the competitiveness of Alberta trade-exposed industries, output-based credits are allocated to each facility based on a performance benchmark, outlined in Alberta’s Carbon Competitiveness Incentive Regulation.
The performance benchmarks penalize higher carbon intensity assets, whether a function of reservoir geology, fuel choice or efficiency, and will incent technology to reduce the carbon intensity across all facilities and particularly more challenging reservoirs.
The Oil Sands Emissions Limit Act includes a precedent-setting 100 megatonnes (Mt) emissions limit by 2030 on oil sands development. Emissions from the production of power through cogeneration are excluded from this limit, as is an incremental 10 Mt of upgrading capacity.
As a limit on emissions, rather than production, it allows production to grow as long as the total emissions of the basin remain under the limit. The emissions limit is expected to accelerate the innovation required to reduce both carbon and cost in the oil sands industry.
Quebec and Ontario
Suncor’s refineries in Quebec and Ontario are regulated under a cap-and-trade program linked to the Western Climate Initiative (WCI). Regulated refining facilities receive an allowance allocation that aligns with a benchmark performance and takes into account competitiveness in a trade-exposed context. With the announcement of the termination of the cap and trade program in Ontario, Suncor will work with the provincial government to explore solutions that achieve the required outcomes while minimizing impacts to people and business.
Fuel suppliers are required to purchase allowances to cover the tailpipe emissions of all fuel sold, the cost of which is expected to be largely passed to the consumer, thus acting as a carbon price on fuel consumption.
Transportation fuels policies in Canada
Transportation emissions are approximately 25% of total emissions in Canada. Jurisdictions across the country are considering policy mandates and incentives for alternative fuels, as well as major public transit and urban planning initiatives intended to reduce the carbon intensity of transportation.
British Columbia's Low Carbon Fuel Requirement Regulation requires fuel suppliers to meet a provincial fuel pool carbon intensity target through blending incremental renewable fuel or investing in alternative fuels infrastructure. Federal and provincial renewable fuel standards mandate blending of ethanol into gasoline, and biodiesel into diesel.
In addition, the federal government has recently proposed implementing a national Clean Fuels Standard, which remains under development.