Confronting carbon lock-in: Canada’s oil sands

Canada’s oil sands are the greatest contributor to the country’s oil and gas sector emissions, making up 72 million tonnes of carbon dioxide equivalent (t CO₂e) of the sector’s 180 million t CO₂e total.

This brief finds that Canada’s major existing oil sands projects are resilient to a decline in oil prices, and are therefore “locked in.” Furthermore, continued production of the oil sands has climate consequences, as doing so may lead to an oversupply of oil in global markets, thereby making the low-carbon transition more difficult outside Canada, and undermining global climate action.

The paper first describes the economics of Canada’s oil resources – with a focus on the oil sands – and then describes how continued production affects the broader oil market. It finds that limiting the country’s oil production could have climate benefits as great – or greater – than the measures in Canada’s existing climate action plan, the Pan-Canadian Framework.

This brief closes with a discussion of possible policy approaches to managing Canada’s oil resources under a fixed carbon budget. These approaches deserve further research and consideration by policy-makers in Canada.