The oil and gas sector will need to lower greenhouse gas emissions by 42 per cent if Canada has any hope of meeting overall reductions targets by the end of the decade, says a new report from an environmental think-tank.

The Pembina Institute report also says the only way that's going to happen is if upcoming federal regulations on the sector go much farther than those already in place in Alberta.

The Conservative government has been promising new rules for the oil and gas sector since 2008 and has suggested they will finally be unveiled this year.

They'll follow earlier regulations for the transportation and electricity sectors, all aimed at reducing Canada's greenhouse gas emissions by 17 per cent from 2005 levels by 2020.

Both the environmental commissioner and the now-defunct National Round Table on the Environment and the Economy warned last year that Canada was not on track to meet that goal.

A federal government report last summer, however, said Canada was already halfway there.

The oil and gas sector is responsible for about 22 per cent of all emissions, making the rules governing the sector the most critical, the institute said Tuesday in releasing its report.

Alberta regulations likely a model

It's a make-or-break moment for Canada's climate credibility, said Clare Demerse, the think-tank's director of federal policy.

"This is an industry that has been under microscope, it is facing more and more scrutiny of its environmental track record, and having strong regulations in place would help to answer its critics (and) would help to increase public support for the sector's operations," Demerse said.

The institute would rather see an overarching approach to emissions reductions, rather than the government's current sector-by-sector rules, Demerse said. But the Conservatives are likely to model their regulations after the precedent-setting regime already in place in Alberta, she added.

There, companies can voluntarily reduce emissions, make payments in lieu of reductions to a technology fund, or purchase so-called carbon offsets.

If the federal government is going to follow that model, it is needs to go father, the report said.

Rather than charge $15 a tonne for a technology fund, as Alberta does, the federal rules should charge at least $100 per tonne by 2020, the report recommends.

If companies are indeed allowed to buy offsets, the government will have to ensure they actually represent emissions reductions, it adds.

"A higher target sends a stronger signal to oil and gas companies that they need to reduce their emissions, and the funds they provide to a technology fund or to offset projects mean increased investment in projects that cut GHG pollution in other sectors as well."

'Carbon tax' not under consideration

While the measures being proposed by the report would represent about a $3 cost per barrel of oil, it's by no means a carbon tax, Demerse said, since the industry would be able to find other ways to reduce emissions.

A tax, on the other hand, would be mandatory, she said.

In fact, the reduction goals aren't so out of line with an old Conservative pledge on GHG emissions from 2008 that aimed to cut the oil and gas sector's contributions by 37 per cent, Demerse noted.

The Conservatives, meanwhile, have insisted a tax on carbon of any kind is not on the table. The government is committed to getting levels down — but not at all costs, Natural Resources Minister Joe Oliver said Tuesday.

"One sure way to reduce greenhouse gas emissions — and it's been done in a lot of countries — is to have the economy collapse," Oliver said..

"That's not the route our government wants to take."