Canada’s oil and gas industry is currently negotiating with provinces and the federal government over new regulations that will be rolled out nationally. Specific proposals are finally emerging that will define the greenhouse gas emission reduction ambitions and costs of nationally important regulations. In this policy brief, IISD explains the economics behind the proposals and provides one view on their cost and emission reduction implications. We think it is worthwhile to reveal the trade-offs of the proposals to provide a common information base to inform ongoing discussions. While all proposals on the table will deliver emission reductions at costs that seem reasonable, a 40 per cent intensity standard with a two-tiered price ceiling could strike a good balance. Such a policy could deliver 42 megatonnes (Mt) of compliance in 2020, at an average cost of $28 per tonne or $0.42 per barrel of oil produced. One compliance pathway that is being contemplated is payments in lieu of emission reductions. The amount of emissions reduced would depend on how these payments are spent. Ideally, payments would be oriented to some mix of short-term emission reductions and long-term technology investments.