The government will table draft regulations on the plan by October and expects to publish the final regulations by mid-2024 after consultations with provinces, indigenous groups, civil society and industry, federal Environment Minister Steven Guilbeault told Reuters.

Canada, the world's fourth-largest oil producer, lags many global peers in tackling emissions. Prime Minister Justin Trudeau's government sees the cap as a key element to enforce a sharp reduction in pollution from the oil and gas sector, responsible for 27% of the country's emissions.

The cap, which envisions limits on emissions or potentially raising the carbon price to incentivise driving down emissions, was first promised in Trudeau's 2021 election campaign. It has faced delays amid opposition from industry and some provincial lawmakers.

The government's framework for eliminating inefficient fossil fuel subsidies released on Monday was expected to abolish C$1 billion ($759.82 million) in annual federal support for local oil, gas and coal production, Guilbeault said.

"As per our Glasgow commitment, we eliminated last year international fossil fuel subsidies. Now we're doing domestic," Guilbeault said in a phone interview, referring to the Glasgow Climate Pact agreed at the COP26 summit in 2021.

Canada's announcement to eliminate such subsidies made it the first G20 country to deliver on a 2009 commitment to rationalise and phase out government support for the sector.

Climate policy analysts said the framework was an important step forward, but fell short by continuing to allow government support for oil and gas projects that plan to reduce emissions through technologies such as carbon capture and storage (CCS).

Guilbeault said he estimated the tax credit for CCS projects in Canada to represent about C$15 billion worth of investments.

"We're not counting on CCS to solve all of our climate change problems. It will account for maybe 5% of our overall plan. It could be less than that by 2030," he said.

Canada will be introducing a regulation to ensure that its electricity grid is carbon neutral by 2035, Guilbeault said, a move he said would require support from CCS. He also expects CCS to contribute towards decarbonising "hard-to-abate" sectors such as aluminium and cement.

"We can anticipate that there will still be some gas on the grid in 2035 in Canada, but that gas would have to be abated. So some CCS probably in the electricity sector," Guilbeault, a former Greenpeace activist, said.

"You'll see that CCS has a role to play in ensuring that we achieve our 2030 targets, but it's not a magic bullet," he said.

($1 = 1.3161 Canadian dollars)