OTTAWA – Prime Minister Mark Carney is set to announce a significant agreement with Alberta this Thursday, aimed at facilitating the construction of a new oil pipeline in exchange for strengthened environmental regulations. This initiative is part of a broader strategy that may involve a reconsideration of some of Ottawa's climate policies. Alberta Premier Danielle Smith has indicated that her government has been engaged in talks with Ottawa regarding a "grand bargain," which would see the advancement of the proposed Pathways Alliance carbon-capture project alongside plans for a new oil pipeline to the West Coast.
While addressing reporters in Ottawa on Wednesday, Carney emphasized that the memorandum of understanding with Alberta would encompass various elements. He reiterated that the agreement is concerned with not just one single issue, but also with building a stronger economy, increasing Canada's independence, and fostering sustainability. “There are many aspects to Thursday's announcement,” Carney stated.
Carney has expressed his ambition to transform Canada into an "energy superpower." However, a pivotal hurdle for the proposed pipeline is the existing tanker ban. This moratorium prohibits tankers from transporting more than 12,500 metric tonnes of crude oil in certain areas along the northern coast of British Columbia. The tanker ban was enacted in 2019 under former Prime Minister Justin Trudeau and has been a central point of contention for Alberta's government.
British Columbia Premier David Eby has called on the federal government to maintain the ban. Moreover, the president of the Coastal First Nations in British Columbia has asserted that the oil pipeline proposal for the province's northern coast is not feasible, stating emphatically, “It will never happen.” Carney and his cabinet members have underscored that no pipeline will proceed through British Columbia without the explicit consent of both the provincial government and First Nations representatives.
When asked if he had conveyed to Alberta officials that Ottawa would consider lifting the tanker ban, Carney replied, “It’s a good question for tomorrow. I’ll answer it tomorrow.” The upcoming memorandum of understanding is also expected to delve into potential adjustments to Alberta’s industrial carbon pricing system, which Premier Smith has indicated she is open to revising.
In September, Alberta announced the extension of its freeze on the industrial carbon price at $95 per tonne through 2026. This decision places Alberta's pricing out of alignment with the federal government's backstop price, which is scheduled to increase to $110 per tonne next year. For several months, Carney and his ministers have remained non-committal on whether Ottawa will activate the backstop on Alberta and Saskatchewan, the latter of which abolished its industrial carbon price entirely in April.
The climate competitiveness strategy released by the government earlier this month in conjunction with the federal budget heavily relies on bolstering the industrial carbon price. The strategy also outlines projections for the price per tonne beyond 2030 and includes improvements to carbon markets that form the foundation of this pricing system.
Canada's industrial carbon pricing system operates by setting a cap on allowable emissions. Companies that maintain emissions below this cap can generate credits to sell to those that exceed it, creating a financial incentive for investment in emissions reduction. However, if the price for these credits remains low, the incentive to invest diminishes.
Furthermore, the government’s climate strategy has indicated the possibility of scrapping the emissions cap currently applied to oil and gas producers. This change has been advocated for by Premier Smith and industry representatives, but it is contingent upon the implementation of improvements to the industrial pricing framework, the scaling-up of carbon capture and storage technology, and enhanced regulations to reduce methane emissions in the oil and gas sector.
