Ottawa commits to designating a West Coast pipeline as a project of national interest by October
Canada's industrial carbon price just got a slower clock and a new pipeline may be the reason why.
Carney and Smith signed an agreement in Calgary on Friday committing to a new West Coast oil pipeline and a phased increase in Alberta's industrial carbon price, building on a November memorandum of understanding, CBC News reported.
The deal sets Alberta's effective industrial carbon price at $130 per tonne by 2040 — a decade later than the previously projected 2030 target — with the headline price reaching $140 per tonne by then.
The headline price, what companies pay directly to the Alberta government for compliance, would hit $100 per tonne by 2027 before rising to $130 per tonne by 2035, BNN Bloomberg reported, citing a source with knowledge of the discussions.
Alberta froze its industrial carbon price at $95 per tonne last year.
The difference matters for compliance costs.
The effective price is the market rate at which credits trade on the open market; the headline price feeds a general fund for emissions reduction technology.
According to CBC News, the agreement also commits Alberta to a minimum floor price for credits beginning in 2030.
Because Alberta's price now sits below the federal carbon pricing backstop, Ottawa will be required to give other provinces that follow the federal price more lenient treatment — a consequence of a 2021 court ruling requiring equal treatment across all jurisdictions.
Carney said he is in discussions with other provinces about changing the national price “with the intention of having consistency” across the federal backstop.
On the pipeline, Alberta will submit a proposal to the federal government's Major Projects Office by July 1, with Ottawa committing to designate it a project of national interest by October 1.
Construction could begin as early as September 2027, with oil potentially flowing by 2033 or 2034.
There is currently no private proponent or confirmed route.
Alberta said it will act as proponent in submitting the proposal, and Intergovernmental Affairs Minister Dominic LeBlanc said pipeline construction is “contingent” on the Pathways carbon capture, utilization and storage project advancing alongside it.
“These two projects, if ultimately they go ahead, would go ahead together,” LeBlanc told CBC's Rosemary Barton Live.
The agreement also narrows the Pathways project's scope, CBC News reported.
It initially targeted 4.2 megatonnes of carbon capture per year by 2030, scaling to 62 megatonnes by 2050; Friday's deal targets six megatonnes per year by 2035, with an overall reduction of 16 megatonnes by 2045.
Industry reaction was mixed.
The Oil Sands Alliance, representing five of Canada's largest oilsands companies, said the deal “provides greater clarity” on the industrial carbon tax but adds uncompetitive costs, according to CBC News.
Adam Waterous, executive chairman of Strathcona Resources, called it a mixture of good and bad news, saying the raised carbon price is “a pretty tough message to hear.”
ATCO chief executive Nancy Southern told BNN Bloomberg the industry would adapt, saying companies would find ways to stay “just as competitive as we have been in the past with a new carbon price.”
Smith told reporters the deal would save industry “billions” in compliance costs but called it “a pretty big concession,” CBC News reported.
Her preferred carbon price would be “somewhere around $50 a tonne,” she said, “but those are the things we have to negotiate.”
Criticism came from multiple directions.
Former environment minister Catherine McKenna told The Canadian Press the pricing schedule “doesn't make sense from an environmental or economic perspective.”
Canada's climate plan, she said, is “being dismantled because of demands by Alberta's reckless Premier Danielle Smith.”
The Pembina Institute said the deal will “undermine clean energy investment and accelerate climate change,” while the Canadian Climate Institute said it will “put Canada's target of net zero by 2050 well out of reach,” CBC News reported.
Carney dismissed those concerns, saying both governments committed in writing to net zero by 2050 and that the deal “more than compensates” for the potential emissions increase from a new pipeline.
BC Premier David Eby, whose province any pipeline would have to cross, said Ottawa is “rewarding bad behaviour” given Alberta's secessionist movement, and argued that projects should not be prioritized because a premier “threatens to leave the country.”
Carney said he will meet with Eby next week to discuss a path forward.
Conservative leader Pierre Poilievre said he would scrap the industrial carbon price entirely and argued pipeline construction should start this year, CBC News reported.
NDP leader Avi Lewis called the deal Carney's “official surrender to the oil and gas lobby.”
The agreement also holds clean electricity regulations in abeyance in Alberta pending a legal challenge — if upheld, the two governments would negotiate an equivalency agreement; if struck down, Ottawa would repeal the regulations.
