Last November, to much fanfare, Prime Minister Mark Carney and Alberta Premier Danielle Smith signed a Memorandum of Understanding (MOU). The five-page document signaled their willingness to put years of federal/provincial acrimony behind them and find common ground on the future of climate policy and regulations that govern the energy industry in Canada. By April 1, they have committed to producing a set of agreements.
It is hard to overstate how important these talks are, not only to Canada’s ability to meet climate goals, but also to our aspirations of growing our economy in a way that will keep Canada strong, free and prosperous for the long term. Yet their importance is shrouded by the fact that most of what is being negotiated is deeply complex, in-the-weeds climate regulation that took many years – in some cases decades – to write, and is now being re-written very quickly. This makes it difficult for Canadians, or indeed parliamentarians, to be able to judge whether the outcome is broadly good, or broadly bad, for the climate and for Canada’s future prosperity.
At the Pembina Institute, we’ve identified four key outcomes we need to see on April 1. These are the minimum requirements that would help lower emissions from existing industries and allow new industries to be established, while limiting the risk of public funds being overextended on fossil fuel projects with increasingly spurious business cases.
An effective carbon price of $130 by 2030
This is the most important piece; Alberta carbon credits must be trading at $130 per tonne no later than 2030.
It’s important to note the difference between the industrial carbon price set by the provincial government (sometimes called the “headline price”) and the effective price of credits on the market. The Alberta government has repeatedly undermined the market for provincial credits, known as TIER credits. Last year, despite a headline price of $95 per tonne, TIER credits were trading between $17 and $39.
Alberta and Ottawa agreed to “ramp up to a minimum effective credit price of $130/tonne” but the MOU text was silent on the timeline. However, if other regulations – especially the oil and gas emissions cap – are to be shelved in favour of industrial carbon pricing, we must see this $130 credit price reached by 2030, so companies have the necessary incentive to invest in emissions reductions.
Any new rules in Alberta must not create unfairness for industry elsewhere in Canada
The MOU suggests Alberta will get a special deal on methane and on clean electricity, but that would be unfair for businesses across Canada. Companies should get broadly similar treatment across Canada – whether they’re fixing methane leaks at oil and gas wells or trying to build low-cost renewable energy projects. If Alberta prefers to propose its own rules, it must demonstrate a credible plan to reaching the same emissions reductions on the same timelines, based on the best available data – so businesses can plan and invest.
The oilsands companies must immediately put money on the table for their Pathways Alliance carbon capture project
Industry has been talking about the Pathways project for years. It is not a silver bullet, but it’s the only plan on the table to reduce oilsands emissions. The federal and Alberta governments have offered to pay for two-thirds of Pathways through generous tax credits. These very profitable companies must now show their commitment by producing their share of the money.
No taxpayer money for another pipeline
Either an oil pipeline is a good business idea, or it’s not. If it is a good idea, then the private sector should be happy to invest in it. If they won’t invest, then it’s a bad idea and taxpayers shouldn’t be asked to pay for it.
Ultimately, we believe a climate competitive Canada is a prosperous and united Canada. That means taking real action to protect Canadians from harm by slowing – and ultimately reversing – the worst effects of climate change. It also means embracing the vast economic opportunity of the ongoing global energy transition. With more countries prioritizing cheaper, more energy-secure alternatives such as renewable energy and electric vehicles, not only does Alberta need a plan to reduce its emissions; it needs a plan to diversify its industries. The MOU must therefore balance the short‑term economic gains of oil and gas exports with the urgent need to build the industries that will secure Alberta’s future.
What’s more, these talks don’t only impact one sector, or one province. The outcome – especially any watering down of ambition on low-carbon investment – will have ripple effects elsewhere in the country. These talks could therefore either be a drag on Canada’s progress towards becoming a competitive player in the global low-carbon market or could set us up for the long-term economic resilience we need.
