Alberta Premier Danielle Smith and Prime Minister Mark Carney meet in Ottawa on Friday, May 8.Sean Kilpatrick/The Canadian Press
Ottawa and Alberta are close to finalizing a new accord on industrial carbon pricing that would result in the fee going up to $130 a tonne by 2040, two government sources, one federal and one provincial, said Tuesday.
If approved, the agreement would dramatically roll back former prime minister Justin Trudeau’s marquee climate policy and set the stage for the construction of another oil pipeline to the British Columbia coast, as well as the expansion of crude production.
A deal on carbon pricing would also bring the governments closer to finalizing the fine print of a memorandum of understanding signed last year that conditioned Ottawa’s support for a potential pipeline on Alberta increasing the carbon price and meeting other environmental goals. The governments said at the time that the MOU marked the start of a new era of co-operation.
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Discussions on the accord had been stymied by a disagreement over the speed at which the province must increase its carbon price to $130 a tonne, from its current $95.
Prime Minister Mark Carney is expected to present the plan at a Wednesday cabinet meeting, according to two other government sources.
There are tentative plans for Mr. Carney to fly to Alberta later this week to announce the deal, the first two sources said.
The Globe and Mail is not identifying the sources because they were not permitted to disclose the plans.
Mr. Carney and Alberta Premier Danielle Smith met in Ottawa Friday. The Premier later said that the timeline for when the carbon price would hit $130 was at the heart of their discussions.
A spokesperson for Natural Resources Minister Tim Hodgson said the federal government would not comment on the possible deal.
An industrial carbon price is a critical element of Canada’s climate change strategy and, under the previous Liberal government, it was projected to contribute to significant reductions in emissions. However, if cabinet approves the new deal struck with Alberta, that price will be far less stringent than the $170-by-2030 charge announced by Mr. Trudeau.
Pressure to reach an agreement has become more urgent as Alberta faces a potential vote on secession in the fall. The separatist movement is driven in large part by what it believes is persistent federal policy that holds back the energy sector and, therefore, the province.
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Mr. Carney has pointed to the MOU as a sign of improved federal-provincial relations and as proof that the province benefits by being part of Canada.
After the Friday meeting, Ms. Smith said she and the Prime Minister share an urgency to reach a deal.
She said that industry support is deteriorating for the so-called grand bargain that the two levels of government struck in the November agreement – essentially that a pipeline to the West Coast could happen if the oil sector reduces its greenhouse gas emissions.
“The Prime Minister wants to quell any uncertainty about how committed his government is to this major project, which is why, when we met, I think we both landed on the need for shared urgency on this,” Ms. Smith said on Monday.
Since coming to office, Mr. Carney has undone several Trudeau-era climate policies. He cancelled the consumer carbon price, scrapped the emissions cap on the oil and gas sector, repealed the electric vehicles mandate, and shuttered a program to plant two billion trees.
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If the federal cabinet approves the plan to raise the industrial carbon price only to $130 per tonne by 2040, analysis from the Canadian Climate Institute suggests it will result in “little to no emissions reductions in heavy industry.” The institute’s analysis was based on the carbon price being slightly stricter and reaching $130 per tonne by 2035.
Further delaying increases to the carbon price is “unnecessary and unreasonable, given the average cost to the oil sands industry is just dimes per barrel,” said Rick Smith, president of the Canadian Climate Institute. “This decision would leave significant low-carbon investment on the table.”
“2040 is too late,” he added.
Still, he cautioned that there are many unknowns around the details of the new carbon price, and those specifics will “matter greatly in terms of Canada’s long-term decarbonization.”
In February, his organization released a report that showed Canada was already on track to miss its 2030 and 2050 emission reduction targets.
Alberta plans to submit an application for a new pipeline to Ottawa’s Major Projects Office by July 1, according to the provincial government source, even if it doesn’t know the exact details of what companies would be part of a consortium to build it.
The province has long said that the proposal would be for a “world-class Indigenous co-owned pipeline to the West Coast of British Columbia.”
Ottawa last week proposed new rules that would reverse the order of pipeline approvals, allowing cabinet to green-light new projects prior to the completion of technical assessments and approvals. Its aim is to boost investor confidence.
Once the federal government declares a pipeline a project of national importance, Alberta will finalize a route and how the project consortium would work, the provincial source said.
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The Globe first reported last month that the federal government is eyeing a new oil pipeline route in southern British Columbia, rather than a northern route Alberta is proposing.
Alberta prefers a northern route to Prince Rupert, B.C., or the region because it is North America’s closest port to Asia. It is also the continent’s deepest port, which would enable access for the massive tankers that are favoured for transporting oil to Asia.
However, some in Ottawa believe that a southern route – which could run next to the Trans Mountain pipeline or follow another path – would face fewer environmental hurdles and less resistance from Indigenous groups than heading north.
The provincial source said there is no agreement yet on either option, though Ms. Smith has said Alberta is looking at five possible routes.
One of the major issues yet to be resolved is a massive carbon capture system proposed for Alberta’s oil sands by six of the largest production companies. Officials have told The Globe that once the timelines are reached on carbon pricing, the multibillion-dollar carbon storage project, called Pathways, should be attainable.
Ms. Smith said last week that getting the Pathways project off the ground is an important part of the plan to increase oil production.