A significant agreement concerning an oil pipeline between the federal government and Alberta is poised for announcement, potentially boosting oilsands production and solidifying Canada’s status as a major fossil fuel producer. However, this move could further challenge the country’s climate goals. The deal is expected to enhance Canada’s industrial carbon pricing system, recognized as a crucial tool for reducing emissions and promoting investments in carbon capture projects.
Michael Bernstein, president of Clean Prosperity, expressed optimism about the potential impact of the agreement on decarbonization efforts. He emphasized the importance of a well-designed industrial carbon pricing strategy in driving significant emissions reductions.
Concerns have been raised about Alberta’s carbon pricing system, with analysts pointing out its inefficiencies in promoting low-carbon investments. The system requires industrial facilities to lower emissions gradually, with companies investing in technology to meet specific standards. Credits are awarded to companies surpassing the standards, which can be traded, while those exceeding limits face carbon pricing penalties.
The oversupply of carbon credits in Alberta has led to low trading prices, affecting the incentive for companies to invest in emission reduction technologies. Bernstein proposed a solution through a carbon contract for difference, ensuring a minimum credit price and government support if market prices fall too low.
The potential deal between Prime Minister Mark Carney and Alberta Premier Danielle Smith may involve federal backing for a new oil pipeline to the West Coast for exporting oil to Asian markets. Despite including commitments to carbon capture projects, analyses suggest that the pipeline’s increased oil production could outweigh emission reductions, even with carbon capture facilities.
The Pembina Institute highlighted the need for additional carbon capture projects to effectively reduce emissions from oilsands production. While the Pathways project presents an opportunity for emission reductions and investments, tying it to a new pipeline could lead to higher emissions than current levels without these developments.