The governments of Canada and Alberta are finalizing terms that will raise Alberta's industrial carbon price to C$130 per metric ton by 2040, a step that clears an important hurdle for federal support of a new crude pipeline headed to the Pacific coast.
Officials discussed the terms at a federal cabinet meeting on Wednesday, and Prime Minister Mark Carney and Alberta Premier Danielle Smith are expected to make a joint announcement on Friday, according to reporting that cited a person familiar with the talks. While the price agreement resolves a core dispute tied to Ottawa's potential backing of the pipeline proposal expected next month, discussions remain ongoing about a carbon capture system for the oil sands.
Key elements of the deal
- The agreement sets an effective industrial carbon price of C$130 per metric ton to be reached by 2040. The source cited a dollar equivalent of $95 per metric ton.
- It establishes escalating price floors between 2027 and 2040, creating a pathway of rising minimum prices over that period.
- The price referenced is described as an effective price - reflecting what companies actually pay to comply with the industrial carbon tax regime, which applies only to the heaviest-emitting businesses.
The deal also addresses a malfunctioning carbon market in which credits have been trading well below the nominal headline price. The C$130 figure in the agreement is intended to capture the real compliance cost to industry rather than the higher nominal targets previously discussed.
The arrangement represents a rollback of earlier environmental targets enacted under the prior administration. The article notes that the predecessor government had envisioned the carbon price rising to C$170 per metric ton by 2030; the new agreement instead phases in C$130 by 2040 with incremental floors starting in 2027.
Environmental groups had lobbied for the C$130 target to be achieved by 2030, indicating a tension between advocates seeking a faster timetable and industry and political interests favoring a slower pace. The agreement reduces the near-term compliance burden on industry compared with a more accelerated schedule.
Some oil producers have pushed for the carbon tax to be eliminated entirely, arguing the charge renders them uncompetitive on international markets. Those calls for repeal remain part of the broader industry debate, even as the current deal moves forward.
This pricing agreement is the third substantive issue resolved between Alberta and the federal government since the two sides signed a broader memorandum of understanding on energy and environmental policy in November. Earlier deals reached in March covered measures to cut methane emissions and clarified jurisdiction for impact assessments.
Implications and next steps
With the carbon price framework largely settled, Ottawa's support for the pipeline proposal expected next month faces one fewer major obstacle. However, negotiations continue over a carbon capture system for the oil sands, a remaining element of the broader discussions between the province and the federal government.
Until those carbon-capture talks are concluded, some aspects of the overall agreement on energy and environmental policy are still unresolved.