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In a significant development for Alberta’s industrial sector, Premier Danielle Smith and Prime Minister Mark Carney have reached an agreement on carbon pricing that aligns with the terms laid out in the Ottawa-Alberta deal from November 2025. While this move could pave the way for a new oil pipeline to British Columbia’s coast, critics argue it represents a troubling regression in climate policy, failing to address the fundamental challenges of pipeline construction.
A Shift in Carbon Pricing
The newly established industrial carbon price of $130 per tonne is being presented as an enhancement over Alberta’s previous pricing. However, this figure is a considerable reduction from the $170 per tonne set under the prior Liberal administration, marking a retreat from ambitious climate targets. Furthermore, the timeline for implementation has been extended to 2040, a delay from the originally proposed 2030.
The Canadian Climate Institute’s modelling indicates that by 2050, emissions could be approximately 84 million tonnes higher than if the original pricing plan had been followed. This represents an alarming 13-per-cent increase in Canada’s overall emissions compared to current levels. Despite assurances from the Prime Minister that Canada remains on track to achieve its net-zero emissions goal by 2050, many experts remain sceptical, pointing to a lack of concrete plans to realise this ambition alongside the evident weakening of existing climate policies.
Legislative Changes for Pipeline Projects
In an effort to facilitate the construction of the new pipeline, the Prime Minister has introduced legislative measures, including the Building Canada Act, which permits the government to circumvent traditional regulatory reviews. Additional proposals aim to streamline the approval process further, raising concerns about potential environmental repercussions. Critics fear that loosening environmental regulations could compromise spill prevention, weaken protections for endangered species, and fail to adequately assess climate impacts.
However, the true barrier to the proposed Alberta pipeline appears to be economic rather than regulatory. The International Energy Agency has warned that while global oil demand may continue to grow, it will do so at a significantly slower pace. Should current government policies remain unchanged, demand is expected to peak around 2030, followed by a gradual decline. In a scenario where rigorous net-zero policies are embraced, the forecast indicates an alarming 75 per cent reduction in oil demand by 2050.
Economic Viability Under Scrutiny
The future of Alberta’s oil exports remains uncertain, with the Canada Energy Regulator’s upcoming report predicting variable outcomes between 2025 and 2035. Projections suggest that exports could either drop by 25,000 barrels per day or increase by as much as 777,000 bpd. Existing pipeline operators, Enbridge Inc. and Trans Mountain Corp., already possess the capacity to expand their systems by a combined total of 1.1 million bpd, with a third proposal for the partially built Keystone XL potentially contributing another 1.1 million bpd.
Given that these expansions could meet even the most optimistic forecasts without the need for a new pipeline, the rationale for the Alberta project falters. The costs associated with constructing a new pipeline are likely to be significantly higher, translating to elevated tolls for oil producers and diminished returns for Alberta and Canada.
The Case for Diversification
Proponents of the Alberta pipeline often cite the need to diversify export markets as a key argument. However, this reasoning is increasingly being challenged. The world oil market tends to equalise prices, diminishing the advantages of accessing new markets. Short-term gains in Asian markets might be countered by the elevated transportation costs faced by Canadian producers, leading to a substantial portion of Trans Mountain exports continuing to flow to the United States instead.
While there may be geopolitical motivations for seeking new markets, the existing Trans Mountain expansion already provides a viable alternative, negating the urgency for a new pipeline. In light of these considerations, pursuing the construction of a new pipeline amidst more cost-effective options seems imprudent.
Why it Matters
The recent agreement on carbon pricing marks a pivotal moment for Alberta’s industrial landscape, yet it raises critical questions about the province’s commitment to climate action. As Canada grapples with the pressing realities of climate change, the decision to relax regulations while pursuing new fossil fuel projects could have long-lasting implications. The balance between economic growth and environmental stewardship is delicate, and the choices made today will inevitably shape the future of Canada’s energy landscape. The challenge lies not just in meeting immediate economic needs but in ensuring a sustainable and responsible approach to energy that prioritises the health of the planet for generations to come.
