Prime Minister Mark Carney is preparing to weaken proposed industrial pollution limits and loosen restrictions on subsidies for the Alberta oilpatch, as part of a major realignment of climate policy he unveiled Thursday alongside Alberta Premier Danielle Smith.
The memorandum of understanding between the two governments, billed as a "grand bargain," is focused on boosting the production of Alberta oil and gas and planning for future projects such as a new pipeline, data centres or transmission lines.
All of this, Carney and Smith said Nov. 27, would occur while the two aim to reach carbon neutrality by 2050 and provide opportunities for Indigenous consultations, ownership and partnerships.
"This is Canada working, this is co-operative federalism, this is Canada building," Carney said as he shook hands with a beaming Smith in Calgary.
"In effect, it creates an energy transition -- all aspects of energy -- but really sets the stage for an industrial transformation."
But the deal proposes rolling back several environmental initiatives that had been proposed by the federal government under former prime minister Justin Trudeau, including on clean electricity, methane, clean technology and carbon pricing.
It also commits to helping out a proposed megaproject in the oilpatch, the feasibility of which has yet to be proven. And it lends political support to a new Alberta pipeline to the West Coast, an idea that has been vigorously opposed by First Nations and the B.C. government, even as they point out how there isn't a concrete plan for such a pipeline yet.
It's a lot to sort through all at once. Here's a look at seven key environmental policies the Canada-Alberta deal proposes to change.
The Canada-Alberta deal commits to an agreement by next April that would allow the province to delay cutting its oil and gas methane emissions by five years compared with proposed federal restrictions.
Methane, an invisible, odourless gas is the second most common greenhouse gas in Canada, after carbon dioxide, and comes mostly from the fossil fuel industry. It's a potent driver of climate change and an air pollutant that contributes to smog and respiratory health complications. Years of scientific studies have shown how previous published figures on the extent of methane from the oil and gas industry have underestimated reality.
The new federal rules, proposed in December 2023, would require slashing oil and gas methane emissions 75 per cent from 2012 levels by 2030. The deal signed Thursday between Carney and Smith would allow Alberta to achieve the cuts in 2035 instead, and be based on 2014 levels.
"Delaying the methane reduction target for Alberta's oil and gas industry to 2035 is unwise," Chris Severson-Baker, executive director of the Pembina Institute, said in a statement.
"It is unacceptable that Alberta should be held to a lower standard than other provinces on this; both the climate and Alberta's economy will ultimately feel the impacts."
It wouldn't be the first time Canada and Alberta have weakened their own methane rules. In 2017, the fossil fuel industry persuaded the provincial government to delay and weaken its methane rules, which were then accepted by the federal government in 2020 as being in compliance with its own.
Rick Smith, president of the Canadian Climate Institute, also said delaying the methane deadline was unnecessary. "If there is one no-brainer of climate change policy, it is enhanced reduction of methane emissions from oil and gas," he said in a statement.
The "grand bargain" commits to constructing a large oil pipeline from the Alberta oilpatch to the West Coast, with an application ready to go by July. The pipeline would take "a route that increases export access to Asian markets as a priority."
Canada would declare an oil pipeline to Asian markets as a "priority" and offer "opportunities for Indigenous co-ownership and economic benefits." The federal government would refer the project to its fast-tracking office for consideration to be deemed in the "national interest."
Oil lobbyists say Canada needs another oil pipeline to export more petroleum to places other than the United States, as trade tensions continue under President Donald Trump. While the federally owned Trans Mountain pipeline, which was recently given a $34-billion overhaul that almost tripled its capacity, carries crude oil from the oilsands to the West Coast where it can be loaded on tankers and shipped overseas, no private sector proponent has stepped up to propose another new oil pipeline.
But the economics of the industry might delay the prospects of any new oil pipeline. Oil prices are low compared with a few years ago, forcing the industry to cut costs and pare back spending, while green energy sources like solar power and wind power are becoming ever cheaper. Canada's oilsands produce oil that is heavier and full of more sulphur than other blends around the world, meaning it's more complex and expensive to refine and so must compete with lower-cost operations.
Meanwhile, building a new oil pipeline from Alberta to B.C. would result in higher emissions than a scenario where no pipeline is built, even if it's paired with a carbon capture project like Pathways Alliance is proposing, according to a report from the Pembina Institute.
The Canada-Alberta deal commits both parties to working with the Pathways Alliance, a lobby group made up of six large oilsands companies, to enter into a three-way deal by April to create "a set of emissions-savings projects" focused on carbon capture and storage or other technology.
In fact, the proposed pipeline is contingent on the Pathways project moving forward.
For several years, the lobby group has proposed a carbon capture and storage network in Alberta that would theoretically capture a portion of the roughly 90 million tonnes of greenhouse gases the oilsands create per year, and transport the carbon in a new pipeline to rock formations deep underground.
The companies involved in the Pathways Alliance have spent years lobbying the federal and provincial governments to put public money toward their proposal, which they once pegged at $70 billion, and to delay or weaken proposed restrictions on the oilpatch while they gear up to build.
At the same time, Pathways Alliance companies have not committed to paying for the proposal themselves -- even though they are posting big profits this year. Suncor, for example, reported $1.62 billion in profits over the third quarter, a three-month period, while Cenovus made $1.29 billion in profits. The other members similarly reported hundreds of millions of dollars in profits over the quarter.
Their plan has also been criticized as a form of greenwashing because it does not account for the emissions created when the oil companies' products, like gasoline, are burned. It only proposes to draw down the emissions created during the process of digging up more oil.
The Carney-Smith deal said the lobby group's projects will be built "in a staged manner between 2027 and 2040." Constructing a carbon capture network that large would be unprecedented. Canada currently captures 4.4 million tonnes per year; scaling up to capture tens of millions of tonnes will require a massive buildout -- and that's if the technology works properly.
That's not to mention the concerns locals have about the safety of storing carbon underground in such large amounts.
Canada is preparing to loosen the restrictions on the tax breaks it has offered for companies to install carbon capture equipment, in a bid to encourage more oil drilling, according to the deal.
It commits to extending federal investment tax credits "and other policy supports" that encourage investments in carbon capture, and indicate these could be applied to "enhanced oil recovery."
That's an industry term for taking the carbon that's been captured from exhaust sources, and instead of burying it in rock formations underground, injecting it into wells so more oil can be recovered.
The most common use for carbon capture operations in Canada so far has been enhanced oil recovery -- but when Canada introduced tax breaks for carbon capture equipment, a key provision in the rules banned their use for this purpose.
Hours after the bargain was made public, Steven Guilbeault resigned as Carney's Canadian identity and culture. Guilbeault was environment minister in the Trudeau government, when he said the restriction was important to differentiate between providing support for the oil and gas industry to decarbonize, and providing other incentives to encourage more oil production.
"We've been asked, and we have resisted, and we have refused to include, for example, the use of carbon capture and storage under the tax credit for enhanced oil recovery," he told a Parliamentary committee in 2022.
Keith Stewart, senior energy strategist for Greenpeace Canada, said allowing carbon that is captured to be used to "pump more oil out of the ground" would suggest there's "no net benefit" to that activity.
Along with the methane and other rule changes, he described the deal as "a betrayal of Canada's climate commitments" and said it "makes a mockery of our commitment to reconciliation with Indigenous people."
Canada and Alberta said any future oil pipeline would be "private sector constructed and financed," and "with Indigenous Peoples co-ownership and economic benefits."
"At the heart of this is co-operation and partnership with Indigenous Peoples -- in Alberta, in British Columbia -- as they're affected. Unprecedented opportunities for Indigenous ownership, partnership, economic benefits, as well as substantial economic benefits for the people of British Columbia," Carney said Thursday.
Even so, First Nations and the B.C. government have been saying no from the start. B.C. Premier David Eby panned the idea as one that "doesn't actually exist" and said it was "unacceptable" that Carney and Smith were meeting without B.C.'s input.
Marilyn Slett, president of the Coastal First Nations-Great Bear Initiative and elected Chief of the Heiltsuk Nation, said the nation continues to oppose a new oil pipeline after seeing the agreement.
"Today's [memorandum of understanding] does nothing to increase the chances of a pipeline project to the northwest coast ever becoming a reality," she said in a statement.
"We have made repeated calls to the federal government to uphold Bill C-48, the Oil Tanker Moratorium Act, as it is foundational to the vibrant and growing conservation economy we have built on the North Coast."
Slett says they have "zero interest" in co-ownership or economic benefits stemming from the proposed pipeline.
Since 1972, the federal government has had a moratorium on oil tankers along the north coast of B.C., and signed a voluntary agreement with the U.S. in 1988 creating an oil tanker exclusion zone.
The purpose is to protect coastal waters from the risk of pollution from an oil spill. The ban was formalized in legislation by the Trudeau government in 2017 when it passed the Oil Tanker Moratorium Act.
Coastal First Nations and the province of B.C. also signed a North Coast Protection Declaration on Nov. 5, which calls for the tanker ban to be upheld.
Thursday's "grand bargain" says if a new oil pipeline is approved under federal fast-tracking legislation, Canada would commit to allowing tanker exports through "a strategic deep-water port to Asian markets" -- including, "if necessary," by amending the Oil Tanker Moratorium Act.
Carney has said "all stakeholders have to agree" before a pipeline is built, including the government of B.C. and First Nations.
One big win for Premier Smith is the immediate suspension of the federal government's Clean Electricity Regulations.
The province, which operates one of the highest-emission grids in the country due to its reliance on natural gas instead of hydroelectricity, has pushed back against the regulations ever since they were proposed.
But the Smith government has gone even further by restricting a booming renewable energy sector and incentivizing new natural gas generation.
Suspension of the regulations means it will not have to move fast to bring emissions down.
A potential compromise offered by the agreement is a push to increase what are known as interties with B.C. and Saskatchewan -- essentially, stringing wires between the three provinces to help ensure consistent generation.
B.C.'s wealth of hydroelectricity can be a cleaner source of regular power to offset intermittent renewables, although Saskatchewan, which still burns some coal for electricity, isn't likely to help reduce Alberta's power emissions.
It's unclear whether this suspension will apply across the country. Most provinces easily meet the requirements thanks to hydroelectricity, but Saskatchewan and Alberta have chafed at the timeline for cleaning up their fossil fuel-reliant grids.
"Exempting Alberta from these regulations yet again sends the signal that Alberta is closed for business to renewable electricity developers, an industry which has already suffered under Alberta's erratic electricity policy changes over the last two years," Severson-Baker said.
The federal government will still require a commitment to industrial carbon pricing from Alberta, but the new deal shows it comes with caveats.
The agreement acknowledges Alberta's provincial system and calls for increases in the carbon price, which the province froze this year at $95 per tonne through 2026. The freeze meant Alberta would have been out of step with the federal benchmark as of next year.
The deal says the two governments will work to ensure "the application of Alberta's carbon pricing system (including pricing and stringency) is adapted to the specific circumstances of the electricity sector, the oil and gas sector and other large emitters such as fertilizer and cement sectors."
In other words, some large polluters will be allowed to operate under special rules. It's unlikely those carve-outs will be more severe.