The pressure is building on Mark Carney from the progressive wing of his own party as he pursues his “grand bargain” with Alberta Premier Danielle Smith on the development of Canada’s resources.
Former environment minister Catherine McKenna told
that the Trudeau government tried to make a deal with the fossil fuel industry “and we failed.”
Another senior Liberal suggested the climate caucus is on the verge of revolt. “I think it’s getting to the edge, frankly,” he said.
Fortunately for Carney, the NDP is in disarray but others are looking to pick up disillusioned Liberal voters motivated by the climate issue. On Sunday, Bloc leader Yves-François Blanchet warned Carney is “wallowing in the Western Canadian oil fantasy.” The Bloc has said it is against any more oil pipelines and pledged it will be the party that is responsible when it comes to climate change.
McKenna said experience suggests the oil and gas industry will not act. “Giving them more money or incentives as part of some grand bargain, when they haven’t done the minimum now…is a real problem,” she said.
It’s not true that the industry has been befouling the environment with impunity. Emissions in the oil and gas industry peaked in 2014 at 228 megatonnes but by 2023 they had fallen nine per cent or 20 megatonnes. Meanwhile, in the same timeframe, production of crude increased by 41 per cent and natural gas by 27 per cent.
However, it’s true that we have not yet seen the major investments in decarbonization that will be needed if Canada is to hit its goal of net zero by 2050.
The bad news for advocates of more action on climate who are disillusioned with the direction in which the government is heading is that things are likely to get worse for them.
Smith and the energy industry have called for Ottawa to repeal a number of Trudeau-era policies that they claim are a drag on the economy, including the oil and gas emissions cap, the Impact Assessment Act and the tanker ban off the West Coast.
There is every prospect that Carney will bend to Smith’s will in pursuit of his ultimate prize: a well-functioning industrial carbon market, where the price of carbon credits rise from the current $95 a tonne to closer to $150 a tonne over the next decade.
Carney has agreed in principle with Smith that the federal government will support a new pipeline that ships “decarbonized” crude to the Pacific Coast. The oil would be decarbonized by the giant Pathways Alliance carbon capture project that is likely to be 60 per cent funded by federal investment tax credits, but also requires a much higher carbon price than $95 to be viable.
The problem is that Alberta has indefinitely frozen its industrial carbon tax, cancelling the planned increase to $110 a tonne next year, which was keeping in line with federal rules. If the freeze is not lifted, Alberta will be in breach of its compliance agreement.
The options for Carney are to strike a deal that would strengthen Alberta’s Technology Innovation and Emissions Reduction industrial carbon pricing program, or attempt to impose the federal price, which would be a declaration of war on the province by Ottawa and an end to Carney’s efforts to repair the divisions in the federation.
“If we actually had an effective system, we would see an inflection point in the investments in decarbonization,” said Michael Bernstein, chief executive of Clean Prosperity, a climate policy organization working on decarbonization. “The previous government had a whole series of climate policies and it seems almost inevitable that there has to be some rationalization of the framework, as part of actually moving ahead alongside the provinces. So, you focus on the thing that is basically an order of magnitude more important than anything else to get a deal.”
For Carney, that thing has to be unfreezing the industrial carbon tax and raising the stringency of the rules.
Alberta brought in new rules for its industrial carbon price on Tuesday that are likely to have precisely the opposite effect. Companies will be able to avoid paying provincial fees for emissions by investing in their own emissions reduction projects.
Not all the details are clear yet but there are concerns that it may result in “double counting”: giving companies relief from the carbon levy and then allowing them to monetize the credits generated when the carbon is captured. That inevitably weakens the system by creating an oversupply of carbon credits, eroding their value.
Carney has already jettisoned a consumer carbon tax that he had called “a model for others” in his book Value(s). He has suspended the electric vehicle mandate that
obliged automakers to buy credits from Elon Musk
.
He looks set to ditch an emissions cap introduced by the former environment minister, Steven Guilbeault, as a way to cut oil and gas production by stealth.
But if Carney is to achieve his goal of maximizing jobs, profits, exports and tax revenues, while lowering emissions, he cannot abandon the industrial carbon pricing system.
As Clean Prosperity advocates, the best way to unlock billions of dollars in low carbon investment is for the two levels of government to agree to joint carbon contracts for difference, effectively an insurance policy on the future price of carbon credits that gives businesses a degree of predictability and the confidence to invest in technology.
“If you want to make progress, this is the path forward,” said Bernstein. “We have got to have a pricing system and Pathways, and you also support the industry. That seems like a win-win-win.”
In the federal government’s favour, polls suggest only
voters wants Ottawa to prioritize emissions over competitiveness.
Canadians still care about the environment but most want the government to pick an approach that does not prove to be a drag on the economy.
If Carney and Smith can find the political path forward, there remains the prospect of a happy ending in the unlikeliest love story in Canadian political history.
National Post