‘Sledgehammer’ Carbon Price Deal Boosts Emissions by 230Mt, Aims for Fall 2027 Pipeline Approval

Prime Minister Mark Carney and Alberta Premier Danielle Smith have taken a “sledgehammer” to Canada’s remaining climate commitments with a carbon pricing agreement that will drive up the country’s greenhouse gas emissions by an estimated 230 million tonnes through 2040, leading climate analysts say.

The deal announced Friday afternoon has Carney and Smith eyeing a fall, 2027 start date for construction of a new bitumen pipeline to the West Coast, The Canadian Press reports. It’s part of a plan to complete the remaining steps of the controversial Memorandum of Understanding they signed last fall.

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Details of the plan were confirmed in multiple news leaks earlier this week. But climate hawks were quick to respond after Carney and Smith made it official early Friday afternoon.

“Prime Minister Carney is taking a sledgehammer to one of the last remaining pillars of Canada’s climate plan,” Caroline Brouillette, executive director of Climate Action Network Canada, said in a release.

“The prime minister came into office on a promise to strengthen Canada’s industrial carbon pricing system,” she added. “He has positioned it as the backbone of his climate strategy, and used that to justify slashing other measures to hold polluters accountable. Instead, he is dismantling essential protections for ecosystems and communities and letting the American-owned oil and gas industry write its own rules, as Canadians face the rising cost of fossil fuels and climate disasters.”

2050 Net-Zero Target ‘Well Out of Reach’

The MOU implementation agreement “will put Canada’s target of net zero by 2050 well out of reach. It also means that Canada will be on path to achieve its 2030 target at a much later date, creating more than a decade of delay for needed progress,” said Canadian Climate Institute President Rick Smith.

While the deal improves on the current status quo in Alberta’s carbon market, the biggest in the country, “this is the lowest of bars,” Smith added. “The MOU agreement’s unreasonable compromises on industrial carbon markets and clean electricity regulations, and the implications for weakening policies in other provinces, will undermine emissions reductions and Canada’s low-carbon competitiveness.”

Environmental law charity Ecojustice warned that the deal could accelerate climate risk, damage coastal ecosystems, endanger the habitats of “iconic species at risk” like British Columbia’s Southern Resident Killer Whales, and undermine public finances.

“Let’s be clear,” said Ecojustice Climate Director Charlie Hatt. “Prime Minister Carney’s latest deal will—by design—unleash more fossil fuels, which means more heat waves, wildfires, and floods that put our lives, health, and the well-being of our communities at risk. Canadians’ most fundamental rights under the Charter would be threatened by this deal and any public financing for pipelines or LNG infrastructure that locks in a future of climate harms. It also means more economic volatility and energy unaffordability.”

And as the federal electricity strategy released Thursday largely acknowledged, “the world beyond Trump has learned electrification—not oil and gas—is the only true path to a secure and sovereign energy system,” Hatt added. “Asian and European import markets for oil and LNG are now sprinting away from the price volatility of these fossil fuels in favour of energy security through renewables and storage. This means that even setting climate impacts aside entirely, public money should not be wasted on fossil projects destined to become stranded assets,” as Carney himself warned in 2020. “Prime Minister Carney should know his deal doesn’t add up economically or for our future climate.”

Pembina Institute Executive Director Chris Severson-Baker said Friday’s deal harms Canada’s economic future and abandons its international commitments, increasing the country’s climate pollution by 230 million tonnes over the next 15 years.

“The federal-Alberta energy MOU is a failure for Canada and Alberta both in the global clean energy economy, and in doing our share to tackle the climate crisis,” he said in a statement.” The agreement to delay a meaningful price on Alberta’s industrial carbon emissions until 2040 will hurt Canadian jobs, undermine clean energy investment, and accelerate climate change.”

After Carney “explicitly committed to strengthening industrial carbon pricing in November 2025,” then rolled back most other aspects of the federal climate plan, “we were expecting, at the very least, an adequate industrial carbon price,” Severson-Baker said. “All the federal government’s eggs were in this basket. Instead, a price of $130 per tonne by 2040 simply will not position the Alberta and Canadian economies for decarbonization and long-term competitiveness in an increasingly low-carbon global economy.”

The Details

Under the MOU implementation plan:

• Alberta’s “effective” industrial carbon price will be set at just $130 per tonne (about $110 in today’s dollars) by 2040. Its “headline” price is to rise to $140 per tonne by 2040, from the current $95 per tonne.

CP says the effective price refers to how much carbon credits are sold for on the market, while the headline price refers to how much companies pay the province to comply with emission limits. A headline carbon emission price of $140 per tonne by 2040 for Alberta means Ottawa is permitting a much weaker pricing scheme, as the current federal backstop price is scheduled to reach $170 per tonne by 2030.

• Briefing materials shared by Ottawa said the current carbon policy in Alberta hasn’t been working effectively due to an oversupply of carbon credits. The flooded market has led to credits trading for $40 per tonne—last year reaching as low as $17 per tonne—far below the current federal headline price of $110 per tonne.

“This $70 gap means that decarbonization is not being incentivized as effectively as it should be,” says a briefing document.

• Friday’s announcement commits Alberta to bring in a minimum price for credits that companies buy and use to fulfill emission requirements. It says the minimum transfer price would be set at $60 starting in 2030 and gradually increase to $110 by 2040. But the flood of surplus credits the province has granted under its Technology Innovation and Emissions Reduction (TIER) Regulation will be “grandfathered”/ grandparented, so they will “continue to dilute the stringency of Alberta’s carbon market,” writes environmental lawyer and Climate Action Network National Policy Analyst Isabel McMurray.

• The deal is also likely to force Ottawa to be more lenient with other provinces following the federal price. The Supreme Court of Canada ruled in 2021 that all jurisdictions need equal treatment for carbon pricing.

“The agreement confirms that PM Carney is not just gutting Alberta’s carbon pricing framework, but the national benchmark as well,” writes Aly Hyder Ali, senior program manager, oil and gas at Environmental Defence Canada.

• Alberta recommits to its MOU promise to submit a pipeline application to the federal Major Projects Office by July 1, and Canada will aim to designate it as a Project of National Interest by October 1. “This would be the first project actually listed as a PONI and would gain access to all of the fast-tracking powers that Bill C-5 (the Building Canada Act) created,” McMurray writes.

• If the project receives the designation, Canada will aim to bring it to the final stage of assessment by September 1, 2027.

“A new pipeline delivers more pollution, more tar sands toxic tailings, and more devastating climate disasters,” brought to you by the industry that is already “Canada’s largest source of climate pollution,” Ali says. And “if a pipeline moves forward, it will be built for political reasons—not economic ones. Global oil demand is on track to peak by the end of this decade,” so “no proponent would build this without government subsidies.”

Carney and Smith: ‘We’re Serious’

Carney and Smith, meeting in Calgary, said the implementation plan shows Alberta and Canada are serious about supporting and expanding the fossil energy sector, The Canadian Press writes.

“We’re much closer to attaining our joint ambition to make Canada into a global energy leader and a trusted supplier of responsibly produced lower emissions energy in the world,” Alberta Premier Danielle Smith told reporters.

“We’ve accomplished a lot together in less than six months.”

Friday’s deal also acknowledges the need to consult with First Nations on the pipeline, and Smith and Carney said they will continue engaging with the British Columbia government, which has expressed strong opposition to the project.

“Earning trust, as we all know, it requires more than just ambition,” Prime Minister Mark Carney said. “It requires partnership and requires cooperation, cooperation that respects our duty to consult and ensures Indigenous economic benefits and opportunities for co-ownership exist in every project.”

No private company has come forward or been announced to build and own the pipeline, CP notes. Smith’s government has been acting as the proponent so far and has been undertaking initial planning and consultations, and Alberta officials said the province hopes to see oil start flowing through the pipeline in 2033 or 2034.

The agreement also includes a commitment from Alberta to facilitate investment in renewable energy projects. That would amount to a big win for the Calgary-based Pembina Institute, which called two months ago for Alberta to unwind its uniquely onerous restrictions on renewables development, and for its Business Renewables Centre, which has steadily documented the impacts of the province’s renewables moratorium and subsequent regulatory changes.

Pipeline Still Depends on Carbon Capture

The prime minister said there was no change in the MOU provision that a new pipeline remains dependent on the Pathways carbon capture project in Alberta. That means the next step is reaching an agreement with the Oil Sands Alliance, the consortium of major oil players behind the project.

But it may not be easy: after the alliance spent years demanding ever more lavish taxpayer subsidies for its proposed $16.5-billion carbon capture and storage (CCUS) hub in Alberta, one of its most intrepid leaders argued two weeks ago that the industry should walk away from the project.

In a May 1 Globe and Mail op ed, Martha Hall Findlay, the former Liberal Member of Parliament and Suncor Energy executive who “devoted several years of my life” to building the carbon capture alliance, called for what amounted to a radical reframing of the MOU.

“It is historic and remains critical not only for our national economy but our national unity,” she said of the Nov. 27 deal. “So let’s build on it. Let’s reframe the effort into a better version of Pathways, one that uses its public-private and federal-provincial collaborations to support more [fossil] energy production and the building, instead of a CCUS project, of a pipeline to sell more of what we have to the world.”

For the newly-rebranded Oil Sands Alliance itself, even Carney’s massive climb-down on carbon pricing was insufficient to take the win. “The announced industrial carbon tax, while lower than the current industrial carbon tax, still maintains uncompetitive costs on the Canadian oil sands industry,” the lobby group formerly known as the Pathways Alliance said in a release. “No other major oil producing nation faces a similar tax.”

One Timbit Per Barrel

That claim echoed a massive PR push from much of the oil and gas lobby in recent weeks, insisting that Ottawa’s carbon policy is putting Canada at a competitive disadvantage. Some industry execs, including ATCO CEO Nancy Southern, have said Canada’s industry can afford a higher price

The Canadian Climate Institute, which President Rick Smith said is the only organization to have modelled the impact of industrial carbon pricing for every fossil fuel facility in the country, previously placed the average cost at the equivalent of one Timbit (about 30 to 50¢, depending on flavour and location) per barrel—at a time when the price of oil was around US$60 per barrel, en route to about $100 today.

He added that oil exporters Norway and the United Kingdom both have industrial carbon prices, while Saudi Arabia is “spending tonnes of money to bring down emissions in their oil sector, knowing that in a world driven by increasingly violent climate change impacts, oil and gas producers had better bring down their emissions or else that’ll start to matter in the marketplace.”

Yet Premier Danielle Smith told reporters Friday that the $130 per tonne price is a concession from her government, CP writes.

“If I had my druthers on what it would be set at, it would probably be somewhere around $50 (per tonne),” Smith said, saying she believed the lower figure would still incentivize emissions reductions.

Carney: ‘This Is Climate Action’

Carney pushed back against environmental concerns and said the deal would put an end to Alberta’s existing carbon market allowing credits to be sold for the bottom dollar.

“This is climate action,” he said.

He also touted the benefits he said he expects from the Pathways project, saying it would take the equivalent of emissions from 90% of cars in Alberta out of the atmosphere every year. That calculation presumably excluded the 80% of the emissions in a barrel of oil that enter the atmosphere after the product is shipped to its end user in another country.

Smith and Carney have said their plan shows Ottawa and Alberta can work together, but it may not be enough to entirely stomp out the separatist movement in the province, CP says.

Smith has said she supports a sovereign Alberta in a united Canada but also that Albertans are frustrated with Ottawa and deserve to be heard.

Earlier this week, an Alberta judge threw out a petition seeking to put separation to a referendum, ruling it should have never been issued and that Smith’s government neglected its duty to consult First Nations.

Smith has said the province will appeal.

On Friday, she issued a direct attack on her province’s independent judicial system. “I just don’t simply believe that an unelected judge should be able to run roughshod over all of these democratic provisions,” she declared.

Major segments of this report were first published by The Canadian Press on May 15, 2026.