Officials will extend Alberta's industrial carbon price program and raise its minimum price as part of an agreement with the federal government that clears the way for a new crude pipeline.
The government of prime minister Mark Carney and Alberta last week struck a memorandum of understanding (MOU) that includes an agreement to implement a "globally competitive", long-term industrial carbon pricing mechanism by 1 April.
It also calls for the federal government to suspend or drop plans for new electricity and emissions regulations opposed by the province, which agreed to achieve net-zero greenhouse gas (GHG) emissions by 2050.
Under the MOU signed on 27 November, Alberta will implement the pricing mechanism through its Technology Innovation and Emissions Reduction (TIER) program and raise its minimum carbon price to C$130/metric tonne ($92.89/t).
The agreement could mean Alberta will have to revise plans it proposed in September to adjust its TIER program. Under that proposal, the province would allow entities covered by program to cover up to 90pc of their compliance obligations through on-site investments in emissions-reduction technologies.
The MOU also includes a commitment between Alberta and Ottawa to finance and support the C$16.5bn ($12bn) Pathways Alliance carbon capture and storage project, which will be built in stages from 2027-2040. It is a "prime example" of a qualifying TIER investment project, Alberta premier Danielle Smith has said.
The TIER program covers large industrial sources of CO2 emissions in Alberta. Those sources can comply under the program by lowering emissions below certain thresholds, procuring credits or offsets from other sources or paying into a fund that supports low-carbon technologies.
Alberta froze its carbon price for the TIER program at C$95/t in May, and the program's credit and offset market has been in a bearish slump because of oversupply. Argus last assessed TIER offsets at C$18/t on 7 November, the lowest price since the October 2015 to January 2016 period.
The MOU appears to be the culmination of a "grand bargain" between Carney's Liberal Party government and Alberta. Carney has had to balance Canada's climate goals with the realities of a shifting — and tumultuous — trade relationship with the US, while Smith has pursued an energy policy prioritizing taking advantage of Alberta's significant oil and natural gas reserves.
The MOU also includes a guarantee from the federal government to not implement an oil and gas emissions cap, which would help Alberta reach its goal of producing 6mn b/d of crude by 2030 and 8mn b/d by 2035. The federal government unveiled a proposal early last month to scrap the proposed cap, which would have functioned as an emissions trading program to lower GHG emissions from Canada's oil and gas sector by 35pc from 2019 levels.
The federal government will also suspend clean electricity regulations in Alberta and instead work with the province to construct "thousands of megawatts" of new generation to help power Canada's artificial intelligence data centers.
Other provisions outlined in the MOU include a goal to lower methane emissions by 75pc from 2014 levels by 2035, construct a pipeline to move at least 1mn b/d of bitumen to Asian markets through a deep-water port, and reduce regulatory uncertainty. Construction would begin in 2029, provided the Alberta government submits an application by 1 July and it is approved within a two-year period.
