Canada and the oil-rich province of Alberta are expected to soon announce an agreement that will see the province raising the price of carbon for industry — a key condition for the federal government fast-tracking approval of an oil pipeline to the coast of British Columbia.
The pact, which would significantly reduce the impact of the previous government’s climate policy, is likely to provoke dismay from people on both sides of the climate debate.
While the province will agree to increase its carbon price, which is levied on companies for every metric ton of greenhouse gas pollution they produce, the amount will be substantially lower than a federal target set by Justin Trudeau’s government and it will take a decade longer to fully implement. At the same time, many people in Alberta’s oil industry — the largest source of oil imported to the United States — have called for an end to carbon pricing.
A source familiar with the negotiations, who was not authorized to speak publicly on the matter, defended the plan, calling it a “landmark agreement” and a significant improvement over the current situation.
The lower industrial carbon price and extended timeline are the latest carbon reduction measures introduced by Mr. Trudeau that have been reduced or eliminated by Prime Minister Mark Carney since he took office last year.
The source said that Alberta carbon credits were trading at around 20 Canadian dollars per metric ton, 75 dollars below the current federal price standard.
A higher carbon price should, in theory, make a variety of plans to reduce carbon emissions from Alberta’s oil sands financially viable. The oil and gas industry is Canada’s largest source of carbon emissions, which are generated by burning large quantities of natural gas and other fuels to mine oil sands, separate the oil-bearing bitumen within them, and then process the tar-like substance into usable petroleum.
Under Mr. Trudeau’s plan, the industrial carbon price was slated to rise to 170 Canadian dollars a metric ton by 2030. The source said that the agreement will mean that the effective price, the minimum level, reaches only 130 dollars by 2040.
The source noted that Alberta’s carbon pricing policy was frozen a year ago by Danielle Smith, the province’s premier, at 95 Canadian dollars.
It will also, the source said, contain measures to ensure that the price lowers carbon emissions, although they offered no details.
In the wake of President Trump’s trade war against Canada and his calls for the country’s annexation, Mr. Carney, who was once a United Nations special envoy for climate action, now characterizes Canada as an “energy superpower” and is working to expand overseas sales of Canadian oil, natural gas and uranium.
Just over a year ago, Mr. Carney eliminated the consumer carbon tax, saying that it had become “too divisive.”
While the oil industry once accepted industrial carbon pricing, many executives have recently called for its end.
Last week, during a call with analysts, Jon McKenzie, the president and chief executive of Cenovus Energy, a major Canadian oil producer, said that the industrial carbon price does nothing to reduce carbon emissions in Canada while causing companies to invest elsewhere.
He added: “The national dialogue on further development of the oil sands has been myopically focused on the climate agenda and climate policy, which have ignored a multitude of benefits that responsible oil sands development has brought to this country.”
Rick Smith, the president of the Canadian Climate Institute, a research group, said that “this notion that we can’t get to 130 bucks a tonne until 2040 is beyond ludicrous and a capitulation to nonsensical arguments.”
Mr. Smith said that a 130 Canadian dollar price will add just 50 cents to the cost of a barrel of oil. He added that the market price of carbon credits in Alberta is now well below the official price, mainly because of a program introduced by the province last year.
Alberta, which is landlocked, exports the majority of its oil to the United States. A pipeline to the British Columbia coast, purchased and expanded by the federal government during Mr. Trudeau’s time, has opened new markets in Asia for oil sands producers. Ms. Smith is determined to get a second pipeline.
That idea is unpopular among many residents of British Columbia, particularly members of some Indigenous communities.
Mr. Carney and Ms. Smith signed an agreement late last year committing the federal government to fast-track approvals for a new pipeline, provided that Alberta and its oil industry meet several conditions. In addition to the industrial carbon price, the oil industry must build a multibillion-dollar system to capture carbon emissions from oil sands projects and move them underground.
While Ms. Smith’s government has been preparing plans for several potential pipeline routes, no company has come forward to build and own any new pipeline.
