Carney and Smith sign "grand bargain" on pipelines and carbon capture

What happened: PM Carney and Alberta Premier Danielle Smith signed a deal to advance a new pipeline to BC’s coast as a project of national interest - but only if Alberta fixes its carbon market and the Pathways CCUS megaproject goes ahead.

The details: Under the MOU, the feds will support a West Coast pipeline, grant Alberta a carve-out from Clean Electricity Regulations, and remove parts of federal greenwashing rules and the oil and gas emissions cap (both already previewed in the budget).

In return, Alberta will commit to long-term industrial carbon pricing of $130/tonne (with timelines and ramp up tbd), collaboration on a nuclear generation strategy, expanded cross-province grids, and a plan to cut methane emissions 75% by 2035. The pipeline project is also explicitly contingent on the Pathways CCUS project moving forward.

Many hurdles remain: BC’s tanker ban, consultation with First Nations, and actually finding a private sector proponent for the pipeline.

Why it matters: Pipelines makes headlines, but the full deal shows that the Carney government is betting heavily on a stronger carbon market and electrification.

• A higher, credible carbon price could unlock new investments in low-carbon technology and large-scale CCUS projects like Pathways. An oversupply of credits in Alberta’s market has pushed the effective price to just ~$30/tonne, well below the $95 benchmark.

• Nuclear generation and expanded grid interties would also expand the market for clean electricity in western Canada and support industrial electrification.

If successful, the deal will strengthen the economics of carbon removal, methane abatement, and other climate solutions, while also creating a more stable policy environment with the feds and provinces rowing in the same direction.

And with so many conditions to be met, including a July deadline for a pipeline proposal, Carney may be betting that a pipeline never materializes while carbon market reforms move ahead.

Yes, but: The deal carries real climate and economic risks.

• A new pipeline will likely increase emissions (both production and end use)

• Climate wins can backslide - Alberta agreed to up its industrial carbon price in the past to secure the TMX pipeline

• Billions spent on pipelines will lock up capital in potentially stranded or underused assets as oil demand peaks by the end of the decade

What’s next: Terms need to be nailed down by April, including agreements on carbon pricing, methane, and a binding agreement with Pathways. It’s a pivotal window as key details get negotiated.

It’s also an important opening for climate tech builders. Policymakers need to hear directly from companies working on carbon management, electrification and other climate solutions about the climate and economic potential that’s on the table with a stronger carbon market - or the final package will tilt toward legacy interests.

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