With a possible referendum looming, Carney and Smith find common ground on carbon pricing

On fri morn in Calgary, deutsche mark Carney and Danielle ian smith shook custody, then signed and posed with official copies of an "implementation agreement for the Canada-Alberta memorandum of understanding," an eight-page document bound up in profound questions of climate change, resource development, economic sovereignty and national unity.

"Today is a good day for Alberta," the Alberta premier said. "And it's a good day for Canada."

"Today," the prime minister said, was about "building trust in a Canada that works" — a country "rooted in co-operative federalism, where we build together, pragmatically and ambitiously, to achieve our shared ambitions."

Opinions will vary on Carney's particular weighing of pragmatism and ambition. But he no doubt hopes he has something that can hold together. 

The centrepiece of Friday's implementation agreement is a new framework for pricing greenhouse gas emissions produced by large industrial emitters — first for Alberta, and likely next for every other province that was functioning under the existing regime.

This new framework was subject to duelling boasts from the principals.

For Alberta, the new agreement was about achieving a lower price than what was previously written into federal law. For the federal government, the new agreement was about achieving a stronger underlying system for pricing emissions. 

What Carney has potentially achieved in that regard is not insignificant. But he has also made significant concessions, at potentially no small consequence — this new pricing framework coming after the Carney government also agreed to scrap plans for a cap on emissions from the oil and gas sector.

"The final Canada-Alberta MOU implementation agreement will put Canada’s target of net zero by 2050 well out of reach," Rick Smith, president of the Canadian Climate Institute, said in a written statement.

The Pembina Institute said its modelling showed the carbon pricing schedule included in the implementation agreement would result in an additional 230 megatonnes of greenhouse gas emissions over the next 15 years. 

The federal government had no modelling of its own to offer on Friday.

Alberta pipeline agreement 'is climate action,' Carney tells environmental groups

The policy left behind by Justin Trudeau's government was stronger on paper. But Carney might argue his policy is stronger in practice — not least because it was achieved via political consensus with a conservative Alberta premier.

In response to a question about the criticism his government received on Friday, Carney seemed to want to emphasize that he was getting "action" on climate policy.

In defiance of the federal benchmark, Smith's government had frozen the province's industrial price at $95 per tonne last year. (Meanwhile, Saskatchewan has stopped collecting an industrial carbon price altogether.) And because of inefficiencies in Alberta's pricing system, the effective price was much lower.

Alberta has now agreed to raise the headline price to $130 per tonne by 2035, with a legislated price floor that will reach $100 by 2040. Still, it might be asked whether Carney needed to concede as much as he did to achieve those gains.

Conservative Leader Pierre Poilievre remains opposed to the industrial price, just as he seemingly opposes nearly all other federal policies aimed at reducing emissions. And recent history suggests it's foolish to make too many predictions about the future of Canadian climate policy.

But perhaps it's possible to speculate that the agreement announced on Friday — including financial measures meant to backstop the industrial carbon price — could ultimately make it less likely that the next federal Conservative government will repeal the price on industrial emissions entirely.

Even then, there is greater onus on Carney now to explain how Canada can be put on a credible path to net zero emissions by 2050, a date that only grows closer with each passing day.

For Carney and Smith's memorandum of understanding, the next day to anticipate is July 1, the deadline for the submission of a plan for a new pipeline to the West Coast. A private proponent for that pipeline remains outstanding. 

But Carney also made clear again on Friday that a pipeline is contingent on oil and gas companies agreeing to move ahead with the Pathways project for carbon capture and storage, which oil companies have been touting since 2022.

So the next question is whether agreement can finally be found to proceed with that project, and on what terms. The language in Friday's agreement seemed to lower ambitions for how much Pathways will reduce industrial emissions.

In a statement on Friday, the consortium of oil companies behind the Pathways proposal claimed that the industrial carbon price, even at its lower level, "maintains uncompetitive costs on the Canadian oil sands industry." (The Climate Institute has estimated that an industrial carbon price of $130 per tonne would add 50 cents to the price of a barrel of oil.)

Construction on pipeline from Alberta to West Coast could start next year

But looming in the background of all this is the risk of a referendum in Alberta this fall — a potentially fractious vote that would ask Albertans whether they want their province to remain a part of Canada. That was the powder keg that lurked, barely concealed, in the shadows on Friday.

In Carney's prepared remarks, the words "trust" and "co-operation" were noticeably prominent. At Smith's news conference, the first questions touched on the possibility of a referendum.

"I think this will go a long way towards demonstrating that the new prime minister approaches the issue of co-operative federalism in a very different way than the previous prime minister," Smith said. "Now [it] may not be the deciding factor for everyone, but it's going to, I believe, convince a few more people that Canada is worth fighting for and it's worth working towards."

Probably nothing Carney and Smith could have announced this week would have completely extinguished separatist sentiment in Alberta. Some minds are surely already settled.

But Carney has twice now gone to Alberta to shake hands with the premier and find agreement. He has made compromises. And it should be harder now to argue that it is the federal government that is somehow standing in the way of a pipeline. 

At the very least, such actions will presumably have not aided the separatist cause. At the very least they may have contributed to the cause of holding the country together.

Senior writer

Aaron Wherry has covered Parliament Hill since 2007 and has written for Maclean's, the National Post and the Globe and Mail. He is the author of Promise & Peril, a book about Justin Trudeau's years in power.

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