A crucial aspect of the agreement between Alberta and Ottawa regarding a new pipeline involves a $130-per-tonne “effective credit price” on industrial carbon emissions. However, there is a discrepancy in how the two governments are interpreting this figure, leading to confusion and questions regarding their alignment.
Prime Minister Mark Carney views the deal as a significant increase in the carbon price compared to its current level, while Energy Minister Tim Hodgson believes it surpasses the existing market price in Alberta. On the other hand, Premier Danielle Smith and her team are comparing the new $130-per-tonne level with the current $95-per-tonne price collected by the province from large emitters.
The memorandum of understanding specifies that the federal government’s interpretation aligns more closely with the agreement. However, the numbers cited by the provincial government are based on real data, highlighting the existence of two distinct but interconnected carbon prices.
The carbon pricing system in Alberta involves a “headline price” that large polluters pay to the government and a “market price” at which carbon credits are traded. The market price, currently below $20 per tonne, plays a crucial role in actual emission reductions and the success of projects like Pathways carbon capture proposal.
Efforts to influence the market price for carbon credits are hinted at in the memorandum of understanding, with details expected to be finalized by April 1, 2026. Factors contributing to the current low market price include changes in carbon-price stringency for oil producers and the rise of renewable energy generation in Alberta.
The agreement also addresses the Pathways Alliance Carbon Capture and Storage project, emphasizing the importance of boosting carbon credit prices to support such initiatives. The fine details of the carbon pricing agreement are yet to be determined and are crucial for achieving emissions reductions and supporting environmentally sustainable projects.
The success of the overall climate policy hinges on getting the carbon pricing details right, as highlighted by experts in the field. While the headline carbon price garners public attention, the intricate policy specifics will ultimately determine its effectiveness in combating climate change.