On November 28, 2025, Canadian Prime Minister Mark Carney and Alberta Premier Danielle Smith signed a landmark Memorandum of Understanding (MoU) that has sent shockwaves through the nation’s energy and political landscapes. The agreement, which removes the planned federal oil and gas emissions cap for Alberta and suspends the application of the Clean Electricity Regulations in the province, marks a dramatic pivot in Canada’s approach to balancing climate commitments with economic realities. The deal’s centerpiece: a new pipeline project aimed at boosting oil exports from Alberta to Canada’s Pacific coast, with an eye on lucrative Asian markets.
Carney, who only this year transitioned from his role as a UN climate envoy to the helm of Canadian politics, made it clear that the move was driven by mounting economic pressures. According to The Economic Times, 90% of Canada’s oil exports currently flow to the United States. With then-President Donald Trump’s tariffs threatening to inflict a $50 billion blow to the Canadian economy—roughly $1,300 per Canadian household—the urgency to diversify export markets has never been more acute. "At the core of the agreement, of course, is a priority to have a pipeline to Asia," Carney said at the signing, standing beside Premier Smith.
The MoU not only paves the way for this new export route by amending the Oil Tanker Moratorium Act, but it also suspends contentious federal regulations in Alberta, pending the creation of a new industrial carbon-pricing regime. In exchange, Alberta has committed to strengthening its own industrial carbon pricing and advancing the Pathways Plus carbon capture and storage project—touted as the world’s largest and specifically designed to target emissions from oil sands operations.
Yet, as Carney’s government steers the country in this new direction, the political fallout has been swift and intense. The rollback of signature climate policies championed by former Prime Minister Justin Trudeau has prompted a fierce backlash from environmentalists and within Carney’s own Liberal Party. Most notably, Environment Minister Steven Guilbeault—long the architect of Trudeau-era climate action—resigned in protest just hours after the deal was inked. "I chose to enter politics to champion the fight against climate change," Guilbeault declared in a public statement. He said he "strongly" opposed the Alberta MoU, charging it would "move Canada further away from its greenhouse gas emission targets." He further lamented that policies he helped craft were now being "dismantled."
The split is emblematic of deeper tensions between Ottawa and Alberta that have simmered for years. Smith, never shy about her opposition to what she calls Ottawa’s stifling of Alberta’s economic potential, took a pointed jab at the previous federal government: "The last 10 years have been an extremely difficult time," she remarked, referencing the Trudeau-Guilbeault climate agenda that many in Alberta saw as a straitjacket on growth.
For Carney, the new pipeline is as much about national resilience as it is about energy. He’s argued that in the face of global trade shifts and profound uncertainty—especially with the US growing less reliable as a trade partner—Canada must chart its own course. "This agreement will make Canada and Alberta, of course, more independent, more resilient [and] stronger," Carney stated. He was candid about the fact that economic relations with the US, particularly under Trump’s administration, are unlikely to return to the pre-tariff era. Trump’s trade war, including the abrupt cut-off of negotiations over the North American free trade agreement, has cast a long shadow over Canada’s energy sector.
But the pipeline project is not without its complications. The plan calls for a formal project proposal by July 2026, and actual construction remains a distant prospect. Any future pipeline would need to traverse British Columbia, whose left-leaning government, led by Premier David Eby, has already voiced opposition to routing the project through the province. The deal also mandates consultation with Indigenous groups and co-ownership of infrastructure—a nod to both legal requirements and the fraught history of large-scale resource projects in Canada. However, as The Economic Times and other outlets have noted, First Nations and Indigenous organizations have often stood against such projects, citing environmental, cultural, and sovereignty concerns.
While Carney insists the pipeline can coexist with Canada’s climate ambitions, the environmental community remains unconvinced. The Pathways Plus carbon capture initiative, central to Carney’s sustainability pitch, is designed to mitigate emissions from increased oil and gas production. The Intergovernmental Panel on Climate Change (IPCC) acknowledges that carbon capture is a legitimate tool for reducing emissions, but critics argue it’s often used as a fig leaf to justify continued fossil fuel expansion. As the deal was being signed, some environmentalists pointed out that Canada’s broader climate framework now includes several stalled measures—such as oil and gas methane reduction targets and zero-emission vehicle mandates—paused amid ongoing reviews.
Federal support for Alberta under the new agreement isn’t limited to oil. Ottawa has also pledged to back nuclear power development in the province and to fund upgrades to the electricity grid, which are seen as crucial for supporting the growth of artificial intelligence data centers and inter-provincial power transmission. These investments are intended to modernize Alberta’s energy infrastructure and support economic diversification, especially as foreign direct investment in Canada declined in the third quarter of 2025—a trend that has heightened the urgency for reforms that attract capital and create jobs.
Despite the dramatic shift in policy, Carney has not abandoned all of Canada’s climate goals. He reaffirmed the country’s 2030 and 2035 emissions reduction targets, though he signaled a new willingness to be flexible about how those targets are achieved—especially regarding the use of caps on oil and gas emissions. It’s a balancing act, and one that Carney says is necessary to ensure both economic growth and progress toward decarbonization.
As the dust settles, the future of Canada’s energy and climate policy remains uncertain. The pipeline deal has exposed deep divisions—between provinces, within political parties, and across the country’s environmental and economic priorities. For now, the only certainty is that Canada’s path to net-zero will be anything but straightforward.
