CALGARY (Reuters) - The future of Canada’s six-year-old carbon pricing system is on shaky ground after 14 oil and gas CEOs and the political opposition leader called for its repeal this week. Scrapping the system, which aims to reduce pollution by giving heavy industry a financial incentive to cut carbon emissions, however, puts the viability of the high-profile Pathways Alliance carbon capture project in doubt.
Canada is currently grappling with changing priorities, as U.S. President Donald Trump’s tariff threats spur calls to find new markets for energy. The shifting political tides have emboldened some Canadian voices who believe the country has, for too long, prioritized its climate goals over economic growth.
Conservative Leader Pierre Poilievre made the federal carbon system a potential ballot issue on Monday, March 17, pledging to repeal it if he wins an election expected on April 28. The carbon pricing system, in place since 2019, aims to motivate heavy industries to cut emissions by enforcing financial penalties for pollution. Poilievre stated he would scrap the current rules and replace them with broader federal incentives, such as tax credits, to encourage companies to reduce their carbon footprints. Under his proposed plan, carbon pricing decisions would be vested in individual provinces.
Under existing laws, industrial operations with emissions exceeding a permitted threshold must either pay the government or acquire carbon credits to offset their impact. This framework is designed to become more stringent over time, with carbon prices set to rise at specified intervals.
Canada’s newly sworn-in Liberal Prime Minister Mark Carney, who is narrowly leading in polls against Poilievre’s Conservatives, asserted on Tuesday, March 18, that the country needs industrial carbon pricing if it aspires to grow its trade volumes with allies. Britain, for instance, has announced plans for a carbon levy on products imported from countries with less rigorous climate policies.
In an open letter this week, 14 Canadian oil and gas CEOs stated that the federal scheme should be repealed to allow provincial governments to establish more appropriate carbon regulations. The Pathways Alliance, composed of Canada’s six largest oil sands producers, criticized the existing 'uncompetitive industrial carbon pricing system' on March 21, signaling growing frustration with the current framework to facilitate significant investments in carbon mitigation efforts.
The Pathways proposal, which includes a C$16 billion ($11.47 billion) carbon capture and storage initiative, has been viewed as one of the world’s largest such developments. Nonetheless, regulatory applications for a pipeline to transport captured carbon were filed last March, and a final investment decision on the project remains pending.
Of the six member companies in the Pathways Alliance, five—Canadian Natural Resources, Suncor Energy, Imperial Oil, Cenovus Energy, and MEG Energy—signed the letter advocating repeal of the industrial carbon price. The sixth member, ConocoPhillips Canada, chose not to sign but reaffirmed its commitment to the Pathways initiative.
In an interview with Reuters earlier this month, Scott Stauth, the CEO of Canadian Natural Resources, acknowledged existing uncertainties surrounding energy policy and the impending election. He described how the combination of election dynamics and U.S. administration views on tariffs has slowed discussions on the Pathways project. "If you look at that combined with the views of the administration in the U.S., on tariffs and so forth, those discussions on Pathways have slowed somewhat," Stauth remarked.
Pathways has been in negotiations with the federal government recently, aiming to create a backstop for the industrial carbon price to safeguard against potential future eliminations. However, no agreement has yet been reached.
A weakened carbon pricing framework could diminish governmental leverage to promote projects like Pathways, suggesting that taxpayer funding could become necessary to support such initiatives. Chris Severson-Baker, executive director of the clean energy think tank the Pembina Institute, explained, "It (Pathways) might just end up becoming another thing the taxpayers are paying for."
