By Paul Vieira
OTTAWA--Canada's oil-rich province of Alberta agreed Friday to a stringent levy on carbon from its energy producers, the first of a series of conditions it has to meet before Prime Minister Mark Carney backs a new crude-carrying pipeline to the Pacific Coast.
The higher industrial carbon tax is the latest development in Alberta Premier Danielle Smith's bid to build a new pipeline aimed at meeting the energy demands from the faster-growing economies in Asia. With a deal on an industrial carbon tax now settled, Canadian officials will now focus on talks with energy producers in Alberta about the construction of a carbon-capture storage project that Carney has repeatedly said is required before pipeline construction can start.
The steps by Canada and Alberta are an attempt to capitalize on demand for energy from sources other than the Middle East, given the geopolitical uncertainty exposed by the U.S.-Iran conflict. Furthermore, Carney is pushing for the construction of new trade corridors and the development of resources to restore economic resilience and reduce dependence on trade with the U.S. to restore growth.
Alberta said it would raise its levy on carbon emitted by industry from its current per-tonne level of 95 Canadian dollars, or the equivalent of about $70, to C$140 by 2040. Officials from Alberta said the staggered increases would save its energy sector up to C$250 billion in compliance costs, and provide certainty to investors about the regulatory landscape. Alberta has also agreed to compel producers to annually improve their emissions intensity, or carbon output per facility.
"This is a landmark agreement that provides long-term certainty rooted in consistent, effective increases to the price of carbon emissions in Alberta," the Canadian government said in a release. Combined, the measures "will help create the long-term certainty needed to advance major projects, grow Canada's energy sector, and reach net-zero emissions by 2050."
Alberta now has until July 1 to submit a proposed pipeline project for federal backing. Should the proposal pass muster while other conditions are met, Carney could declare the pipeline project to be of national interest--thereby accelerating the approval process. Construction could begin as early as September 2027.
Smith said the pact agreed to Friday shows, "Canada and Alberta are serious about expanding market access, building major infrastructure and creating the conditions for long-term investment in our province's energy sector."
However, further hurdles remain, and some energy-sector watchers remain skeptical that a new pipeline will proceed. At the moment, there is no pipeline operator or consortium of investors willing to back the project--likely reflecting concern about the political risk involved.
Write to Paul Vieira at paul.vieira@wsj.com
(END) Dow Jones Newswires
05-15-26 1350ET
