The Alberta-Ottawa Carbon Pricing Deal marks a major shift in Canada’s climate and energy policy, linking industrial carbon pricing changes with a proposed new oil pipeline from Alberta to Canada’s West Coast. Prime Minister Mark Carney and Alberta Premier Danielle Smith said the agreement is part of a broader energy memorandum of understanding signed in November 2025.

Under the deal, Alberta will raise its headline industrial carbon price from the current $95 per tonne to $140 per tonne by 2040. The price will rise to $100 per tonne next year, then $115 in 2030, $118 in 2031, $121 in 2032, $124 in 2033, $127 in 2034, and $130 in 2035, before increasing by 1.5% each year until it reaches $140 by 2040.

Pipeline Plan to Asian Markets

The agreement also sets out a pathway for a new privately built oil pipeline from Alberta to Canada’s West Coast, aimed at supplying oil to Asian markets. Alberta is responsible for finding a private-sector proponent for the project. The proposed pipeline could transport more than one million barrels of oil per day.

If Alberta submits a proposal by July 1, 2026, the federal government plans to refer it to the Major Projects Office with the goal of designating it a “project of national interest” under the Building Canada Act by October 1, 2026. If that designation is secured, construction could begin as early as September 1, 2027.

Key Carbon Pricing Details

What the Deal Includes

• Industrial carbon price increase: Alberta will gradually raise its headline industrial carbon price to $140 per tonne by 2040.
• Not a consumer carbon tax: Premier Danielle Smith said the agreement applies to industrial pricing and will not appear on gasoline, diesel, or home heating bills.
• TIER credit floor price: Alberta will set a minimum floor price for Technology Innovation and Emissions Reduction credits to help prevent an oversupply of cheap carbon credits.
• Clean Electricity Regulations exemption: Alberta will be exempt from Canada’s Clean Electricity Regulations under the memorandum, and this suspension is not dependent on pipeline approval.
• Methane reduction focus: Alberta’s industrial carbon pricing strategy will aim to reduce methane emissions by 75% over the next decade.
• Net-zero goal: The memorandum says Alberta will aim to achieve net-zero emissions by 2050 through a new industrial carbon pricing agreement with Ottawa.

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Political and Climate Reactions

The agreement has triggered sharply different reactions. British Columbia Premier David Eby said the deal could give Alberta an unfair advantage, while NDP Leader Avi Lewis called it a surrender to the oil and gas lobby. Conservative Leader Pierre Poilievre said he supports pipeline construction but opposes increasing the industrial carbon price.

The Canadian Climate Institute also raised concerns, saying Alberta’s carbon market covers roughly a quarter of Canada’s national emissions and that the new pricing timeline may be too slow for Canada’s 2050 net-zero target. It noted that the current industrial carbon pricing system costs the oil sands less than 10 cents a barrel in 2026 and is expected to cost less than 50 cents a barrel by 2030.

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Final Takeaway

The Alberta-Ottawa Carbon Pricing Deal is both a climate policy compromise and an energy infrastructure strategy. For Alberta, it offers a clearer industrial carbon pricing path and a potential route to Asian oil markets. For Ottawa, it attempts to balance emissions targets with energy competitiveness. The real test will be whether the carbon pricing system drives meaningful emissions cuts while the proposed pipeline faces regulatory, Indigenous consultation, political, and market hurdles.

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