Canada ’s federal government has struck a new agreement with the province of Alberta that reshapes national climate policy while aiming to accelerate energy investment and export capacity.
Prime Minister Mark Carney and Alberta Premier Danielle Smith have agreed to roll back several planned climate measures, including a proposed emissions cap on the oil and gas sector and certain clean electricity regulations.
In exchange, Alberta has committed to strengthening its industrial carbon pricing framework and supporting large-scale carbon capture and storage (CCS) development.
The deal marks a notable shift in Canada’s energy strategy, prioritizing economic growth and market diversification amid rising trade uncertainty with the United States. The federal government is seeking to reduce reliance on its largest export market, which currently accounts for the vast majority of Canadian oil exports.
Pipeline expansion and carbon capture at the centre
A key element of the agreement is support for new pipeline infrastructure aimed at expanding access to Asian markets. The federal government has signaled it will streamline approvals and revisit existing regulatory barriers, including adjustments to tanker restrictions on Canada’s west coast.
At the same time, both governments have reaffirmed support for carbon management solutions. The deal includes plans to advance the Pathways Plus initiative, which is expected to become one of the world’s largest CCS projects, targeting emissions from oil sands operations.
The agreement has exposed political and societal divisions. Industry groups, including Canadian Association of Petroleum Producers, have welcomed the removal of the emissions cap and the focus on expanding infrastructure, arguing it will unlock investment and improve competitiveness.
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Environmental organizations, however, have raised concerns about the long-term implications for Canada’s climate targets. Groups such as Pembina Institute warn that weakening national standards could undermine emissions reduction efforts and delay the transition to cleaner energy systems.
The policy shift has also triggered internal tensions within the federal government, including the resignation of Steven Guilbeault, who cited concerns over the direction of climate policy.
While the government maintains its commitment to achieving net-zero emissions by 2050, the agreement underscores the balancing act between economic priorities, energy security, and climate ambition as Canada navigates a rapidly changing global energy landscape.
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