Canada and Alberta close in on carbon price agreement, Reuters sources say

Prime Minister Mark Carney, left, meets with Alberta Premier Danielle Smith in Calgary, Alta., Thursday, Nov. 27, 2025. THE CANADIAN PRESS/Jeff McIntosh

CALGARY -- Canada and Alberta are expected to strike a deal in the next two weeks that will increase the price on carbon for the province’s industrial emitters, two sources with knowledge of the talks said, but a broader agreement to tackle oil sands greenhouse gases and green-light a new crude oil export pipeline remains elusive.

Canada’s federal government and its main oil-producing province have been in talks since November, when both parties agreed to work together to boost investment in energy production.

Prime Minister Mark Carney has rolled back climate rules in order to help the oil-and-gas sector as part of an effort to make Canada’s economy more resilient against U.S. President Donald Trump’s tariffs. He has said he is willing to get behind the construction of a new oil pipeline to the West Coast if Alberta agrees to strengthen its pollution pricing scheme and if Canada’s biggest oil sands companies will sign on to the giant $16.5 billion (US$12.1 billion) Pathways carbon capture and storage project.

But getting all of those moving parts to snap into place that address Canada’s twin goals of boosting economic growth and tackling climate change is proving to be thorny, and it is unclear whether a pricing agreement will increase the chances that the other negotiations are ultimately successful. The three parties recently missed a self-imposed April 1 deadline on divvying up the costs of the larger carbon-capture project.

The two sources said a carbon pricing agreement that would increase the effective credit cost in the province’s carbon market to $130 a metric ton is very close to being finalized. Alberta froze its headline industrial carbon price in May of last year. Credits currently trade between $20 and $40 a metric ton - too low to incentivize polluters to invest in emissions reduction technology, experts said.

The sources did not say what year the deal will require the target to be reached.

Greenhouse gases and pipelines

Experts say a carbon pricing deal is necessary first to make the economics of the Pathways project work. Pathways, first proposed by the companies in 2022, would be one of the world’s largest such projects, with the potential to significantly reduce emissions from the oil sands, Canada’s largest source of greenhouse gases.

At the same time, Canada’s oil industry is keen to grow production, and Alberta is working on a proposal for a new one-million-barrel-per-day crude oil pipeline to British Columbia’s northwest coast, hoping to entice a private company to build the line.

An Alberta government source said the province remains committed to presenting its pipeline proposal by July 1, and wants an agreement before then with Canada’s oil sands companies that commits them to building the carbon capture and storage project. Carney has said any pipeline project must be built in tandem with that project.

Critics said all of the interlocking pieces must come together in order for Canada to meet its twin goals of climate action and economic growth, which is why it is concerning that the April 1 deadline has come and gone with only partial progress.

“If they (the oil sands) don’t move forward with Pathways now, there is no way a pipeline could move ahead concurrently,” said Janetta McKenzie, director of oil and gas at the Pembina Institute, a clean energy think-tank.

Representatives for both Alberta Premier Danielle Smith and the Oil Sands Alliance, which represents the five largest Canadian oil sands companies, said negotiations are ongoing. The prime minister’s office did not respond to a request for comment.

(Reporting by Amanda Stephenson in Calgary; Editing by Caroline Stauffer and David Gaffen)