The government didn’t enforce the federal standard on Alberta’s industrial carbon price as a gesture of co-operation with the province, Federal Environment Minister Julie Dabrusin said Tuesday.
“Fighting with our provinces, being tied up in courts … we’re working to be in really a true co-operative federalism,” Dabrusin told The Canadian Press when asked why Ottawa didn’t enforce the federal backstop on Alberta.
“Doing that makes us stronger.”
Ottawa allows provinces and territories to create their own carbon pricing systems. But if those programs don’t meet a federal standard, Ottawa can impose the federal backstop instead.
Right now, only Manitoba, Prince Edward Island, Yukon and Nunavut use the federal backstop.
Alberta implemented sweeping changes to its industrial carbon price program in December, which tanked the market price of carbon credits in the province to as low as $17 per tonne.
The changes allowed companies to avoid paying provincial fees for emissions by investing in their own emissions reduction projects instead, and allowed smaller companies that didn’t meet the program’s minimum emissions threshold to opt out of the carbon pricing system.
Prime Minister Mark Carney and Alberta Premier Danielle Smith signed an agreement on Friday to bring Alberta’s effective carbon price — the market price for credits — to $130 per tonne by 2040, while the headline price in Alberta would also reach $100 per tonne by 2027, before rising to $130 per tonne by 2035.
The difference between the effective carbon price and the headline price is in the way companies accumulate credits to comply with their emission limits.
And as Prime Minister Mark Carney has clawed back most of the Trudeau-era climate policies, the cornerstone of his government’s commitment to reducing emissions has become a “strengthened” industrial carbon price.
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Though the timeline set out in the headline price of the Alberta deal was more lenient than Ottawa’s federal backstop, it will have ripple effects across the country for the provinces following Ottawa’s benchmark.
Following Friday’s announcement, the federal government quietly updated its headline price trajectory for all industrial carbon pricing systems in Canada, matching the schedule in the Alberta deal.
“This new trajectory will be part of a full, updated federal benchmark that will be published later in 2026,” the updated web page reads.
Ottawa is selling Alberta’s new carbon price structure as a stronger model because of the impact it will have on the province’s credit market — despite choosing not to enforce the backstop.
“We actually have a path to an effective industrial carbon price that would be regulated by Alberta, and that actually has a guarantee that’s matched by the federal government and the government of Alberta to ensure that it meets that effective industrial carbon price,” Dabrusin said.
“So it’s a strong and credible price that is predictable for industry.”
Michael Bernstein, CEO of Clean Prosperity Canada, said the new deal is stronger in reality but also weaker than what had been contemplated on paper.
“So it really comes down to, how confident were you that the theoretical plan was actually going to work in practice? And I don’t think it was going to work,” Bernstein told The Canadian Press.
“So I come out in the end saying this is progress, albeit modest progress.”
Bernstein said Ottawa’s approach of working collaboratively with Alberta was the right one.
“That is the way we can actually get enduring policy that will send the certainty to the market that’s needed over many decades to get investment in decarbonization project,” said Bernstein, who is also a member of the government’s independent Net-Zero Advisory Body.
“While in theory, and I guess it is true that the federal government legally had some grounds to try to challenge or try to replace the Alberta system with its own, I think in practice that would have been incredibly difficult and not very desirable.”
Other climate groups still aren’t sold on the new plan.
Environmental Defence, the Sierra Club Canada Foundation and Greenpeace put out statements Friday calling the Alberta deal a “weakening” and “gutting” of Canada’s industrial carbon price system.
Simon Donner is climate scientist and professor at the University of British Columbia, and the former chair of the Net-Zero Advisory Body.
He said the new carbon pricing plan in Alberta is disappointing because the government had signalled it intended to reinforce the industrial carbon pricing system amid all its other climate clawbacks.
“The argument was the industrial pricing system is the thing we need to save. And even if we lose a lot of other things, as long as we save the industrial pricing system, we’ll be able to tackle the sectors that are the biggest sources of emissions,” Donner told The Canadian Press.
“But this is like removing the final pieces of brick from the foundation of the house. And so it’s disappointing.”
While Donner agreed Ottawa is in for a tough legal fight because the provinces have the right to challenge federal policies which affect resource production, he said Carney still created a carveout for one province. He pointed out that the prime minister’s predecessor Justin Trudeau was criticized for doing the same thing by exempting home heating oil in Atlantic Canada from carbon pricing.
“I have trouble making sense of the argument that this is the best deal we could get, so we should be happy with it,” Donner said.
“I would be OK with that if this wasn’t going to affect how the system worked outside of Alberta … Because when you add it all up together, the emissions math of this just doesn’t work well. And so then I’m not sure what they’re trying to accomplish.”
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