Carbon pricing deal unlikely to cut Canadian emissions, study warns
New analysis says Alberta's energy agreement with Ottawa will do little to reduce Canada's emissions due to inefficiencies in carbon pricing system.
Ottawa's energy deal with Alberta will do little to reduce Canada's emissions, a new study released Thursday by the Canadian Climate Institute suggests.
The analysis says the "minimal" benefits from the Alberta memorandum of understanding are not enough to offset the prospect of increased oil production. The problem lies in inefficiencies in the changes to Alberta's industrial carbon pricing system.
Last month, Prime Minister Mark Carney and Alberta Premier Danielle Smith signed an implementation agreement on industrial carbon pricing to bring Alberta's effective carbon price to $130 per tonne by 2040. The headline price in Alberta would reach $100 per tonne by 2027 before rising to $130 per tonne by 2035.
But the agreement also relaxed stringency rates — the amounts of emissions industries can produce under Alberta's carbon pricing system — effectively giving industries more leniency on how much they're allowed to emit.
The Canadian Climate Institute's analysis suggests the new system isn't set up for market prices to rise enough to meet the government's floor, thus discouraging investment in emissions-reduction measures. The study warns there is likely to be an oversupply of lower-cost credits after 2030, because producers can easily outperform their emissions benchmarks and build up a credit stockpile under the more lenient rates.
"Price maintenance does not translate into emissions reductions," the report reads. "Instead the system mostly delivers paper compliance rather than cutting emissions."
For Ottawa residents watching federal climate policy, this signals a central tension: the government has tied emissions reduction to a market mechanism that may not produce the reductions it promises.