From 'absolutely critical' to 'should be repealed': Has industry turned on industrial carbon pricing?
The answer, like everything to do with this policy, is complicated. Details matter
Nearly a year ago, the head of a major oilsands consortium called on Pierre Poilievre to clarify his position on industrial carbon pricing.
The federal Conservative leader had vowed — loudly and repeatedly — to "axe" the consumer-level carbon tax, but had been evasive at the time about his position on the federally mandated carbon price for large-scale emitters.
"I think it would be very helpful for him to provide greater clarity on that," Pathways Alliance executive chairman Derek Evans told CBC's West of Centre in May 2024.
Ten months later, Evans got his answer, loud and clear.
On Monday morning, Poilievre pledged to eliminate the federal backstop on industrial carbon pricing, if his party were to form the next government. His plan would leave it up to provinces to run their own carbon-pricing systems (as most currently do) or to scrap those systems altogether (which they currently can't do, lest the federal backstop be applied).
By Monday afternoon, the head of a clean energy think-tank was criticizing Poilievre's plan, pointing out that industry leaders have historically been on board with this approach to industrial carbon pricing, perhaps calling for tweaks but not for a complete abandonment of federal standards.
"There really isn't anybody in corporate Canada that's calling for what the Conservative Party has announced today," Pembina Institute executive director Chris Severson-Baker told CBC's Power & Politics.
Until Wednesday, at least.
That's when the heads of more than a dozen major oil and gas companies released an open letter titled "Build Canada Now" that, among other things, called for basically what Poilievre had proposed two days earlier.
"The federal carbon levy on large emitters is not globally cost competitive and should be repealed to allow provincial governments to set more suitable carbon regulations," the group of 14 CEOs, presidents and board chairs wrote.
Among the signatories were five of the six companies that make up the Pathways Alliance, the consortium of oilsands operators chaired by Evans, who less than a year earlier was striking quite a different note on carbon pricing in Canada.
"The advice I would give Pierre Poilievre is carbon policy is going to be absolutely critical to maintain our standing on the world stage," Evans said at the time.
"We've talked for 40 years about climate change. And we've done very, very little about it."
Carbon capture's reliance on carbon pricing
The Pathways Alliance was created when six of Canada's largest oilsands producers — Canadian Natural Resources Limited, Cenovus, ConocoPhillips Canada, Imperial Oil, MEG Energy and Suncor — came together in an effort to reduce the industry's greenhouse gas emissions.
The consortium proposes to do this through carbon capture on a massive and unprecedented scale.
The "foundational project" it wants to build includes more than 400 kilometres of pipeline linking more than 20 facilities to a "carbon storage hub" in northeastern Alberta, where it would be permanently stored underground.
The plan is to have this $16.5-billion project sequester an eye-popping 40 megatonnes of greenhouse gas annually, once it's fully operational in 2050. (For context, Canada, as a whole, captured a grand total of 7.2 megatonnes from 2017 to 2022.)
Underpinning Pathways' ambitious proposal is the financial incentive created by carbon pricing.
The permanent sequestration of so much CO2 would generate enormous amounts of emissions credits, which have monetary value because they can be used to reduce a company's carbon-price obligations or sold to other companies for cash.
The Canadian Climate Institute estimates that industry already holds close to $5 billion worth of emissions credits in Alberta and notes these assets "were acquired with the expectation of generating a return as the carbon price rises."
Evans said last year that "there isn't a big enough market for carbon in the province of Alberta" to handle the scale of what Pathways is proposing to do with its flagship project.
"We need a pan-Canadian carbon market," he said. "At some point in time, the volumes of credits that will be generated with Pathways Alliance will overwhelm any single market in its own right."
But now, less than a year later, a majority of the Pathways members are calling for the Canadian carbon-pricing system to be abandoned in favour of a more fragmented, province-by-province approach.
What gives?
Rhetoric, reality and details
While there has been a distinctive change in tone coming from the oil industry, if you parse the details of what's now being said, it's not necessarily a contradiction of what was being said previously.
Asking that provinces be allowed to "to set more suitable carbon regulations," for instance, does not imply abandoning carbon pricing altogether.
And it's not impossible to imagine a "pan-Canadian carbon market" that allows for interprovincial credit trading, even without federal rules governing carbon pricing at a national level. Trading markets that span subnational jurisdictions do exist. Look no further than Quebec, which has a linked cap-and-trade system with the state of California.
But in practice, the change in rhetoric matters a lot, says University of Alberta energy and environmental economist Andrew Leach.
"You've seen the Overton window on this move dramatically," Leach said Wednesday on Alberta@Noon, referring to the range of opinions and ideas acceptable in mainstream political discourse at a given time.
"You're seeing it just be much more permissible for someone to say, either directly or in code, we're not going to act on climate change. And that CEO letter, I mean, is essentially there, right?"
Still, leading voices in the oil industry haven't come right out and said carbon pricing should be abandoned altogether.
"Let's remember we've had a price on carbon in Alberta far before the federal government imposed that approach," Tristan Goodman, president of the Explorers and Producers Association of Canada, told The Calgary Eyeopener on Thursday.
"We need something that allows more flexibility for provinces," he added.
Putting pricing entirely in the purview of the provinces would have a particularly profound effect on the oil and gas industry, which accounts for the majority of emissions in Alberta — a province that leads all others, by far, when it comes to greenhouse gas output.
Indeed, carbon-intensive industries that are less concentrated in Alberta have staked out public positions with a less confrontational tone than that of the oil and gas executives in the 'Build Canada Now' letter.
"We support industrial carbon pricing as the backbone of decarbonization across this country," a group that includes the Canadian Manufacturers and Exporters industry association, the Canadian Steel Producers Association and the Cement Association of Canada wrote in an open letter of their own last October.
"Yet this critical policy isn't working as well as it should," the letter continued. "A patchwork of provincial carbon pricing systems has produced numerous barriers and created significant red tape across efforts to decarbonize our economy."
Poilievre's promise to scrap the federal backstop came with a parallel promise to expand eligibility for federal subsidies to reward industries that are effective in reducing in emissions, in what the Conservative leader described as a "carrot, not stick" approach.
Canadian Exporters and Manufacturers CEO Dennis Darby told CBC's Power & Politics he'd have to know more before being able to evaluate either the Conservative plan or, for that matter, what the Liberals now have in mind with their new leader.
Prime Minister Mark Carney has said he'll aim to "improve and tighten" industrial carbon pricing in an effort to drive more investments to "the lowest-carbon opportunity" but has not released a detailed policy proposal.
"The devil's in the details," Darby said.
"Of course, industry needs incentives. But what we need, more certainly, is we need certainty."
Where does this leave the Pathways project?
The Pathways Alliance has not made a decision to go ahead with its massive carbon-capture project, but Evans said last year he was "sick and tired of all of the talk and the lack of action" when it comes to addressing climate change in Alberta's oilsands and he was personally committed to seeing it through.
"This is probably one of the most important things I've done in my career and this is important to me, personally, as well as professionally," he said.
Critics have accused the Pathways project of being more talk than action and questioned whether carbon capture can be relied upon to such a degree when it comes to meeting Canada's climate commitments.
Doubt has been cast on the financial feasibility of the project as well, even before the additional uncertainty generated by the change in Liberal leadership and Poilievre's promise to scrap the federal backstop.
"Even under optimal conditions, the Pathways project may struggle to break even, and real-world operations are rarely optimal," reads a December 2024 report from the Institute for Energy Economics and Financial Analysis.
The report notes carbon-capture costs are "approaching thresholds that threaten profitability" and there is a risk that an "oversupply of carbon emission performance credits" could drive down the value of those credits and reduce prospective revenues.
The Pathways Alliance told CBC News it had no comment on Poilievre's promise to get rid of the federal backstop.
And while executives of five of its six member companies called for the backstop to be repealed, the lone member that didn't sign says the letter does not represent its position or that of the consortium more broadly.
"The 'Build Canada Now' letter was not sent on behalf of the Pathways Alliance," ConocoPhillips spokesperson Dennis Nuss told CBC News in an email. "Our commitment to the Pathways Alliance is unchanged."
The company's position on carbon pricing, he added, is outlined on its website.
"ConocoPhillips believes a well-designed pricing regime on carbon emissions is the most effective tool to reduce [greenhouse gas] emissions across the global economy," it states.
ABOUT THE AUTHOR
