The agreement recently signed between Alberta and the federal government is an uneven bargain. Alberta gets support for a pipeline and the waiver of major climate policies in exchange for strengthening industrial carbon pricing, which is the key pillar of Canada’s emissions reduction efforts. But rather than strengthening financial incentives to reduce emissions, the agreement proposes an ineffective fix that will further derail efforts to reduce greenhouse gases. 

Industrial carbon pricing is designed to give big emitters in Canada an incentive to reduce emissions while remaining internationally competitive. Without it, big emitters have few reasons to cut back, but when emissions are priced, curtailing them can be profitable.  

Canada has priced industrial emissions jointly with provinces since 2019.  Some provinces, including Alberta, introduced a price on emissions before that.

Carbon pricing aims to reduce emissions by requiring that big emitters obtain permits for each tonne of greenhouse gases released. These permits are in limited supply and come at a cost. This price is effectively the penalty companies pay for emissions and creates an incentive to reduce them.

Under Canada’s and Alberta’s industrial carbon pricing, emitting facilities receive some permits for free, which keeps average costs low and helps maintain competitiveness. They can purchase further permits to offset their emissions from the government at a fixed “headline price.”

They can also purchase permits on the open market either as “offsets” from smaller operations working to reduce emissions or from surplus permits from regulated facilities. Larger emitters can use these permits or offsets to help satisfy their........

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