The Alberta and Canadian governments are finalizing an agreement to increase the province's industrial carbon price to C$130 ($95) per metric ton by 2040.
This is a key step toward securing federal support for a new oil pipeline to the Pacific Coast.
The terms of the agreement were discussed at a federal cabinet meeting on Wednesday. According to Bloomberg, citing a source familiar with the matter, Premier Mark Carney and Alberta Premier Daniel Smith plan to announce the deal on Friday. The agreement removes a key obstacle to Ottawa's support for the province's pipeline proposal, expected next month, although negotiations on a carbon capture system for the oil sands continue.
The deal is intended to correct malfunctions in the carbon credit market, where credits are currently trading well below par. Furthermore, this is another step by Carney to relax environmental regulations introduced by his predecessor, Justin Trudeau, who planned to raise the price to C$170 per metric ton by 2030.
C$130 is the effective price and reflects the real costs companies face in complying with the industrial carbon tax, which applies only to enterprises with the highest emissions. According to the source, the agreement provides for a phased increase in price minimums between 2027 and 2040.
Environmental groups had called for the C$130 target to be set as early as 2030. Although the deal reduces the short-term burden on industry, a number of oil producers advocate for the complete abolition of the carbon tax, arguing that it undermines their competitiveness in the international market.
The agreement marks the third settlement between Alberta and Canada since the parties signed a broader memorandum of understanding on energy and environmental policy in November. In March, agreements were reached on measures to reduce methane emissions and on the delineation of powers in the area of environmental impact assessment.