Carbon deal unlikely to cut emissions, climate institute warns

The Carney government's recent pipeline deal with Alberta won't deliver meaningful emissions cuts, according to a new analysis from the Canadian Climate Institute.

The independent institute modelled the impact of the agreement signed in May between Ottawa and Alberta. The deal establishes an effective carbon price of $130 per tonne by 2040 — weaker and delayed from the previous target of $170 per tonne by 2030. Their conclusion: Canada's emissions would remain largely unchanged in the best case, or increase in the worst.

"The emissions reductions we are getting out of the deal are not really significant," said Dave Sawyer, the institute's principal economist.

The core problem is that any reductions from carbon pricing may be offset by the new pipeline itself. The proposed West Coast pipeline would add 1.4 million barrels of oil per day to production, keeping emissions on a "high trajectory through the middle of the century," the institute found.

Alberta's carbon market — formally called TIER (Technology Innovation and Emissions Reduction Regulation) — is also struggling. The system lets large emitters trade carbon credits, but an oversupply of low-priced credits has undermined its effectiveness. The agreement commits to implementing a price floor, but Sawyer said implementation looks "really complex" and uncertain.

Signs are already troubling. Two weeks after the deal was signed, TIER carbon credits in Alberta fell 25 per cent, from around $42.25 per tonne to $31.50, according to Quantum Commodity Intelligence.

Neither the federal government nor Alberta has released their own emissions modelling to back the deal's promised climate benefits.