Originally published in the Calgary Herald.

Monday’s First Ministers’ Conference in Saskatoon might be remembered as the moment Canadian politicians finally got on the same page about decarbonizing the energy sector. 

To realize the leaders’ vision of turning Canada into a low-carbon energy superpower, we now need the energy sector to step up. And we need provincial and federal governments to strengthen polices that will unleash a wave of new low-carbon projects.

First we need the oil sands majors to commit to building their proposed Pathways Alliance carbon capture and storage project without further delay. 

The federal and Alberta governments have already offered to cover almost two-thirds of Pathways’ capital costs as well as setting up additional carrots and sticks to help get the project over the line. Now they’ve also agreed on the need for new pipelines to tidewater that can substantially increase revenues. A new climate of federal-provincial collaboration creates a big opportunity to deliver enabling policy changes. 

What are the Pathways companies waiting for? The time is now to strike a deal with governments and build the infrastructure that Canada’s oil sector needs to remain competitive in a rapidly decarbonizing world. Further delays jeopardize the objective that Canada should someday supply the last barrels of oil that the world consumes. 

Getting Pathways built quickly is critical to this goal and to Canada’s larger low-carbon growth ambitions. The project would reduce emissions by 22 million tonnes per year, almost a third of the oil sands’ total output. It would set Canada’s oil and gas sector on a virtually unstoppable trajectory to decarbonization. 

For years trying to decarbonize the energy sector has been like pushing a giant boulder up a hill. Pathways could heave us over the top. 

For years trying to decarbonize the energy sector has been like pushing a giant boulder up a hill. Pathways could heave us over the top. 

Michael Bernstein, President and CEO, Clean Prosperity

For their parts, the provincial and federal governments should build off their newfound spirit of cooperation to strengthen the policy framework that will unleash not just Pathways but also a wave of other low-carbon projects. 

Stronger carbon markets are the key to making industrial decarbonization contagious across the Canadian economy. Like Alberta Premier Danielle Smith said at the press conference following Monday’s meeting, “there’s lots of ways to decarbonize.” Carbon markets let companies figure out the best and cheapest ways, without the need for government intervention or funding. 

The federal government should strengthen Canada’s carbon markets by freeing them to do their work. Cancel duplicative policies like the oil and gas emissions cap and the Clean Electricity Regulations. They’re unnecessary. Instead of driving investment and reducing emissions, they’ve created confusion and inflamed federal-provincial tensions. 

The federal government should strengthen Canada’s carbon markets by freeing them to do their work.

Michael Bernstein, President and CEO, Clean Prosperity

We also need better supports for carbon credit prices. Alberta, for example, has Canada’s biggest carbon market, but it’s being hobbled by an oversupply of carbon credits. When companies invest in technology to reduce emissions they’re rewarded with credits that they can sell to emitters. But if the credits aren’t worth enough, it undermines the investment case.

Napkin math shows that every additional dollar in carbon credit value could be worth $22 million a year to a completed Pathways project, for example. That’s $2 billion per year if credits trade close to the current price of $95 per tonne, or $3.7 billion at the scheduled $170 per tonne in 2030. Higher carbon credit prices further improve the investment case for decarbonization.

If Alberta commits to ensuring that credit demand always exceeds supply, it can push up credit prices — and support investment in Pathways and other low-carbon projects that create growth and jobs. 

Industrial decarbonization projects are expensive to build and operate. The carbon credits they generate only have value by virtue of government policy. Companies need some insurance in order to justify making big long-term investments. 

The federal and provincial governments should address this by jointly offering standardized carbon contracts that guarantee the future value of credits, and make them widely available.

Finally, provinces should incorporate carbon markets into their drive to break down interprovincial trade barriers. Linking carbon markets together will support the vision of unifying Canada’s economy, and will help accelerate low-carbon investment. To make integration work, provinces will need to improve the transparency of markets by publishing better data about credit transactions.

This is an exciting moment for Canada. There’s a feeling of renewal and opportunity that we need to quickly seize. Whether the moment turns out to be a historic one in our progress towards a prosperous low-carbon economy now depends on bold moves by Canadian industry and smart policy choices by governments.

_{Photo credit: KentSorensen from Getty Images}