In a significant political development, Prime Minister Mark Carney and Alberta Premier Danielle Smith have signed a memorandum of understanding that aims to bridge the long-standing divide between federal climate ambitions and Alberta's energy industry. The agreement, signed in Calgary on November 27, 2025, represents a dramatic shift from previous Liberal policies and has drawn mixed reactions from across the political spectrum.
A Deal Born from Political Necessity
The Carney-Smith agreement would have been considered standard Liberal environmental policy just five years ago. However, following the anti-business policies of former Prime Minister Justin Trudeau, the current pact has positioned Carney as unexpectedly pro-energy industry. Liberals view this with disappointment, while conservatives express relief at what appears to be a pragmatic approach to Canada's energy sector.
While Carney deserves credit for negotiating this compromise with his political rival, serious questions remain about whether any pipeline will actually be constructed as a result. The memorandum adds as many regulatory hurdles as it removes, creating a narrow and uncertain path forward for energy infrastructure.
Key Concessions and Commitments
The agreement contains several significant wins for Alberta that Premier Smith can highlight to calm separatist sentiments within her United Conservative Party. Ottawa has formally committed to increasing production of Alberta oil and gas and to approving the construction of one or more privately financed pipelines.
Additional federal concessions include abandoning the planned Oil and Gas Emissions Cap, exempting Alberta from clean energy regulations, and considering a temporary exemption to the west coast tanker ban. These regulatory changes address long-standing points of contention for Alberta's government and energy industry.
However, these concessions may simply remove unnecessary regulatory layers that even environmental standards didn't require. The Trudeau era had created a complex web of regulations including consumer and industrial carbon taxes, clean energy regulations, emissions caps, and the Impact Assessment Act with its broad mandate considering Indigenous knowledge and gender factors.
The Fine Print: New Hurdles Emerge
While the MOU removes some federal obstacles, it establishes new requirements that may prove equally challenging. Alberta must raise its industrial carbon tax from $95 to at least $130 per tonne and reduce methane emissions by 75% below 2014 levels.
Perhaps most significantly, any pipeline project must feature Indigenous co-ownership and consultation. Furthermore, pipeline construction is entirely contingent on the simultaneous development of a massive carbon capture project, allowing Carney to claim the pipeline would transport only low-emission bitumen.
The agreement also introduces potential new delays by requiring immediate trilateral discussions with British Columbia, whose Premier David Eby has already expressed opposition to the deal. While the MOU doesn't explicitly grant B.C. a veto, its inclusion creates additional political complexity for any west coast pipeline project.
Ultimately, the Carney-Smith pipeline agreement represents a political compromise that shifts environmental expectations rather than eliminating them. While it creates a theoretical path for pipeline construction, the numerous conditions and requirements suggest the road ahead remains fraught with uncertainty for Canada's energy industry.
