Prime Minister Mark Carney and Alberta Premier Danielle Smith clash on emissions cap as energy industry demands action
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Energy policy is shaping up to be a defining issue in Canada’s upcoming federal election. With climate goals clashing with economic and regional concerns, the direction taken by the next government could reshape the future of the country’s most important industry—oil and gas.
Prime Minister Mark Carney, the former Bank of Canada and Bank of England governor now leading the Liberal Party, finds himself at the centre of a growing storm over emissions policy and national unity.
Last week, confusion erupted over the government’s position on the emissions cap for oil and gas producers. On Thursday, Environment Minister Terry Duguid stated that the Carney government would maintain the cap. But hours later, speaking at an event in Edmonton, Carney appeared to soften that stance, saying he would work with provinces and industry “on specific ways to get those reductions, as opposed to…having preset caps or preset restrictions on preset timelines.”
Then, on Friday, Carney clarified that the emissions cap would remain in place if his government is elected. However, he pledged to fast-track federal investments in carbon capture and storage technology and methane reduction to help the sector meet those targets.
 Carney stands by emissions cap as Smith warns of unity crisis. |
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“There is a role for an emissions cap—and again, emissions cap, not a production cap, just to be clear because some twist it,” Carney said. He noted the government is putting a framework in place to accelerate emissions-reducing technologies.
Alberta Premier Danielle Smith, leader of Canada’s largest energy-producing province, remains a vocal opponent of the federal policy. Alberta’s economy is heavily reliant on oil and gas, which accounts for more than a quarter of the province’s GDP. In 2022, the sector contributed over $138 billion to nominal GDP, which is about 5.7 per cent of Canada’s total GDP that year, and supports hundreds of thousands of direct and indirect jobs. Smith has long warned that Ottawa’s climate agenda is economically damaging and constitutionally overreaching.
She has demanded the removal of the emissions cap, repeal of clean energy regulations and the federal ban on single-use plastics, an end to the net-zero vehicle mandate, and provincial control over the industrial carbon tax. In an email to Bloomberg, Smith said she made it clear to Carney that Alberta will not accept “an export tax or restriction of Alberta’s oil and gas to the United States.”
She also presented a broader list of demands, including establishing oil and gas corridors to the north, east and west, repealing legislation she says hinders pipeline development and lifting the tanker ban off British Columbia’s northern coast. Smith warned that the next prime minister must act on the list within the first six months of their term “to avoid an unprecedented national unity crisis.”
Carney acknowledged the need to build large-scale energy projects, including in Alberta, but stopped short of endorsing specific proposals or repealing existing federal legislation. He emphasized the opportunity for Canadian energy to reach global markets.
“We need new customers in Europe and elsewhere,” he said, suggesting that export routes through Canada’s North could unlock new opportunities for Alberta producers.
Conservative Leader Pierre Poilievre called Smith’s list of demands “very reasonable” but declined to commit to fulfilling them.
“You’ll have to see the rest of our platform roll out in due course,” he told reporters in suburban Ottawa. Poilievre characterized Smith’s move as a tactical effort to force clarity on federal energy positions.
Meanwhile, leaders from Canada’s oil and gas sector weighed in with an open letter to federal political parties. As reported by Calgary Herald columnist Chris Varcoe, an alliance of CEOs from top petroleum producers and pipeline companies urged Ottawa to declare a “Canadian energy crisis” and set firm six-month timelines for approving major infrastructure.
“We are at a turning point in Canada’s history and national interest. There is increasing public support to urgently grow our energy sector and build energy infrastructure,” the letter stated.
The group—which includes members of the Pathways Alliance—called for eliminating the emissions cap, repealing the federal carbon levy on large emitters, simplifying federal environmental assessments and lifting the B.C. northern coast tanker ban.
Even Quebec, traditionally opposed to pipelines, appears to be shifting. Premier François Legault acknowledged that public opinion is changing.
“Given what Donald Trump is saying, the opinion is changing right now,” he said after a meeting of provincial premiers and Carney last Friday. “We’re open to these kinds of projects,” he added, in reference to new pipeline discussions.
Ahead of the premiers’ meeting, federal Finance Minister François-Philippe Champagne met with his provincial and territorial counterparts in Montreal to discuss large-scale, nation-building infrastructure. He said Ottawa is open to interprovincial hydroelectric transmission initiatives and other economic growth efforts.
Ontario Finance Minister Peter Bethlenfalvy highlighted the Ring of Fire mining region in Northern Ontario as a top development priority.
“The status quo is no longer an option,” he said.
British Columbia Finance Minister Brenda Bailey said her province has identified 18 priority projects, including clean energy, mineral extraction and LNG.
“Minister Champagne has challenged us to identify more projects, and I’m very hopeful that on the other side of this trade conflict, Canada will be so much stronger,” she said.
With provinces signalling openness, industry leaders pushing for action and the public watching closely, Canada’s energy stakeholders must seize this rare window of opportunity. The path to growth—and national unity—may well depend on it.
Toronto-based Rashid Husain Syed is a highly regarded analyst specializing in energy and politics, particularly in the Middle East. In addition to his contributions to local and international newspapers, Rashid frequently lends his expertise as a speaker at global conferences. Organizations such as the Department of Energy in Washington and the International Energy Agency in Paris have sought his insights on global energy matters.
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