By Natasha Bulowski
Local Journalism Initiative Reporter
Canada’s National Observer
Alberta Premier Danielle Smith and Saskatchewan Premier Scott Moe are pulling their punches despite a message in budget 2025 that they need to abide by federal industrial carbon pricing standards.
Both premiers are notorious for challenging the federal government on all manner of climate and energy policies, but had mild reactions to the federal budget this week.
The budget said the federal government will “promptly and transparently” apply the federal industrial carbon pricing backstop whenever a provincial or territorial system falls below the benchmark. This would have implications for Saskatchewan, which reduced its industrial price to zero on April 1, and Alberta, which froze its price at $95 per tonne and proposed changes experts say would undermine its carbon credit market.
“At this time, Alberta is reserving judgment on the budget until we have concluded negotiations with the federal government on a MOU which we hope to have completed by mid November,” Smith said in an emailed statement to Canada’s National Observer on Wednesday.
The MOU Smith referenced includes discussion on a wide range of issues like removal, carve-out or overhaul of laws like the Clean Electricity Regulation and the Oil Tanker Moratorium Act and an agreement to work towards ultimate approval of the Alberta to BC bitumen pipeline as well as the Pathways project, Smith said on Oct. 9.
“We will then have a much better idea regarding whether or not the current federal government is serious about repealing or overhauling the various policies and laws that have devastated Alberta’s economy over the past decade and put the very stability of Albertan’s electricity grid at existential risk,” Smith said in her emailed response on Nov. 5.
“Although we remain hopeful of reaching a positive outcome, because we are in the midst of sensitive negotiations with the federal government, we do not wish to comment further at this time,” Smith said.
Moe’s staff did not directly respond to questions posed by Canada’s National Observer but shared tape from a press conference with Saskatchewan’s Deputy Premier Jim Reiter.
“On the carbon tax, we’ve been having some discussions with the federal government. That’s continuing. We’re optimistic something can happen in the next little while on that,” Reiter said.
“There’s a number of things we’ve asked for that aren’t mentioned in there we’re going to continue to advocate for.”
‘A game of chicken’
The budget did offer an olive branch to industry and premiers like Smith and Moe by promising to reverse anti-greenwashing legislation following an uproar from industry groups like the Pathways Alliance.
Along with the industrial carbon price, Moe’s government opposes the same suite of climate policies as Smith, including the federal Clean Electricity Regulations. Saskatchewan is currently facing a judicial review for its choice to extend the life of its coal-fired power plants.
When Saskatchewan abandoned the industrial carbon price in April the federal government did not bring in the federal backstop. Carney, Finance Canada and Environment and Climate Change Canada have not answered questions on when the federal government will apply the backstop in Saskatchewan.
The budget says the backstop will be applied “promptly” to provinces and territories that are not up to par. This language is “promising” and suggests the federal government will start actually holding provinces to account, said Scott MacDougall, director of the Pembina Institute’s electricity program.
“This is a game of chicken,” Dennis Pilon, a political science professor at York University, told Canada’s National Observer in a phone interview.
“The risk for Alberta and Saskatchewan is, if they’ve got a government that is willing to build a pipeline, do they want to alienate them?”
He said Alberta and Saskatchewan have to be careful because the fact is, the pipelines are “very, very popular in their provinces and almost nowhere else” and ultimately a pipeline would have to be built across provinces that don’t want one so they’re going to need a federal government to help carry that out.
“If they’re too difficult, if they’re too nasty, if they’re unwilling to cooperate, then they may not get what they want,” Pilon said.
“Carney’s got options; he doesn’t have to rely on Saskatchewan and Alberta to get the Liberal Party elected nationally, but Alberta and Saskatchewan do need to rely on a friendly federal government to make their plan come to fruition.”
In politics, premiers like Smith and Moe want to fight and rally the troops — whether it’s on climate, crime, or immigration — “but sooner or later they have to actually do something, they have to get some results,” Pilon said. At the same time, he expects Carney is going to try to use his leverage in these pipeline talks and negotiations to get concessions on key policies like industrial carbon pricing.
The budget suggested the proposed regulations to cap oil and gas sector emissions “would no longer be required” if the industrial pricing regime and methane regulations are strengthened and carbon capture and storage technology is deployed.
“That might also be part of the negotiations going on,” mused Anna Johnston, a lawyer at West Coast Environmental Law.
Smith and Moe vehemently oppose the emissions cap, and it appears the government is willing to kill this climate policy if the industrial pricing system is strengthened and provinces — largely Alberta and Saskatchewan — get on board.
“What I’m hoping this budget is signalling to the provinces is, ‘If you do something, then we’ll back off. But if you don’t do enough, then we are going to step back up to the plate,’” Johnston said, adding the federal government also threw other bones to the provinces and industry, such as LNG and carbon capture tax incentives and a commitment to reverse amendments so companies no longer have to prove their environmental claims.
Renewed dialogue with provinces
Looking at the language in the budget and Smith’s mild-mannered response, “it certainly seems to suggest that the door is open for collaboration with the provinces,” Julie Simmons, associate professor of political science at Guelph University, said in an interview with Canada’s National Observer.
“Carney has worked quite carefully to renew dialogue with provinces that seemed to be quite fractured with the federal government under the Trudeau Government,” Simmons said.
Smith’s statement suggests that she doesn’t think there’s much to gain by criticising the federal government for this budget, but she’s also signalling to the federal government that she could become a “very vocal irritant” for the federal government in the future, depending on how those negotiations unfold, Simmons said.
Simmons added that at any given time (but particularly now, with the US trade war threatening entire Canadian industries) there are so many interrelated intergovernmental files and negotiations taking place at the same time — some in a state of conflict, some in a phase of cooperation. This file appears to be in a more cooperative phase compared to the Trudeau era, but federal provincial negotiations are all “smoke and mirrors and chess” to outsiders, she said.
At an announcement in Ottawa on Wednesday morning, Carney said on industrial carbon pricing that “we believe in cooperative federalism, so we don’t just say by fiat, ‘this is what you’re going to do.’ We work with the provinces in order … to tighten the system.”
At a press conference in Vancouver on Wednesday BC Premier David Eby said the federal budget includes some “really positive pieces of news for British Columbians and Canadians” including the clean electricity investment tax credit that could help build the proposed North Coast Transmission line from Prince George to Terrace, to support expanded LNG facilities.
However, the province still wants to see more forestry sector support and infrastructure funding, Eby said. When asked about the federal government further setting the stage to scrap the proposed oil and gas cap Eby said “We’re going to follow closely what their plans are and respond accordingly.” The province is conducting a provincial review of its Clean BC program and the results of that review “will inform our provincial decisions about how to move forward,” Eby said.