On Thursday, November 27, the Government of Canada and Alberta formally signed a Memorandum of Understanding (MOU). Alberta and Canada have agreed to collaborate on shared long-term objectives to establish Canada as a global energy superpower by unlocking the growth potential of Western Canada’s resources. This includes oil and gas (specifically liquified natural gas (LNG)), renewable energy, critical minerals, and other commodities required to meet global energy and economic demands. This agreement arrives against the backdrop of the United States fundamentally reshaping its trade relationship with Canada and other nations. Consequently, the MOU outlines a stated objective for Canada to diversify its trading partners and expand energy exports to Asian markets.
The framework strengthens federal-provincial collaboration to drive financial investment into energy infrastructure and achieve net-zero emissions by 2050. The agreement includes concessions from both governments and centers on the development of two core projects: a new bitumen pipeline to Asian markets and the Pathways carbon capture, utilization, and storage (CCUS) project. These projects are mutually reinforcing–designed to increase pipeline capacity by at least one million barrels a day of Alberta bitumen–while ensuring the transported oil ranks among the lowest carbon-intensity barrels globally through the Pathways and other CCUS initiatives.
Key negotiated items include Canada withholding implementation of the oil and gas emissions cap, suspending the Clean Electricity Regulations (CER) in Alberta, and Alberta designing sector-specific stringency factors for large emitters in both the oil and gas and electricity sectors through its TIER system. Additionally, the deal includes funding commitments for CCUS infrastructure projects and the removal of specific greenwashing provisions.
Proposed Pipeline Construction and Scrapping of the Oil and Emissions Cap
The central pillar of the MOU is the construction of one or more private-sector financed pipelines. Both governments reiterated the need for the pipeline to be financed privately to avoid repeating the Trans Mountain scenario, which the federal government acquired in 2018 due to project uncertainty and potential withdrawal concerns.
The pipeline would transport at least one million barrels of low-emissions Alberta bitumen per day to export hubs prioritizing Asian markets. This capacity would be in addition to the expansion of the Trans Mountain pipeline.
Alberta will act as the proponent and offer opportunities for Indigenous co-ownership, with the application for the pipeline project ready to submit to the Major Projects Office (MPO) on or before July 1, 2026. The government will collaborate with Alberta to provide a clear and efficient approval process under the Building Canada Act, creating a pathway to enable the export of bitumen from a deep-water port on the British Columbia coastline. If necessary, adjustments will be made to the Oil Tanker Moratorium Act. While Canada and Alberta will engage with the Government of British Columbia in trilateral discussions, Premier Danielle Smith explicitly stated during the press conference that the MOU does not contain a veto for British Columbia or any other party.
The federal government also committed to not implementing the oil and gas emissions cap originally scheduled to come into effect at the beginning of 2030. This decision provides longer-term certainty, allowing for an increase in oil production and future infrastructure investment.
Suspension of the Clean Electricity Regulations & TIER Commitments
Canada agreed to an immediate suspension of the Clean Electricity Regulations, pending a new carbon pricing agreement (to be administered through TIER). Upon completion of this agreement, Canada will place the CER in Alberta in abeyance. The objective is to increase electricity generation for consumer and industrial use and provide grid stability to meet the needs of thousands of megawatts of AI computing power and data centers.
In exchange for this suspension, Alberta will regulate heavy electricity generation emitters through the Technology Innovation and Emissions Reduction (TIER) program. The federal government and Alberta will work collaboratively to design long-term carbon effective prices and carbon levy recycling protocols. They will ensure the application of Alberta’s carbon pricing system (including pricing and stringency) is adapted to the specific circumstances of the electricity sector, the oil and gas sector, and other large emitters such as the fertilizer and cement sectors. An agreement on industrial carbon pricing equivalency will be reached on or before April 1, 2026.
The MOU stated that the TIER system will ramp up to a minimum effective credit price of CAD 130/tonne (surpassing the current freeze at CAD 95). No further specifics on the scheduled increase were provided, as the MOU noted that the implementation date and price trajectory will be addressed in the new agreements.
Pathways and CCUS
A key contingency of the MOU is the construction and financing of the Pathways CCUS projects. Alberta will extend the Alberta Carbon Capture Incentive Program (ACCIP) to support Pathways, while the federal government will extend federal Investment Tax Credits (ITCs) to encourage large-scale CCUS investments, including Pathways and enhanced oil recovery. Both governments will enter into a trilateral MOU with Pathways partner companies on or before April 1, 2026, to develop a multi-phased approach to delivering a set of emissions-saving projects. The Phase 1 Pathways Projects will be built and commence operations in a staged manner between 2027 and 2040 to achieve committed emissions reductions at date-certain intervals.
Within the MOU, the Pathways project and the bitumen pipeline are prerequisites for one another, establishing mutual dependency.
A final item included within the MOU is both governments agree to enter into a methane equivalency agreement on or before April 1, 2026, with a target date of 2035 and a 75% reduction target relative to a 2014 baseline.
Further supporting the investment climate, and consistent with the framework outlined in Budget 2025, the federal government will propose amendments to the Competition Act. These amendments aim to remove specific "greenwashing" provisions that are currently creating investment uncertainty.
The MOU outlines specific timelines for delivering the stated outcomes. Having a clearer indication of when further details will be released is constructive for the market and supports longer-term stability, though many aspects still require clarification before any significant upside can be realized.
ClearBlue will continue to monitor these developments and update clients as new information becomes available on industrial carbon pricing equivalency and the proposed TIER amendments, including the direct investment pathway. Contact us for Market Intelligence subscription information.