Carney Flips on Tax Breaks for Phony Carbon Capture

Dec. 3, 2025

Carney ‘Will Have To Answer’ Questions About Flip-Flop on Tax Credit, Liberal MP Says

A British Columbia Liberal MP said Wednesday Prime Minister Mark Carney “will have to answer” questions on why he reversed a budget commitment on tax credits for a controversial and self-defeating form of carbon capture and storage when he signed the Alberta energy deal.

The memorandum of understanding between Ottawa and Alberta extends federal tax credits for carbon capture to enhanced oil recovery (EOR), overturning a commitment the federal government made in the recent budget not to do so, The Canadian Press reports.

Speaking to reporters on his way into a Liberal caucus meeting, Liberal MP Patrick Weiler (L- West Vancouver—Sunshine Coast—Sea to Sky Country) said Canada has a “a pretty clear stance” on moving away from inefficient fossil fuel subsidies and extending tax credits to enhanced oil recovery is a “step in the wrong direction.”

“I think that’s a really important thing that the prime minister will have to answer about,” Weiler said.

Enhanced oil recovery is a carbon storage technology that captures carbon dioxide from oil and gas operations or other industrial emitters, but then injects it underground at oilfields. That increases pressure and pushes more oil out of the rock, while the carbon dioxide is trapped underground.

That means any emission reductions from spending billions (and demanding billions in taxpayer subsidies, most likely permanently) to capture the carbon are more than outweighed by the new oil extraction made possible by EOR. Even if carbon capture technology could operate at peak efficiency—a target the industry itself admits is a decade or more away—it only applies to 20% of the oil in every barrel. The other 80% is released after the oil is exported, reaches its eventual customer, and is burned.

Independent analysts see the extension of the tax credits to enhanced oil recovery as a direct subsidy of oil production, while the industry says tax measures are not subsidies.

The section of the federal budget addressing tax credits for carbon capture utilization and storage, often abbreviated as CCUS, said enhanced oil recovery would not be eligible for a federal tax credit.

But the deal with Alberta commits Canada to extending the credits to encourage large-scale CCUS investments, including the Pathways Alliance project, as well as “enhanced oil recovery in order to provide the certainty needed to attract large additional sources of domestic and foreign capital.”

Mark Scholz, CEO of the Canadian Association of Energy Contractors, said the new subsidy support could help make Western Canada’s conventional oil and gas sector more competitive with U.S. producers. “The U.S. oil and gas sector has for years had access to a federal carbon capture tax credit for EOR projects, and the Canadian conventional oil business has fought hard for the same,” the Globe and Mail reports.

When Canada introduced its own CCS tax credit, “we were always concerned that EOR was removed from the conversation,” Scholz told media Monday.

Green Party Leader Elizabeth May said she had heard rumours that the government was going to reverse its budget commitment on enhanced oil recovery, which initially kept her from supporting the budget, CP writes.

As CP reported last week, former environment and climate minister Steven Guilbeault was dispatched to win May’s vote for the budget last month, having received assurances from Carney’s office that tax credits for enhanced oil recovery would not be in the budget or added to it afterwards.

May told CP last week the flip-flop amounted to a “significant betrayal” and she will now question Carney’s word in future.

Carney did not stop to take questions from reporters Wednesday, either before or after the caucus meeting or as he entered the House of Commons.

Neither Energy and Natural Resources Minister Tim Hodgson nor Environment Minister Julie Dabrusin would answer questions about the tax credit.

Hodgson told CP the day the pipeline deal was signed that extending the tax credits to EOR was important to Alberta.

Finance Minister François-Philippe Champagne told reporters Wednesday he would get back with an answer on why the government contradicted the budget in the Alberta deal.

“I think what you’ve found in the budget is that there’s a number of tax credits. I would say that we’re probably, in the G7, the country which has offered the most competitive tax environment for clean technology when it comes to natural resources,” he said.

“I would say that Canada is well positioned to be a responsible and also a sustainable producer of natural resources.”

Not all Liberal MPs seemed concerned about the change of direction Wednesday.

Marcus Powlowski (L-Thunder Bay—Rainy River) said the government should have the flexibility to adjust the policy stances it presents in the budget.

Nathaniel Erskine-Smith (L-Beaches—East York), meanwhile, said enhanced oil recovery is an unproven method and he would have more to say about it soon.

The main body of this report was first published by The Canadian Press on Dec. 3, 2025.

[Top photo: Shell Quest CCS plant, photo by @EarthAccounting]