The method to Mark Carney’s madness

Liberal prime ministers aren’t supposed to get standing ovations in Calgary, much less from a room packed full of mostly-Conservative business leaders and provincial cabinet ministers who spent the better part of a decade honing their hatred of the Trudeau government. But Mark Carney, for better or worse — more on that in a moment — is clearly not your average Liberal prime minister. After all, he got two standing ovations. 

To some outside of Calgary, it might have looked like an undignified surrender to Danielle Smith and her government’s relentless campaign for more oil and gas production. That’s certainly how the Toronto Star, among others, framed the announcement with a headline suggesting that “Carney drops Trudeau-era climate measures in deal with Alberta.” I’d argue the prime minister did something much different: he saved the most important Trudeau-era climate measure of all. 

The MOU also commits both parties to the construction of “large transmission interties with British Columbia and Saskatchewan to strengthen the ability of the western power markets to supply low carbon power to oil, LNG, critical minerals, agricultural, data centres and CCUS industries.” What it didn’t say, but what Carney surely knows, is that an expanded intertie with British Columbia will also significantly improve the economics of wind and solar projects in Alberta. As a 2023 Pembina Institute report noted, “expanding the interties would also significantly reduce the need for new abated natural gas generation to meet peak-winter demand during low-wind hours.”

In exchange for these spoils, he traded two major Trudeau-era climate policies that might have already been rendered moot. An increase in the effective industrial carbon price to $130 per tonne would make both the emissions cap and Clean Electricity Standard largely redundant, while the industrial carbon price combined with new east-west interties will encourage more low-cost renewable energy in a province that has deliberately resisted it. He is, in effect, placing all of his government’s climate bets on the mechanism he knows best and clearly believes in most: markets. Time will tell whether they pay out. 

It’s fair to ask why Ottawa even needs Alberta’s support for industrial carbon pricing. The federal government could, of course, simply impose the federal backstop, as is its right under the 2018 Greenhouse Gas Pollution Pricing Act. But that would guarantee a nuclear-scale response from Alberta, one that could jeopardize both national unity and the prospect of large-scale decarbonization projects proceeding in that province. As the prime minister of Canada, it’s Carney’s duty to avoid that sort of outcome if possible.  “We believe in cooperative federalism, so we don’t just say by fiat that this is what you’re going to do,” he told iPolitics recently. “We will work with the provinces in order to … tighten the system.”

For many Canadians, though, the cost of Carney’s commitment with Smith overrides any potential payout it might deliver. A new oil pipeline, and especially one through northern British Columbia, is simply a non-starter, a non-negotiable, particularly when an existing pipeline — Trans Mountain — could be upgraded further instead. But one of the surprising strengths that Carney has shown as a politician is his ability to deploy strategic ambiguity in moments like this. He described Donald Trump as a “transformative” president in one of their earliest meetings, a word that seemed to please Trump while communicating his actual position to anyone who was paying closer attention. This MOU strikes me as one giant wink to the climate community — one that commits Ottawa to supporting an oil pipeline Carney knows will never get built. 

That’s because Smith and whoever steps up as its proponent will still need to negotiate with impacted First Nations, who have so far been steadfast in their opposition to the idea. They would have to negotiate with BC Premier David Eby, who will be looking ahead to the next election and the prospect of rallying his base around fighting back against another Alberta oil pipeline. And, most importantly, they will have to convince the oil and gas industry to invest in the sort of high-cost growth projects that would be needed to fill the pipeline. 

That isn’t going to happen. The oil and gas industry may have deliberately cultivated a reputation for itself as a place defined by risk-taking and swagger, but today’s oil and gas sector is run by glorified spreadsheet jockeys who consistently shy away from even the smallest quantum of uncertainty. And while they might support the political ambitions of Premier Smith and the UCP, they also have a legal fiduciary duty to their shareholders — one that requires them to seriously assess the prospect of things like peak oil demand and its impact on any new projects they might want to build. 

The MOU, then, is textbook Carney. By telling a political adversary what they wanted to hear, he’s gotten them to agree to something he needs. He’s effectively daring Danielle Smith to do the work required to get her coveted pipeline built, knowing full well she can’t actually do it. But Smith’s concessions help advance his government’s climate agenda far more than anything the previous federal government managed to achieve in, and with, Alberta. For a guy who wasn’t supposed to be a natural politician, he’s turning out to be pretty good at it — better, even, than the one he replaced.