OTTAWA — Prime Minister Mark Carney's government is moving to eliminate the proposed cap on oil and gas emissions while also enhancing the industrial carbon pricing system. In the federal budget released on Tuesday, the government outlined its commitment to enforce carbon pricing in provinces that do not meet federal standards. This approach aims to reduce emissions and attract private investment, a central element of Carney's new "Climate Competitiveness Strategy."

The budget is part of Carney's spending plan for 2025-26. During the recent federal election, he promised to develop strategies that would help industries lower emissions and adapt to clean technologies. Unlike U.S. President Donald Trump, who has advocated for increased oil production, Carney's government is focusing on the global shift toward clean technologies. The government asserts that international buyers of Canadian resources, including oil and gas, prefer lower-carbon products.

Carney's strategy continues to support tax credits for clean technologies, such as carbon capture and storage and hydrogen, which were initiated under former Prime Minister Justin Trudeau. The government aims to strengthen its industrial carbon pricing system, which targets large emitters. Currently, provinces and territories can implement their own systems as long as they adhere to minimum federal requirements for emissions pricing. These levies are set to increase annually until 2030. If jurisdictions fail to comply, the federal government can impose its own pricing system, referred to as a backstop.

The budget states, "The government will improve its application of the benchmark — the tool that ensures all provincial and territorial pricing systems are harmonized across the country in providing a common, strong price signal." It also emphasizes that the government will apply the federal backstop transparently whenever a provincial or territorial system falls below the benchmark.

Carney's government has not explicitly committed to meeting Canada's emission-reduction targets for 2030 and 2035. Instead, Carney emphasized a focus on achieving "results over objectives." Strengthening the industrial carbon pricing system was a key promise made during the April federal election. This comes after the government canceled the consumer carbon tax, which Carney described as divisive.

Calls for improvements to the industrial carbon pricing system have come from climate policy organizations. Meanwhile, Opposition Conservative Leader Pierre Poilievre has demanded the scrapping of the system. Earlier this year, Saskatchewan and Alberta announced they would step back from the carbon pricing system. Saskatchewan Premier Scott Moe paused the industrial carbon tax in March, while Alberta Premier Danielle Smith indicated she would not increase the province's levy as planned for 2026. However, Smith has expressed a willingness to consider changes.

Smith is also urging Carney's government to eliminate several environmental policies from the Trudeau era, which she claims hinder Alberta's oil production. Additionally, she is advocating for the approval of a new million-barrel-per-day bitumen pipeline to British Columbia's coast, a project that Carney's government has said it will consider once a proposal is submitted.

The budget suggests a willingness to revise the proposed cap on oil and gas emissions, a policy that Smith has criticized for discouraging production. The document states, "Canada is committed to bringing down the emissions associated with the production of oil and gas. Effective carbon markets, enhanced oil and gas methane regulations, and the deployment at scale of technologies such as carbon capture and storage would create the circumstances whereby the oil and gas emissions cap would no longer be required as it would have marginal value in reducing emissions."

Carney's government has identified a significant carbon capture and storage project in Alberta as a priority for development. Finance Minister Francois Philippe-Champagne stated, "The message we’re sending is, when the conditions are going to be met, we won’t need the cap anymore."

In addition to carbon pricing, Carney's strategy includes collaborating with provinces on clean electricity regulations, finalizing methane regulations for the oil and gas sector, and updating clean fuel regulations. The government also plans to review the electric vehicle mandate, which has been delayed until 2026.

Carney's government intends to revisit recent changes to the Competition Act, which aimed to prevent companies from making misleading claims about their climate change efforts. The budget notes that these measures have created investment uncertainty and may hinder environmental protection efforts. The government plans to remove some of these changes while maintaining protections against false claims.

The budget also confirmed plans to wind down a two-billion-dollar tree planting program while honoring existing contracts. Other climate-related initiatives identified for cuts include incentives for medium and heavy-duty zero-emission vehicles and a grant program for homeowners seeking energy-efficient upgrades, which is no longer accepting new applicants.