The critical role of the Canada-Alberta MOU in Canada’s energy roadmap

 
The stakes are high. With US tariffs threatening Canadian exports and the European Union's Carbon Border Adjustment Mechanism (CBAM) now in force as of January 1, 2026, Canada's access to global markets increasingly depends on demonstrating robust climate credentials. Against this backdrop, the Canada-Alberta MOU represents a critical piece of Canada's climate competitiveness strategy, first unveiled in Budget 2025.

What follows is a progress report on each of the four April 1 deliverables and what remains to be done.

Impact assessment cooperation agreement: delivered

Overlapping federal and provincial authority over major projects in Alberta has long been a flashpoint. Alberta successfully challenged the constitutionality of the federal Impact Assessment Act (IAA) before the Supreme Court of Canada in 2023 and is now contesting the revised legislation in a separate reference before the Alberta Court of Appeal. The MOU committed both governments to negotiating a cooperation agreement by April 1, 2026, with the goal of reducing duplication "through a single assessment process that respects federal and provincial jurisdictions".

They delivered. On March 6, 2026, Alberta and Canada signed a cooperation agreement, which remained open for public comment until March 27. While cooperation agreements under the IAA are not novel, this one marks a significant step forward. It provides for a two-year approval process—in line with the federal Building Canada Act—and recognizes that Alberta is best positioned to lead environmental assessments for projects primarily within provincial jurisdiction. Canada will continue to consult with Indigenous Peoples on its decisions under the IAA.

Methane equivalency agreement: delivered

On March 25, 2026, Canada and Alberta announced an “agreement in principle” for a methane equivalency agreement under the Canadian Environmental Protection Act, 1999 (CEPA). The target: reduce methane emissions 75% below 2014 levels by 2035.

This builds on a track record of cooperation; Alberta and Canada previously concluded methane equivalency agreements in 2020 and 2025. The new agreement recognizes Alberta’s performance‑based approach, which includes regulations, offset credits, and investments. At the federal level, the Enhanced Methane Regulations, published in December 2025, provide flexible, performance-based compliance pathways designed to facilitate equivalency arrangements with provinces.

Under the agreement in principle, the parties will develop an outcome‑based equivalency agreement that would permit federal methane regulations to be “stood down” in Alberta once the province’s regulatory system delivers equivalent emissions reductions. An independent third party, jointly appointed on a cost‑shared basis, will conduct modelling and assess Alberta’s performance. A draft equivalency agreement will be published in 2026 for a 60‑day public consultation, with both parties aiming to finalize it by year‑end.

The finalized agreement is expected to take effect no later than January 1, 2027 and remain in place for 10 years. If third‑party assessments reveal that methane emissions exceed expected levels, Alberta commits to corrective action. Notably, the first compliance obligations under the federal Enhanced Methane Regulations begin in 2028—reinforcing the urgency of aligned implementation.

Carbon pricing equivalency agreement: not yet achieved

This agreement remains under negotiation. The MOU committed Alberta and Canada to entering into a carbon pricing equivalency agreement for large industrial emitters, including in the oil and gas, electricity, cement, and fertilizer sectors, by April 1, 2026. On March 31, Prime Minister Carney acknowledged the deadline would be missed, though he noted discussions continue¹.

The gap between the parties is significant. Alberta's Technology Innovation and Emissions Reduction (TIER) system currently prices emissions at $95 per tonne; the MOU commits Alberta to ramping up to at least $130 per tonne, but is silent on timing. Meanwhile, the federal backstop under the Output Based Pricing System reaches $170 per tonne by 2030. Whether Alberta's pricing will align with that trajectory remains unclear. Premier Smith has emphasized that any agreement must keep Alberta competitive and not deter investment².

Pathways carbon capture and storage project (tri-lateral MOU): not yet achieved

Perhaps the most consequential commitment in the MOU is the construction of a new bitumen pipeline to tidewater, which is contingent on several prerequisites, chief among them being meaningful progress on the Pathways carbon capture and storage project. Pathways would capture and permanently sequester emissions from approximately 20 oilsands facilities in northern Alberta, fundamentally altering the emissions profile of Canadian crude.

Canada and Alberta had committed to signing a tri-lateral MOU with the Pathways partner companies by April 1, 2026. That deadline has passed. The Pathways consortium has not yet reached a final investment decision, and as mentioned above, progress on the carbon pricing agreement (on which Pathways investment economics depend) has stalled. Complicating matters further, several Alberta First Nations with interests intersecting the project have filed a judicial review application, alleging Canada breached its duty to consult in executing the MOU with Alberta. The same First Nations have also applied—so far unsuccessfully—to have the Pathways project designated for a federal impact assessment under the IAA.

Looking ahead

The Canada-Alberta MOU was always ambitious—a bid to reconcile the federal government's climate commitments with Alberta's economic interests in a matter of months. That two of four deliverables crossed the finish line by April 1 is notable progress. That two did not highlights how difficult the remaining issues are.

The carbon pricing gap and the Pathways investment decision are intertwined—and both are essential to unlocking the pipeline commitment that sits at the heart of the MOU. With global markets increasingly demanding low-carbon credentials, and with the EU CBAM now imposing real costs on carbon-intensive imports, the question is whether political will can match the economic incentives for Canada to become a global energy superpower.