Squeeze the industry to please his party’s green base or keep output, revenue and high-paying employment flowing?
Talk at the latest climate-change shindig in Dubai has centred around the future of the oil industry and whether countries should pledge to phase out oil and gas production entirely or simply transform the industry in decades to come. Canada always talks a deep-green game at these affairs but are we really ready to nail shut the oil and gas coffin?
Maybe not. In Dubai Canada announced a cap-and-trade approach to oil and gas emissions but argued it won’t actually stop oil and gas production outright. The provinces, who yet again weren’t consulted, may not agree. Besides, promises are one thing. The record is another.
It also emerged in Dubai that the Emirates, seventh largest oil producer, is expecting to increase its production by a million barrels a day (mbd) by 2030. This is not a new trend. According to the U.S. Energy Information Service, the UAE increased production of oil and hydrocarbon liquids like coal oil by 15.3 per cent between 2015 and 2022, from 3.7 mbd to 4.2, fourth-most of all oil-producing economies. That’s much faster than world output, which was up only 3.6 per cent since 2015, reaching 100.1 mbd last year.
The irony — maybe even the hypocrisy — is that three countries in the Americas have increased their petroleum output even more than this Middle Eastern oil sheikhdom has: the U.S., Brazil and, yes, us: Canada.
The Biden administration, which is promising 2030 emissions will be half 2005 levels, has so far failed to stymie oil and gas development. U.S. petroleum and liquids production has soared by 33.9 per cent since 2015, reaching 20.3 mbd in 2022. Two-fifths of the increase has been on Biden’s watch. The U.S., not Saudi Arabia, is now the world’s leading oil producer, accounting for fully 20 per cent of global supply.
The Trudeau government has pledged that 2030 oil and gas emissions will be 42 per cent lower than in 2005. This has led to tensions with the oil- and gas-producing provinces, which are resisting emissions caps for oil, gas and electricity. Ottawa’s opposition to liquefied natural gas sales even as the U.S. and Qatar are making great inroads in the world market has had industry leaders scratching their heads. Even so, since the Liberals came to power in 2015, Canada’s oil and gas production has grown second fastest globally, at 26.7 per cent, to reach 5.6 mbd last year. Much of this growth is due to big investments in the oil sands before 2015 but the production increase has been accommodated by pipeline expansion, with the federally-owned TMX soon to come on stream.
Neither Biden nor Trudeau is attending COP28 but Brazil’s president, Lula de Silva, stormed in at the head of a delegation of 2000 to repeat a pledge to cut 2030 emissions to less than half 2005 levels. Much of reduction results from reforestation, however, not phasing out oil and gas. And, to the surprise of attendees, Lula announced that Brazil will align itself more closely with OPEC. No shock there. Since 2015, Brazil’s oil and gas production has risen by 20 per cent, making it the 8th largest producer in the world at 3.8 mbd last year. It now evidently sees itself as a player.
Besides the U.S. Canada, Brazil and UAE, only Iraq (at 10.4 per cent) and Kazakhstan (at 4.5 per cent) have seen their oil production grow faster than the world average since 2015. The rest have had little growth, with seven countries registering declines, including 22.4 per cent in Mexico and 36.7 per cent in Nigeria, the biggest drop anywhere.
The standstill or even loss in oil and gas production in many oil-producing countries since 2015 is due to several factors. Oil prices dropped by three-fifths after 2014 and the pandemic caused another crash. More recently, Saudi Arabia and Russia have persuaded OPEC+ to constrain production and push prices to over US$80 per barrel — mainly in order to replenish their treasuries. In some places, including Ghana, the U.K. and Norway, old fields are depleting. Elsewhere, but especially in Africa and Mexico, crime and political instability continue to discourage development. Finally, in the face of lagging demand, investors have encouraged companies to distribute profits rather than invest in greenfield oil and gas projects.
But top producers like the U.S. and Canada are not holding back and governments aren’t stopping them. Phase-out is all short-term cost in pursuit of climate gains that won’t be realized for decades, if at all. Nor are politicians willing to eliminate the tax revenues and high-paying jobs the industry generates. With energy security crucial in an increasingly dangerous world, oil-consuming countries are finding that intermittent renewable energy and other high-cost energy sources are no substitute for fossil fuels.
As the federal Liberals sink in the polls, they face a many-ways existential choice. Do they pursue their climate promises and phase out oil and gas? Or do they secure the benefits of oil and gas production for years to come? Or, a third option: do they say one thing but quietly do the other? Is it all, as Shakespeare would say, “much ado about nothing”?
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The peak-oil narrative has collapsed, and the IEA’s U-turn marks a major strategic win for Alberta
After years of confidently predicting that global oil demand was on the verge of collapsing, the International Energy Agency (IEA) has now reversed course—a stunning retreat that shatters the peak-oil narrative and rewrites the outlook for oil-producing regions such as Alberta.
For years, analysts warned that an oil glut was coming. Suddenly, the tide has turned. The Paris-based IEA, the world’s most influential energy forecasting body, is stepping back from its long-held view that peak oil demand is just around the corner.
The IEA reversal is a strategic boost for Alberta and a political complication for Ottawa, which now has to reconcile its climate commitments with a global outlook that no longer supports a rapid decline in fossil fuel use or the doomsday narrative Ottawa has relied on to advance its climate agenda.
Alberta’s economy remains tied to long-term global demand for reliable, conventional energy. The province produces roughly 80 per cent of Canada’s oil and depends on resource revenues to fund a significant share of its provincial budget. The sector also plays a central role in the national economy, supporting hundreds of thousands of jobs and contributing close to 10 per cent of Canada’s GDP when related industries are included.
That reality stands in sharp contrast to Ottawa. Prime Minister Mark Carney has long championed net-zero timelines, ESG frameworks and tighter climate policy, and has repeatedly signalled that expanding long-term oil production is not part of his economic vision. The new IEA outlook bolsters Alberta’s position far more than it aligns with his government’s preferred direction.
Globally, the shift is even clearer. The IEA’s latest World Energy Outlook, released on Nov. 12, makes the reversal unmistakable. Under existing policies and regulations, global demand for oil and natural gas will continue to rise well past this decade and could keep climbing until 2050. Demand reaches 105 million barrels per day in 2035 and 113 million barrels per day in 2050, up from 100 million barrels per day last year, a direct contradiction of years of claims that the world was on the cusp of phasing out fossil fuels.
A key factor is the slowing pace of electric vehicle adoption, driven by weakening policy support outside China and Europe. The IEA now expects the share of electric vehicles in global car sales to plateau after 2035. In many countries, subsidies are being reduced, purchase incentives are ending and charging-infrastructure goals are slipping. Without coercive policy intervention, electric vehicle adoption will not accelerate fast enough to meaningfully cut oil demand.
The IEA’s own outlook now shows it wasn’t merely off in its forecasts; it repeatedly projected that oil demand was in rapid decline, despite evidence to the contrary. Just last year, IEA executive director Fatih Birol told the Financial Times that we were witnessing “the beginning of the end of the fossil fuel era.” The new outlook directly contradicts that claim.
The political landscape also matters. U.S. President Donald Trump’s return to the White House shifted global expectations. The United States withdrew from the Paris Agreement, reversed Biden-era climate measures and embraced an expansion of domestic oil and gas production. As the world’s largest economy and the IEA’s largest contributor, the U.S. carries significant weight, and other countries, including Canada and the United Kingdom, have taken steps to shore up energy security by keeping existing fossil-fuel capacity online while navigating their longer-term transition plans.
The IEA also warns that the world is likely to miss its goal of limiting temperature increases to 1.5 °C over pre-industrial levels. During the Biden years, the IAE maintained that reaching net-zero by mid-century required ending investment in new oil, gas and coal projects. That stance has now faded. Its updated position concedes that demand will not fall quickly enough to meet those targets.
Investment banks are also adjusting. A Bloomberg report citing Goldman Sachs analysts projects global oil demand could rise to 113 million barrels per day by 2040, compared with 103.5 million barrels per day in 2024, Irina Slav wrote for Oilprice.com. Goldman cites slow progress on net-zero policies, infrastructure challenges for wind and solar and weaker electric vehicle adoption.
“We do not assume major breakthroughs in low-carbon technology,” Sachs’ analysts wrote. “Even for peaking road oil demand, we expect a long plateau after 2030.” That implies a stable, not shrinking, market for oil.
OPEC, long insisting that peak demand is nowhere in sight, feels vindicated. “We hope … we have passed the peak in the misguided notion of ‘peak oil’,” the organization said last Wednesday after the outlook’s release.
Oil is set to remain at the centre of global energy demand for years to come, and for Alberta, Canada’s energy capital, the IEA’s course correction offers renewed certainty in a world that had been prematurely writing off its future.
Toronto-based Rashid Husain Syed is a highly regarded analyst specializing in energy and politics, particularly in the Middle East. In addition to his contributions to local and international newspapers, Rashid frequently lends his expertise as a speaker at global conferences. Organizations such as the Department of Energy in Washington and the International Energy Agency in Paris have sought his insights on global energy matters.
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At this pivotal global moment, Canada and Alberta, working closely with Indigenous Peoples and industry, must work together cooperatively, and within their respective jurisdictions, to foster the conditions necessary for infrastructure, including pipelines, rail, power generation, a strong and integrated transmission grid, ports and other means that will unlock and grow natural resource production and transportation in Western Canada. As a result, Canada will be able to reach its international export goals and develop new technologies including Artificial Intelligence (AI), and, through innovation and intergovernmental cooperation, be a source of clean energy to lower global greenhouse gas (GHG) emissions.
WHEREAS
Canada and Alberta remain committed to achieving net zero greenhouse gas emissions by 2050;
Alberta and Canada will work together to achieve the shared objective of establishing Canada as a global energy superpower, unlocking the growth potential of Western Canada’s oil and gas (including liquified natural gas (LNG)), renewable energy, critical minerals, and other resources that the world needs;
Alberta and Canada recognize their obligations to consult with, and where appropriate accommodate, Indigenous Peoples; and
Canada and Alberta are committed to respecting Aboriginal and Treaty rights, engaging in early, consistent, and meaningful consultation with Indigenous Peoples, in a manner that promotes reconciliation, and respects the rights and cultures of Indigenous Peoples while advancing economic opportunities through Indigenous ownership and partnerships.
THE OBJECTIVES
The Governments of Canada and Alberta are focused on achieving the following objectives and have developed the following clear actions towards this goal:
Increasing production of Alberta oil and gas to reach Canada’s export and national security goals, creating hundreds of thousands of new jobs, while simultaneously reaching carbon neutrality by, in part, reducing the emissions intensity of Canadian heavy oil production to best in class in terms of the average for heavy oil by 2050.
Increasing electrical generation for consumer and industrial use on Alberta’s electricity grid, including meeting the needs of AI data centres, while simultaneously reaching net-zero greenhouse gas emissions for the electricity sector by 2050.
Creating electricity and energy policies that address consumer affordability, electricity grid stability, economic competitiveness and long-term competitive certainty, that attract Canadian and foreign sources of private sector capital investment.
Reducing layers of regulatory overlap and simplifying regulatory systems to ensure a maximum 2-year timeframe for permitting and approvals with the goal of shorter project approval timelines where feasible.
Providing meaningful opportunity for Indigenous rightsholders to participate in consultation processes and economic opportunities through Indigenous ownership, partnerships and benefits.
THE PROJECTS
Construction of one or more private sector constructed and financed pipelines, with Indigenous Peoples co-ownership and economic benefits, with at least one million barrels a day of low emission Alberta bitumen with a route that increases export access to Asian markets as a priority. The application for this pipeline project will be ready to submit to the Major Projects Office on or before July 1, 2026. It is agreed this new pipeline would be in addition to the expansion of the Trans Mountain pipeline for an additional 300,000 to 400,000 barrels per day destined for Asian markets.
Construction and financing of the world’s largest carbon capture, utilization, and storage (CCUS) project (Pathways) for the purpose of making Alberta oil among the lowest carbon intensity produced barrels of oil in the world.
Construction of thousands of megawatts of AI computing power, with a large portion dedicated to sovereign cloud for Canada and its allies.
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 in support of their sustainability goals.
THE COMMITMENTS
Alberta commits to:
Act as proponent for advancing the development of a bitumen pipeline to Asian markets, that offers the opportunity for Indigenous co-ownership and other forms of economic benefits, for designation and authorization under the Building Canada Act.
In consultation with Indigenous leadership, utilize the Alberta Indigenous Opportunities Corporation (AIOC) to help backstop Indigenous co-ownership of the bitumen pipeline project and, if appropriate, Pathways.
Extend the Alberta Carbon Capture Incentive Program (ACCIP) to support Pathways.
Foster the development of sequestration permitting, worker training, and the capability for Alberta exports of CCUS-related products and services.
On or before July 1, 2026, implement a policy framework to incentivize large investments in data centre development, including incentives for Canadian sovereign computing.
On or before January 1, 2027, collaborate with Canada to develop a nuclear generation strategy to build and operate competitive nuclear power generation that can serve the Alberta and inter-connected markets by 2050.
Collaborate with Canada to significantly increase the inter-tie transfer capability between the western provinces (with consideration to the northern regions) to build the low carbon generation and transmission grid that supports the growth of low intensity heavy oil, LNG, critical minerals, agriculture, data centres and CCUS industries for export growth and domestic use.
Collaborate with B.C. to ensure British Columbians share substantial economic and financial benefits of the proposed pipeline.
Canada commits to:
In consideration for the mutual commitments agreed to in this MOU, Canada will not implement the Oil and Gas Emissions Cap, which has not yet been put into effect.
Acknowledge Alberta’s approach to regulating heavy electricity generation emitters through Alberta’s Technology Innovation and Emissions Reduction (TIER) program for Alberta to provide long-term certainty and time needed by industry and innovators to develop the needed CCUS, direct air capture, nuclear infrastructure and other emissions technologies necessary to achieving a net-zero power grid by 2050.
Suspend immediately the Clean Electricity Regulations (CER) in Alberta pending a new carbon pricing agreement, which includes the electricity sector, administered through Alberta’s TIER program to be negotiated by the parties on or before April 1, 2026. Upon completion of the new carbon pricing agreement and factoring all other measures to the satisfaction of both parties, Canada will place the CER in Alberta in abeyance.
Declare that an Alberta bitumen pipeline to Asian markets as a priority, that offers opportunities for Indigenous co-ownership and economic benefits, is a project of national interest and can be referred to the Major Projects Office for consideration of designation under the Building Canada Act.
Collaborate with Alberta to provide a clear and efficient approval process for the Alberta bitumen pipeline under the Building Canada Act.
In consultation with Indigenous leadership, utilize Canada Indigenous Loan Guarantee Corporation to help backstop Indigenous co-ownership of the bitumen pipeline project and, if appropriate, Pathways.
If an Alberta bitumen pipeline is ultimately approved under the Building Canada Act and provides opportunities for Indigenous co-ownership and shared economic benefits, Canada confirms that it will enable the export of bitumen from a strategic deep-water port to Asian markets, including if necessary through an appropriate adjustment to the Oil Tanker Moratorium Act.
Extend federal ITCs and other policy supports to encourage large scale CCUS investments, including Pathways and enhanced oil recovery in order to provide the certainty needed to attract large additional sources of domestic and foreign capital.
Work collaboratively with Alberta to design policy supports that enable deployment of nuclear technology, CCUS and energy storage to enable decarbonization of the electricity system, while ensuring its reliability and affordability.
As outlined in Budget 2025, propose amendments to the Competition Act to remove some of the “greenwashing” provisions that are creating investment uncertainty.
Undertake to conduct good faith consultations with Alberta on the development and implementation of federal regulatory or policy measures that might impact Alberta industry and the shared goal of making Canada a global energy superpower.
Canada and Alberta together will:
Canada and Alberta agree to engage with British Columbia immediately in a trilateral discussion on the pipeline project, and during the potential development and construction of the bitumen pipeline referred to in this MOU, and to further the economic interests of B.C. related to their own projects of interest that involve the Province of Alberta including interties. In addition, Canada will work with B.C. on other projects of national interest in their jurisdiction.
Canada and Alberta also agree to engage meaningfully with Indigenous Peoples in both Alberta and British Columbia on this project, with the involvement of the B.C. Government for engagement with B.C. First Nations.
Work collaboratively to design and commit to globally competitive, long-term carbon effective prices, carbon levy recycling protocols, and sector-specific stringency factors for large Alberta emitters in both the oil and gas and electricity sectors through Alberta’s TIER system. The TIER system will ramp up to a minimum effective credit price of $130/tonne. The parties will conclude an agreement on industrial carbon pricing on or before April 1, 2026.
Examples of issues to be addressed in the new agreement include the date for introduction of the effective price and the price increases over time.
This industrial carbon pricing agreement will include a financial mechanism to ensure both parties maintain their respective commitments over the long term to provide certainty to industry, and to achieve the intended emissions reductions.
Recognizing Alberta’s jurisdiction over the TIER system, Canada and Alberta agree to work co-operatively to ensure the Alberta carbon market functions reliably and provides a predictable basis for decision-making by industry and investors. This includes a shared undertaking that following the completion of this Memorandum of Understanding, the two governments will work co-operatively to 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 fertilizer and cement sectors.
Enter into a methane equivalency agreement on or before April 1, 2026, with a 2035 target date and a 75% reduction target relative to 2014 emissions levels.
Work cooperatively with the Pathways partner companies to develop and enter into a tri-lateral MOU on or before April 1, 2026 for a multi-phased approach to delivering a set of emissions savings projects (the “Phase 1 Pathways Projects”), focused predominantly on carbon capture and storage, solvent-based replacements or other actions taken by Pathways that reduce emissions intensity. 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. Canada and Alberta agree this tri-lateral MOU and the approval and commencement of the initial Phase 1 Pathways Projects will be a precondition to the commencement of the approved bitumen pipeline referred to in this MOU.
Canada and Alberta agree that the approval, commencement and continued construction of the bitumen pipeline is a prerequisite to the Pathways project, including the extension of the Alberta ACCIP Program.
Canada and Alberta agree that the Pathways Project is also a prerequisite to the approval, commencement and continued construction of the bitumen pipeline, given that the two projects referred to in this MOU are mutually dependent.
Canada and Alberta agree that in order to hold all parties to account for all phases of the Pathways projects, the trilateral MOU with Pathways must include effective enforcement mechanisms to ensure the completion of all phases of the infrastructure and the associated emissions reductions by the Pathways companies as outlined in the MOU. Such mechanisms could include, but are not limited to, tax and regulatory measures.
Canada and Alberta agree to work collaboratively, including with other provinces where appropriate, to develop domestic carbon capture supply chains and Canadian steel and pipe production supply chains.
Negotiate a cooperation agreement on impact assessments on or before April 1, 2026, that reduces duplication through a single assessment process that respects federal and provincial jurisdictions.
Work cooperatively to streamline the regulatory processes among federal agencies, the Canadian Energy Regulator, the Alberta government and municipalities to achieve a maximum 2-year timeframe for approvals while targeting shorter approval timelines where feasible.
Work cooperatively with Indigenous parties in Alberta to consult and accommodate on the CO2 pipeline and capture and storage facilities related to Pathways.
Continue to work together to achieve the objectives set out in this MOU.
Establish a communications protocol whereas each party must agree to public communications of this MOU and its content prior to information being released.
IMPLEMENTATION COMMITTEE
Canada and Alberta will appoint an Implementation Committee responsible for delivering the following outcomes:
A carbon pricing equivalency agreement on or before April 1, 2026.
A methane equivalency agreement on or before April 1, 2026.
A tri-lateral MOU with the Pathways companies on or before April 1, 2026.
A cooperation agreement on impact assessments by on or before April 1, 2026.
Determining the means by which Alberta can submit its pipeline application to the Major Projects Office on or before July 1, 2026.
Acquiring feedback from the federal government for Alberta’s policy framework for AI data centres which is to be finalized by Alberta on or before July 1, 2026.
Collaborating with Alberta on the design of Alberta’s nuclear power generation strategy which is to be finalized by Alberta on or before January 1, 2027.
