The world is cooling on carbon capture. Why is Canada still barreling ahead in the oil sands?

An hour north of Bergen, up a two-lane highway into the foothills of Norway’s fjords, there is a project to save the planet.

Northern Lights, in Øygarden, a coastal region surrounded by the North Sea, is the world’s first cross-border carbon dioxide transport and storage hub, designed to capture CO2 emitted during industrial production and then bury it. Built on rocky terrain that resembles Peggy’s Cove, the industrial park houses a port, storage tanks the size of grain silos and a labyrinth of stainless-steel pipes.

For two decades, Norway has dreamed of showing the world that carbon capture is both scientifically sound and economically feasible. At Northern Lights, liquid CO2 arrives by ship, gets stored in giant tanks, then travels 100 kilometres west through a pipeline into the North Sea, where it is injected into porous rock 2,600 metres below the seabed.

How carbon is captured and stored

in the North Sea

Norway’s Northern Lights transports carbon captured from industrial production and stores it under the North Sea

Carbon

capture

Transport

Receiving terminal

Permanent

storage

Saline aquifer

KEY

CO2 is captured

from industry, liqui-

fied and stored temporarily

Liquid CO2 is transported by ship

Intermediate storage at the receiving terminal

Liquid CO2 sent through a pipe into the North Sea

and injected into a saline aquifer

Diagram is schematic and not to scale

JOHN SOPINSKI/the globe and mail, Source: equinor.com

How carbon is captured and stored

in the North Sea

Norway’s Northern Lights transports carbon captured from industrial production and stores it under the North Sea

Carbon

capture

Transport

Receiving terminal

Permanent

storage

Saline aquifer

KEY

CO2 is captured

from industry, liqui-

fied and stored temporarily

Liquid CO2 is transported by ship

Intermediate storage at the receiving terminal

Liquid CO2 sent through a pipe into the North Sea

and injected into a saline aquifer

Diagram is schematic and not to scale

JOHN SOPINSKI/the globe and mail, Source: equinor.com

How carbon is captured and stored in the North Sea

Norway’s Northern Lights transports carbon captured from

industrial production and store it under the North Sea

Carbon

capture

Transport

Receiving terminal

Permanent

storage

KEY

Saline aquifer

CO2 is captured

from industry, liqui-

fied and stored temporarily

Liquid CO2 is transported by ship

Intermediate storage at the receiving terminal

Liquid CO2 sent through a pipe into the North Sea

and injected into a saline aquifer

Diagram is schematic and not to scale

JOHN SOPINSKI/the globe and mail, Source: equinor.com

The first ship delivering carbon for storage arrived in June, 2025, and one year in, the facility now receives liquid CO2 from two partners, the Heidelberg Materials cement factory in Brevik and a wastewater system near Oslo, with agreements to receive shipments from three more emitters in Sweden, the Netherlands and Denmark over the next few years.

From the start, oil companies have been at the table. While the Norwegian government oversaw development through an arms-length agency called Gassnova, Equinor, Norway’s oil and gas company, is invested in the project alongside Shell and TotalEnergies of France. None of them ship their own carbon there – Northern Lights is built for hard-to-abate sectors such as waste incineration and cement – but their involvement was meant to show the world that government and industry can work together to help tackle climate change.

It’s exactly the type of project Canada has long promised, but never delivered.

Ottawa, Alberta and Canadian oil companies have talked about carbon capture for years, and in 2021 five oil-sands producers came together to form the Pathways Alliance, promising to build a pipeline to bury carbon emissions from their sites. Five years in, there hasn’t been a single shovel in the ground. The oil companies can’t even settle on a way to pay for it, despite making a collective $24.7-billion in profits in 2025.

Lately, though, there’s been progress. In November, 2025, Prime Minister Mark Carney signed a memorandum of understanding with Alberta for a new oil pipeline, and as part of that negotiation, he demanded that a carbon capture project get built. The Prime Minister’s legacy is at stake. After serving as governor of the Bank of Canada and then the Bank of England, Mr. Carney became the United Nations Secretary-General’s Special Envoy on Climate Action and Finance and his name become synonymous with combatting climate change. “No Pathways, no pipeline,” he has said.

Ottawa has since formalized plans for the oil pipeline, which will now travel south, and in July the federal government signed a separate MOU to advance the Pathways project. Final details are due by November, but there is now a concrete plan to construct a 400-kilometre pipeline to transport carbon from oil-sands facilities to an underground hub near Cold Lake, Alta.

On paper, it seems like a win for multiple parties. Oil-sands companies get the crude pipeline they’ve long wanted; Alberta gets to produce more oil, addressing some of the anger that helped fuel a separatist movement; and the Prime Minister can quell some unrest in his caucus over the government’s environmental credibility.

Yet in all this recent deal-making, something’s been glossed over. Around the world, carbon capture is losing its lustre.

“The capture technology works,” says Peter Findlay, director of carbon management at Wood Mackenzie, a global energy consultancy. “There just isn’t enough economic incentive for the industry to grow.”

In other words, the science is solid, but it’s tough to make the math work.

Crucially, transporting carbon is expensive. Canada is lucky to have storage available on shore, unlike Norway’s project, but the Pathways pipeline is still estimated to cost between $20-billion and $30-billion. It’s tough to recoup that money. While there are some uses for captured carbon, such as for carbonated beverages, most gets buried, which means the process is just a cost.

This makes it tough for oil companies to justify, financially speaking. For years they faced pressure from investors to abide by environmental, social and governance principles, but the ESG era has largely died out. Couple that with U.S. President Donald Trump’s disregard for climate change, and a growing number of carbon-capture projects globally have been paused or scrapped.

In Canada, taxpayers are already shelling out at least $35-billion to build a new oil pipeline to the West Coast. Now they’re being asked to cover billions of dollars more for Pathways, a project whose emission reduction targets were just significantly scaled back.

It all raises questions about Mr. Carney’s decision to barrel ahead with the plans. The carbon capture dream, once seen as a panacea by the environmental movement, is looking much less promising.

Norway’s dream

For Norway, launching a carbon-capture project was treated like an Apollo mission. “It is our moon landing,” then-prime-minister Jens Stoltenberg said in a televised New Year’s speech on Jan. 1, 2007.

At the time, a United Nations climate conference in Montreal had just put the environment back on political radars, and as an oil and gas producer in the North Sea, Mr. Stoltenberg believed Norway had an obligation to help combat climate change.

He was also planning for the future. Oil and gas revenues had filled the government’s coffers, helping to fund what is now a US$2-trillion sovereign wealth fund, but they wouldn’t last forever. Norway didn’t have much industry outside of the energy sector, so developing a carbon-capture ecosystem could help soften the blow.

Yet by 2013, Norway had to retreat. Its plans for a carbon-capture project in Mongstad had gone wildly over-budget, and many EU countries were reeling from the European debt crisis, so they were in no place to spend on capture technologies. To pivot, Norway turned its carbon-capture project into a research facility – described at the time by a Norwegian environmental group as “one of the ugliest political crash landings we have ever seen.”

Two years later, nearly 200 parties signed what is known as the Paris Agreement, agreeing to hold the global temperature increase to well below 2°C above pre-industrial levels. The agreement breathed oxygen into Norway’s plans again, and in 2020 its government greenlit the Northern Lights project.

Now fully operational, Norway wants to show it off. The industrial park includes a three-wing visitor centre that its architect, LINK Arkitektur, describes as “a world-class arena for showcasing future storage projects.” The building is reminiscent of Brian MacKay-Lyons’s style of modern, boxy houses dotted along Nova Scotia’s coasts and is supported by stilts, allowing it to hover over a rock formation and look out over the North Sea.

In early June, a thick morning fog enveloped the archipelago surrounding Northern Lights. (There is a saying in Bergen – “Bring your umbrella.” The city gets rain more than 200 days a year.) But by noon the clouds started to lift, and during a presentation in a conference room overlooking the dock, a purple ship, the Northern Phoenix, became much more visible.

Benedicte Staalesen, a former aide to Norway’s prime minister who now leads public affairs for the project, explains there are now four custom-made ships capable of delivering carbon to Northern Lights, and a second dock is being built to service new clients, including an ammonia and fertilizer plant in the Netherlands and a power plant in Sweden.

Progress, it seems. Yet while Northern Lights is expanding, there are some footnotes.

Getting to this point required heavy government support. Despite the partnership with three oil companies, Norway’s government ultimately paid for 80 per cent of Phase 1. (The expansion, meanwhile, will be largely funded by the three private partners, with the European Union covering 20 per cent of the cost.)

In Norway, state funding isn’t necessarily seen as a bad thing. “It’s not possible to finance such projects without government support,” explains Jannicke Gerner Bjerkås, director of carbon capture and storage at Hafslund Oslo Celsio.

Northern Lights also hasn’t had the uptake the planners envisioned. The hope was that once Norway built this project, clients would come. But there haven’t been enough of them yet, two sources familiar with the operations explained. The Globe and Mail is not naming the sources because they were not authorized to speak publicly about the project.

There are multiple reasons for this, the sources said. For one, the project was designed for heavy polluters who emit enough carbon to liquidize it and load onto a ship, which eliminates a lot of smaller-scale companies. And ever since Russia invaded Ukraine in 2022, many European countries have been more focused on shoring up their energy security. Mr. Trump also continually threatens to pull out of NATO, so European governments are spending more heavily on defence. Priorities have shifted.

Another reason: The cost of polluting hasn’t been high enough.

Across Europe, polluters are now subject to something called the Emissions Trading System, in which they pay for what they emit. The hope was that once the cost of polluting got high enough, they would prefer to invest in carbon-capture technology instead. But carbon prices to date haven’t forced that reckoning.

Lessons for Canada

As Canada moves forward with Pathways, there is a lot to learn from Norway’s moon mission.

To start, carbon pricing reform is needed. Provinces are allowed to develop their own systems, and in Alberta, where Pathways is based, it’s called TIER, or the Technology Innovation and Emissions Reduction system. Every large emitter is given an emissions intensity target for its operations, and if the company meets the target in a given year, it is handed credits to either sell to other companies or keep as offsets for future years.

If polluters don’t meet the emissions target, they have to either buy credits for each additional tonne of carbon they emit, at a pre-set carbon price, or they can buy credits from other companies.

For the first few years, the system worked decently. But lately, there’s been a huge oversupply of credits. That means the effective carbon price that Alberta-based companies pay is often much lower than the regulated price. Ottawa acknowledged this in May. “Canada’s carbon credit markets are not working,” the government said in a statement.

To fix it, Canada and Alberta have agreed to set a new effective carbon price, and Alberta will enforce a minimum floor price for its TIER credits starting in 2030.

It sounds good in theory, but the new carbon price is lower than what some environmental groups stressed was necessary. Earlier this year, the Canadian Climate Institute begged the government to impose an effective price of $130 per tonne by 2030. The new rules do mandate this price, but not until 2040.

“Yes, the MOU slightly improves industrial carbon pricing relative to its current status in Alberta—but goodness, that’s a low bar,” the Climate Institute wrote after rules were announced in May.

Because the new rules and prices aren’t too stringent, companies have fewer financial reasons to invest in carbon-capture technology. A few years back, there was talk of creating an industrial zone near Edmonton so that companies who build plants there could connect to the Pathways pipeline. There’s now less reason for them to do that anytime soon.

The second lesson from the Norwegians: Significant government support will be necessary to make carbon capture a feasible option for companies.

Ottawa and Alberta are coming around on this. Under the recent agreement to advance Pathways, Ottawa extended federal investment tax credits for constructing the project through to 2035, the current target to complete the project. It also threw in new tax credits for capital expenditures on enhanced oil recovery.

Beyond 2035, the Pathways MOU says, “Canada and Alberta will maintain appropriate fiscal supports.”

In an e-mailed statement, Charlotte Power, press secretary for Tim Hodgson, the federal Minister of Energy and Natural Resources, said Canada’s objective is “to offer incentives while ensuring that Pathways is responsible for developing the project and reaching a final investment decision.”

She added: “Governments around the world are making similar investments, in some cases that require even greater federal financial support, because carbon capture projects involve significant upfront capital costs but deliver long-term public benefits through emissions reductions, industrial competitiveness, energy security and economic growth.”

Until the final details are released, it’s hard to know how much these incentives will amount to, but economist Charles St-Arnaud at Servus Credit Union in Calgary ran some quick numbers in May and calculated that about 75 per cent of the capital cost for carbon capture and storage is covered by various tax credits. That would put government support around $19-billion out of a potential $25-billion total cost.

Exactly how much the oil producers will pony up won’t be finalized until November, though Ms. Power said the Pathways members “will be expected to finance a material portion of their own investment.”

For years, these companies have argued it’s unfair to have to contribute a material amount to make carbon capture work. Oil prices can be volatile, they argue, with the price of West Texas Intermediate, the North American benchmark, falling back to the US$60-per-barrel range before the U.S. attacked Iran in February. And rival producers in countries such as the United States and Saudi Arabia aren’t mandated to pay for carbon capture.

For environmentalists, this can be infuriating. Protecting the planet matters just as much as quarterly earnings in their eyes. Plus, volatile oil prices can be equally beneficial for oil companies. Cenovus Energy Inc. CVE-T just reported second-quarter earnings and its free cash flow jumped 73 per cent over the first quarter to $3.8-billion after oil prices spiked because of the Iran war.

Martha Hall Findlay, director of the school of public policy at the University of Calgary and the former chief sustainability and chief climate officer at Suncor SU-T, argues public companies can only be expected to contribute so much because of shareholder demands. Capital is global and investors will move their money to oil companies with the best profit margins. Paying for carbon capture eats into those. Plus, “significant infrastructure in this country has almost always had significant government involvement,” she says, citing the railroads and the St. Lawrence Seaway as examples.

However, the industry undeniably got a big win with the government’s new watered-down target for annual carbon capture. Initially, Pathways was supposed to help capture 22 megatonnes of carbon per year by 2030. The new agreement makes it six megatonnes annually by 2035, then rises to 16 megatonnes by 2045.

Portfolio manager Eric Nuttall at Ninepoint Partners LP, who specializes in Canadian energy, put it this way: “As a major investor in the Canadian oil sands, I view this announcement as a win,” he wrote on LinkedIn.

Asked about the lower targets, the Pathways team painted it as a fine balance. “At this scale, the Pathways Project is still one of the largest CCS projects in the world, which we believe is something to celebrate. It’s an ambitious but achievable goal. We believe this volume also finds a balance of reducing emissions intensity while recognizing the importance of maintaining the global competitiveness for our industry,” the alliance said in a statement to The Globe.

As for the environmental crowd, two weeks after the Pathways plan was put forward, Peter Nicholson, board chair of the Canadian Climate Institute, posted an analysis on Sage, a Substack community for policy discussions. He was upset. Mr. Nicholson has worked in government, including serving as deputy chief of staff for policy in the Prime Minister’s Office under Paul Martin, so he’s well-versed on political compromises. But the extent to which Pathways has been weakened still surprised him.

One example: By 2045, nearly two-thirds of Ottawa’s mandated emissions reductions can come from the deployment of emissions reduction technologies, or projects deploying improved production practices, rather than carbon capture. That language is a bit wishy-washy. Mr. Nicholson worries there could be a scenario where emissions are still going up, but are technically “reduced” by comparing them to what they would have been without the new technology.

In June, S&P Global reported that emissions intensity, or the CO2 per barrel, from oil-sands producers has been falling for 17 years, dropping 31 per cent since 2009. The efficiency comes from improvements to things like drilling technology. But a different statistic also stood out. Even though the intensity is falling, absolute emissions climbed in 2025, relative to 2024, because the oil companies are producing more.

Over the phone from his home in Annapolis Royal, N.S., near the Bay of Fundy, Mr. Nicholson puts it plainly: “I think there will be very little capture of carbon.”

Does that make Mr. Carney’s Pathways promise a mirage?

“I think that’s absolutely right,” he says.

The global stakes

Wendy Lam is still a believer.

Originally from Windsor, Ont., she’s got degrees in mechanical and industrial engineering, and she spent much of her career at heavy industrial companies, including Baker Hughes, working on climate technology.

In 2024, she took a leap and joined Oslo-based Capsol Technologies as chief executive officer. The company makes carbon-capture technologies such as an end-of-pipe product for cement and biomass plants, and retrofit products to capture carbon coming off of natural gas turbines.

Ms. Lam acknowledges carbon capture has lost some of its lustre lately, but she thinks that’s temporary. “Right now, the theme is about energy security, and everybody’s just worried about making a living and surviving,” she says. “We’re eventually going to get out of that, and we’re going to have to come back to addressing the costs of emissions.”

The signs of a changing climate are everywhere. This summer, wildfire smoke from northwestern Ontario blew south and blanketed the Great Lakes region, turning the sky orange in some cities. Much of Western Europe also baked under another heat wave. There are even some oddities in places like Oslo. Ms. Lam says she used to brag to her Canadian friends that there were no mosquitoes there, because it didn’t stay hot enough for long enough. “I’ve gotten so many bites this year because it’s so much warmer for longer,” she says.

Some environmental changes are harder to see, but could have devastating consequences. Rising temperatures allow more microbes, such as flesh-eating bacteria, to flourish in new places. More viruses are also adapting to warmer weather, finding ways to survive in the heat. That means one day more of them could learn to survive inside hot human bodies.

All the while, CO2 emissions keep rising. Until the 20th century, the concentration of carbon dioxide in the atmosphere had never breached 300 parts per million, according to the NOAA Global Monitoring Laboratory. It punched through that metric around 1910, and is now close to 425 ppm. This is uncharted territory.

And now the world is adding data centres to the mix.

In July, Meta Platforms Inc. META-Q said it will spend more than $13-billion to build a massive artificial intelligence data centre outside Edmonton. The project is a one-gigawatt facility, which refers to to the amount of electricity it will consume, provided by a new natural gas plant. The entire city of Edmonton draws about 1.4 gigawatts.

In the U.S., Meta is constructing a five-gigawatt facility in Louisiana, and in Kentucky, Canada’s Brookfield BN-T is teaming up with NextEra NEE-N, the largest U.S. utility, to build another. The Kentucky project’s new natural gas plant is big enough to power 1.5 million homes.

Because these data centres are powered by natural gas, Ms. Lam is optimistic that carbon capture technology could prove useful.

But carbon capture can’t be the be-all and end-all, because as Norway has proved and Canada is in the process of finding out, it’s an expensive solution. At one end of the spectrum, capturing emissions from a cement plant can be economical, because the pollution that comes out of its smoke stacks has a high concentration of carbon. But dreams of capturing carbon directly from the air have dimmed because the concentrations are so small.

Because the cost of CCS is so prohibitive, Ms. Hall Findlay wrote a provocative op-ed in The Globe and Mail in May urging the government to postpone Pathways. The world has changed, she argued.

“I’m a huge environmentalist,” she explains by phone, adding that she was on the Pathways steering committee for years. They met together with oil company CEOs every Friday morning at 7 a.m. Calgary time and rarely missed a week. But with Canada now spending so much on defence and major projects across the country, she just doesn’t think Pathways is worth it right now.

Plus, she adds, “climate is a global problem.” So many countries are now focusing on energy security and affordability, not emissions reductions. Spending $20- to $30-billion to save such a small fraction of global emissions under the revised project is tough to swallow.

Ottawa has framed its support of carbon capture as a grand bargain. “Canada supports projects that are expected to deliver real emissions reductions, demonstrate value for Canadians, and help maintain a strong economy and reliable energy supply,” Ms. Power, the press secretary for Minister Hodgson, said in her statement.

She also noted that both the International Energy Agency and the Intergovernmental Panel on Climate Change have concluded that carbon management technologies will be necessary to achieve net-zero emissions.

But there’s been very little said about the politics of it all. It’s possible Mr. Carney is open to using government coffers for Pathways because the project enables more oil production, and that could help quell separatism in Alberta. And it’s possible Mr. Trump’s trade war has made him re-evaluate things. The next decade could be bumpy as Canada diversifies away from the U.S., and one of the best ways to cushion that economic blow is to produce more oil.

Or maybe Mr. Carney simply boxed himself into a corner and fears looking silly after demanding “no Pathways, no pipeline.”

Either way, the expensive, watered-down project seems at odds with the PM’s own words in 2022. Speaking at a climate conference in London, he reminded the crowd they were already nearly a quarter of the way through the “decade of delivery” for the net-zero transition, and a “revolution” was needed.

“The world’s been caught in a timidity trap,” he cautioned, “dithering our way towards climate disaster.”