Business Brief: Canada’s carbon capture compromise

Good morning. For more than a decade, carbon capture has been painted as a great hope for the oil sands. Yet after all this time, there hasn’t been a shovel in the ground. Ottawa, Alberta and the oil companies behind the Pathways project haven’t even figured out a way to pay for it.

There are finally plans to make it happen, but carbon capture projects around the world are now getting paused or scrapped. So I wanted to know: Why is Canada barreling ahead with its own?

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Resources: Nutrien executives say that the war in the Middle East continues to disrupt fertilizer demand and prices.

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Norwegian good

Hi, I’m Tim Kiladze, a reporter and columnist for The Globe, and I’ve been fascinated by carbon capture for years.

Coming out of the 2008 global financial crisis, China was a hungry buyer of oil – particularly Canadian oil – and it fuelled rapid development of the oil sands in northern Alberta.

It was around this time that carbon capture started to be talked about in an almost mythical way. As awareness of climate change grew, there were concerns that Canada’s oil production would release too much carbon into the atmosphere, trapping heat and contributing to climate change.

If this carbon could be captured and buried deep underground, though, it would create a closed loop.

Around 2016, this idea got more traction because investors started to demand that companies uphold environmental, social and governance principles. Eventually, a group of oil-sands producers came together to form the Pathways Alliance, with the goal of constructing a 400-kilometre pipeline to transport carbon from oil-sands facilities to an underground hub near Cold Lake, Alta.

Yet nothing ever got built.

That started to change in late 2025, when Prime Minister Mark Carney signed a memorandum of understanding with Alberta to build a new pipeline to the West Coast, with the condition the Pathways project also get constructed. “No Pathways, no pipeline,” he said. A framework for the project has since been announced, and final details are due in November.

The only problem: Carbon capture has lost its lustre lately, and projects around the world have been getting paused or cancelled. Carbon-capture technology works just fine, but project math is challenging.

To understand how Canada could make it work, I travelled to Norway in June, because they bet the farm on carbon capture. Last year, the Nordic country opened the world’s first cross-border carbon capture and storage hub, called Northern Lights. Liquified carbon is shipped there, stored in giant tanks, and then sent 100 kilometres west into the North Sea, where it is buried.

The secret to Norway’s success: Government support. Even though three oil companies are partners in the project, Norway’s government ultimately paid for 80 per cent of it.

That’s relevant for Canada because taxpayers are already expected to pay $35-billion to build a new oil pipeline to the West Coast. Pathways is projected to cost $20- to $30-billion, and if Norway’s funding model is applied, they’ll have to cover a good chunk of this burden, too.

Norway has also shown that companies don’t necessarily race to bury carbon even if the option is made easy. When Northern Lights was green lit, the hope was that if they built it, the emitters would come. Yet the price of carbon in Europe has not been high enough to incentivize polluters to sign up, so demand at Northern Lights hasn’t been overwhelming.

Here in Canada, the government has acknowledged that industrial carbon pricing hasn’t been working and has proposed some reforms, but some environmental groups argue they don’t go nearly far enough to incentivize companies to invest in carbon capture.

At the same time, Canada has watered down the emissions targets that polluters must comply with. 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 – but that additional 10 megatonnes can come from more efficient production, rather than actually storing carbon.

It is entirely possible, then, that companies won’t feel the pinch from a high enough carbon price, nor will they be held to tough emissions standards. Which raises all sorts of questions about what such an expensive project will achieve.

Carney has yet to address this head-on, but he seems to be making a political compromise.

He made his name as environmentalist before he ran for office, and he’s banking on revenues from oil-sands production to help offset U.S. President Donald Trump’s trade war and to fund defence spending.

A watered-down carbon-capture project may not achieve much on emissions, but it might just be enough to appease climate-driven voters, all while growing oil production boosts Canada’s economic growth and tames thoughts of separatism in Alberta.

Read the full story about my trip to Norway, and the lessons Canada should be taking from it.

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There are many things that the Americans want from Canada. They say they don’t want them, but they do want them. It’s energy, it’s potash, it’s critical minerals, it’s aluminum.

— Prime Minister Mark Carney

Prime Minister Mark Carney says he is “not interested” in making a narrow trade deal that does not address all of Donald Trump’s major tariffs on Canada.

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More files we’re following

Before the bell: Today’s earnings include Emera Inc., PPL Corp., Algonquin Power & Utilities Corp. and Take-Two Interactive Software Inc.

By the numbers: We are watching for data on Canadian employment for July. The Street is expecting a month-over-month gain of 15,000 jobs with the unemployment rate remaining at 6.5 per cent.

Morning update

Global markets climbed as investor optimism over robust earnings growth and enthusiasm over AI offset concern about another flare-up in Middle East tensions that boosted oil.

Wall Street futures pointed higher and TSX futures were in positive territory ahead of key jobs data on both sides of the border.

Overseas, the pan-European STOXX 600 was up 0.48 per cent in morning trading. Britain’s FTSE 100 rose 0.61 per cent, Germany’s DAX gained 0.74 per cent and France’s CAC 40 advanced 0.32 per cent.

In Asia, Japan’s Nikkei closed 0.12 per cent lower, while Hong Kong’s Hang Seng climbed 0.54 per cent.

The Canadian dollar traded at 71.33 U.S. cents.