*

Opposition pledges to repeal carbon pricing scheme ahead

of

election

*

14 oil and gas CEOs say in letter they want provincial

govts to

set carbon regulations

*

Five of six members of oil sands producers' Pathway

Alliance

sign letter

*

Pathway Alliance's C$16 bln carbon capture project

discussion

slows

By Amanda Stephenson

CALGARY, March 21 (Reuters) -

The future of Canada's six-year-old carbon pricing system is

on shaky ground after 14 oil and gas CEOs and the political

opposition leader this week called for its repeal.

Scrapping the system, which aims to reduce pollution by

giving heavy industry a financial incentive to cut carbon

emissions, however, puts the viability of a high-profile carbon

capture project to reduce oil sands pollution in doubt.

Canada is grappling with changing priorities as U.S.

President Donald Trump's tariff threats spur calls to find new

markets for energy. The shifting political tides have emboldened

some in Canada who believe the country has for too long

prioritized its climate goals over the economy.

Conservative Leader Pierre Poilievre made the federal carbon

system a potential ballot issue on Monday, pledging to repeal it

if he wins an election expected on April 28. The system, in

place since 2019, aims to reduce pollution by giving heavy

industry a financial incentive to cut carbon emissions.

Poilievre said he would scrap the federal rules and

replace them with expanded federal incentives such as tax

credits to encourage companies to cut pollution. Carbon pricing

decisions would then be left to individual provinces.

Under the current law, industrial operations whose emissions

exceed a permitted threshold must either pay the government or

buy carbon credits to offset their impact. The system is

designed to become more stringent over time, with the price of

carbon increasing at specified intervals.

Canada's newly sworn-in Liberal Prime Minister Mark

Carney, who is narrowly leading polls against Poilievre's

Conservatives, told reporters on Tuesday the country needs

industrial carbon pricing if it wants to grow its trade volumes

with allies. Britain, for example, has said it plans to

implement a

carbon levy

on products imported from countries with less strict

climate policies.

In an open letter this week, 14 Canadian oil and gas CEOs

said the federal scheme should be repealed to allow provincial

governments to "set more suitable carbon regulations."

Many provinces, including the oil-producing province of

Alberta, already have their own industrial carbon pricing system

in place. Under current rules, provincial systems must be as

stringent as the federal system.

The CEOs argued the national scheme puts the country at a

competitive disadvantage compared with jurisdictions that do not

have one, such as the U.S.

Many analysts, however, say large-scale corporate

investments in decarbonization do not make sense without the

financial incentive of a price on emissions.

An example is the Pathways Alliance, a group of Canada's six

biggest oil sands producers that has proposed a C$16 billion

($11.47 billion) carbon capture and storage project in northern

Alberta aimed at significantly reducing the industry's

greenhouse gas pollution.

"Until there is clarity on the future of policy . . . we are

unlikely to see that (Pathways) investment materialized," said

Michael Bernstein, CEO of the think-tank Clean Prosperity.

The oil sands industry is Canada's heaviest-emitting sector,

and the Pathways proposed project would be one of the largest

carbon capture and storage developments in the world, if

completed. Pathways filed regulatory applications for a pipeline

to transport carbon last March, but it still has not made a

final investment decision to go ahead with the project.

The Pathways Alliance declined to comment. But five of its

six member companies ˜- Canadian Natural Resources ( CNQ ),

Suncor Energy ( SU ), Imperial Oil ( IMO ), Cenovus Energy ( CVE )

and MEG Energy ( MEGEF ) - signed the CEO letter urging

the repeal of the industrial carbon price. The five companies

did not respond to queries for comment.

The letter was also signed by the CEOs of ARC Resources ( AETUF )

, Veren ( VRN ), Pembina Pipeline ( PBA ), Enbridge ( ENB )

, Whitecap Resources ( SPGYF ), TC Energy ( TRP ),

Tourmaline Oil ( TRMLF ), Strathcona Resources ( STHRF ) and South

Bow Corp. ( SOBO )

In an interview with Reuters this month, the CEO of Canadian

Natural Resources ( CNQ ) acknowledged challenges related to the looming

election and uncertainty about the future of energy and climate

policy.

"If you look at that combined with the views of the

administration in the U.S., on tariffs and so forth, those

discussions on Pathways have slowed somewhat," CEO Scott Stauth

said.

In recent months, Pathways has been in talks with the

federal government to provide a backstop to the industrial

carbon price, aiming to insure against a future government

eliminating carbon pricing.

No agreement has been reached.

A weakened carbon pricing system would leave governments

with little way to incentivize projects like the Pathways plan,

other than through direct subsidization, said Chris

Severson-Baker, executive director of clean energy think-tank

the Pembina Institute.

"It (Pathways) might just end up becoming another thing the

taxpayers are paying for."