Mark Carney pivots Canada back to oil and gas in net zero retreat

Mark Carney has spent much of his public life urging governments, banks and boardrooms to treat climate risk as financial risk. Now, as Canada’s prime minister, he is arguing that the country cannot afford to keep treating decarbonisation as a near-term constraint on growth. In a video address this week, Carney backed a major new oil pipeline and set out plans to expand liquefied natural gas production sharply, a pivot that amounts to a relaxation of the ambitious targets associated with his predecessor, Justin Trudeau.

The centrepiece is a proposed 620-mile pipeline, priced at up to C$44 billion, intended to link Alberta’s oil sands to a West Coast export terminal near Vancouver. The ambition is straightforward: move more Canadian crude to tidewater, then on to Asian markets, reducing reliance on the United States as both customer and corridor. Alongside this, the government says Canada will more than triple its LNG production over the next decade and build five new terminals, supported by C$10 billion of investment to upgrade the Port of Vancouver.

Carney’s political justification has been framed as a matter of cost, cohesion and energy security. Trudeau’s plan sought to cut greenhouse gas emissions by up to 45 per cent below 2005 levels by 2030 and achieve net zero by 2050. Carney called that approach expensive and divisive, arguing it would have been “too expensive for Canadians, who are already struggling with affordability”. The message is not subtle: whatever moral clarity net zero rhetoric once offered, the politics of household bills and industrial competitiveness have reasserted themselves.

In one sense, the announcement is a reminder of Canada’s geographic and economic realities. It is a wealthy country with a significant hydrocarbon base, a federation in which provincial interests bite hard, and an export economy that has long been tethered to the American market. The friction between climate ambition and resource politics is not new. Yet the symbolism is sharpened by the messenger. Carney is not a prairie premier who built his career on oil royalties; he is a former governor of the Bank of England, a figure synonymous with the financial sector’s march towards climate disclosure and transition planning, and a onetime UN special envoy on climate action and finance. He helped create the Glasgow Financial Alliance for Net Zero in 2021, a vehicle designed to corral banks and asset managers into aligning with climate goals. For such a politician to declare that restraining oil and gas growth to meet a short-term target is unaffordable marks a shift in tone that will be noticed far beyond Ottawa.

Carney has not denied that emissions will rise as a result. Instead, he is attempting to reframe the argument around comparative advantage and standards, insisting that Canada will produce “conventional oil and gas” in the most environmentally sustainable ways available and export them “to where they will make the biggest difference”. This is a familiar line in producer countries: if demand persists, the world is better off buying from jurisdictions with stricter regulation and cleaner production practices. It is an argument that draws on the logic of emissions intensity rather than absolute emissions, and on the politics of global substitution rather than domestic restraint.

Whether that logic survives scrutiny depends on several moving parts. It assumes that global demand for oil and gas will remain durable over the life of long-lived infrastructure, that Canada can deliver barrels and molecules at a competitive cost, and that increased supply from Canada displaces higher-emitting production elsewhere rather than adding to total consumption. It also rests on the claim that environmental standards can meaningfully “minimise” the increase in emissions. There is a difference between reducing the carbon intensity of production and preventing overall emissions growth when output expands. Governments often blur that distinction because it is politically useful: one allows expansion while maintaining the language of responsibility; the other forces a confrontation with arithmetic.

Carney’s approach also speaks to a growing international tension within net zero politics. Targets for 2030 were always the hard part: close enough to be binding on current voters and current industries, yet demanding enough to require real trade-offs. In many countries, the early phase of climate policy was sold as an opportunity: green jobs, cheaper renewables, cleaner air, modernisation. That pitch remains true in parts, but it is less persuasive when households feel poorer, when capital is expensive, and when voters suspect that the burdens fall unevenly. Carney is betting that a left-leaning government can hold together a coalition by conceding that the pace and cost of transition has been mis-sold, while promising that Canadian oil and gas can be produced to higher standards than competitors.

It is notable, too, that the political frame is explicitly geopolitical. Carney argued that exporting more energy to Asia would help Canada reduce its economic dependence on the United States. That is a pointed statement at a time when Donald Trump has been hostile towards Canada, and towards Carney personally, imposing tariffs and meeting campaigners who want Alberta to secede. The subtext is that energy policy has become entangled with sovereignty: the ability to reach non-US markets is treated not merely as a commercial advantage but as strategic insulation.

The pipeline plan and LNG expansion therefore sit at the intersection of three pressures: domestic affordability, international competition, and a more fractious North American relationship. Seen through that lens, Carney is positioning hydrocarbons as a tool of national resilience rather than a legacy problem to be managed down. It is the language of a world that has become less confident about smooth global co-operation. Energy security, once a phrase associated with the fossil-fuel era, has returned as an organising principle, even in countries that still speak the dialect of climate ambition.

There is also the question of timing. A new pipeline of this scale, with a price tag running into tens of billions, cannot be built as a gesture. It implies confidence in a long runway for oil exports and in the political will to push through opposition, regulatory hurdles and cost overruns. Carney’s government is also committing to build five new LNG terminals, a major expansion that will require not only capital and permitting but also long-term customers willing to sign contracts. The plan to invest C$10 billion in the Port of Vancouver signals a broader industrial strategy: not simply producing hydrocarbons, but upgrading export infrastructure to compete in the Pacific century that politicians have spoken about for years.

For Britain, the significance lies less in the specifics of Canadian geography and more in the political permission structure Carney may create for other centre-left governments. Canada’s government is described as a close ideological ally of Sir Keir Starmer’s administration. If a leader with Carney’s climate credentials concludes that near-term restraint on oil and gas is unaffordable, the argument becomes easier for others to make, including those who have never been net zero evangelists. It will add pressure on Britain’s government to temper Ed Miliband’s net zero commitments, not least because opponents will cite Canada as proof that even the former high priest of green finance has changed his mind.

The UK debate has its own realities: a mature basin in the North Sea, a public that has been whiplashed by energy price shocks, and a political system where the costs of policy are quickly weaponised. Advocates of more North Sea exploration acknowledge it is unlikely to lower bills materially, but argue it increases independence and security. Carney’s argument runs on a similar track: the value is strategic and macroeconomic, not the promise of an immediate windfall for consumers. That is a more sober pitch than the old rhetoric of cheap domestic energy, and it may travel well in an age when voters are wary of overpromises.

At the same time, Carney’s shift exposes a dilemma for climate politics in democracies. If net zero is framed as a technocratic necessity imposed by science and enforced by regulation, it risks being rejected as soon as living standards come under pressure. If it is framed as a growth strategy that will pay for itself, it becomes vulnerable when costs become visible. Carney is effectively trying to keep the moral frame of responsibility while rewriting the economic timetable: slow the squeeze on hydrocarbons now, expand export capacity, and rely on cleaner standards and longer-term targets to maintain credibility.

The credibility question matters because Carney’s personal brand has been entwined with climate finance. As Bank of England governor from 2013 to 2020, he pushed the idea that markets were mispricing climate risk and that disclosure and stress testing would force a repricing. His later role in building coalitions of financial institutions around climate commitments gave him a global platform. That background cuts both ways. It grants him authority when he claims to understand the costs and trade-offs, but it also invites accusations of inconsistency. Critics will say he is proving that lofty rhetoric collapses when confronted with electoral reality. Supporters will reply that he is doing what serious leaders must: adjust policy to changed conditions while trying to preserve long-term direction.

There is a further point that gets lost in the theatre of political conversion. The distinction between “oil and gas” and “net zero” is often presented as binary, yet many governments attempt to live in the overlap: expanding supply while subsidising cleaner technology, tightening methane rules, and betting on carbon capture or other abatement measures. Carney’s pledge to produce in the most environmentally sustainable ways hints at that middle path. The political risk is that the middle path becomes a rhetorical bridge to nowhere: expansion is real and immediate, while the promised mitigation is delayed, disputed or insufficient. The policy risk is that Canada ends up locked into high-carbon assets just as global demand softens, leaving workers and regions exposed.

Carney is plainly gambling that demand will not disappear quickly, particularly in Asia, and that Canada can use the proceeds of an export push to strengthen its economy and bargaining position. In the short term, the politics of that gamble are easier to read than the economics. Voters grappling with affordability are less moved by abstract targets than by jobs, investment and a sense that their government is prioritising the national balance sheet. Provinces tied to the energy sector will welcome a prime minister willing to speak their language. Yet opposition will sharpen in places where climate commitments have become part of civic identity, and among those who see any new fossil infrastructure as a bet against the very transition Canada claims to support.

The announcement also suggests that climate politics is entering a more contested phase in which credibility will be judged less by targets and more by practical outcomes. It is relatively easy for governments to declare a 2050 ambition. It is harder to explain, year after year, what is being sacrificed, what is being built, and who is paying. Carney has chosen to answer that question by loosening the near-term constraints on the hydrocarbon economy and presenting exports as a tool of security and sovereignty. In doing so, he is inviting other leaders to make the same argument, and daring critics to explain how they would protect affordability while keeping the transition on schedule.

For now, the most striking fact is that a politician who once helped orchestrate net zero finance is willing to acknowledge that emissions will rise and to argue that the country must accept that increase for strategic reasons. That is a more candid posture than many governments adopt, and it may be precisely what makes it politically potent. It is also a reminder that the net zero era was never going to be sustained by moral exhortation alone. It will be shaped by ports, pipelines, terminals, tariffs, and the voting public’s tolerance for cost, and by how leaders navigate the growing tension between the language of climate responsibility and the lived politics of energy.