Canada’s government is in talks with Alberta and energy firms about scrapping a federal emissions cap on the oil and gas sector, sources told Reuters, if the industry commits to reducing its carbon footprint through other measures.

The cap, which has not yet been enacted, would have required emissions to fall to 137 million metric tons by 2030, about 37% below 2022 levels. The oil and gas sector remains the country’s largest source of greenhouse gases, and growing production in the oil sands threatens national climate targets.

Prime Minister Mark Carney’s government is exploring the removal of the cap as part of a wider “climate competitiveness strategy,” expected later this autumn. Officials have stressed that any decision would hinge on firm environmental commitments, such as the Pathways carbon capture and storage project, according to sources familiar with the talks.

The move signals a shift from the government’s earlier position, which had indicated the cap would stay in place following draft regulations published under former Prime Minister Justin Trudeau. Canada’s oil industry has long opposed the cap, warning it would force production cuts.

Carney has said he aims to make Canada a “world-leading energy superpower” by promoting clean energy while supporting conventional oil and gas production, and is also seeking to improve relations with Alberta after tensions over environmental policies, according to Reuters.

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