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Ontario Premier Kathleen Wynne and her Quebec counterpart, Philippe Couillard, discuss the ceremonial mace on display at the Ontario Legislature in Toronto during a break from Friday meetings.Chris Young/The Canadian Press

TransCanada Corp. must consider the effect of the Energy East pipeline on global warming if it wants Ontario and Quebec to give the $12-billion project their blessing.

That requirement was one of seven Premiers Kathleen Wynne and Philippe Couillard agreed to jointly impose in a meeting of their two cabinets in Toronto on Friday.

"Alberta needs to move its resources across the country, and we want to work with Alberta," Ms. Wynne told reporters after emerging from the session at the Royal York Hotel. "But we also recognize … we have to protect people in Ontario and Quebec."

The sit-down between the nation's two largest provinces was designed to rekindle a relationship that cooled during Quebec's short-lived péquiste interregnum. Among other things, the governments cut deals to trade more electricity and to push for national targets on curbing climate change.

Most immediately, however, the two governments will put stringent conditions on Energy East.

Whether the project goes ahead will be determined by the National Energy Board, but the provinces can take part in NEB hearings and try to sway its decision. Ontario is already conducting a review to decide what position to take. Quebec, meanwhile, sent TransCanada a letter last week setting out conditions the project must meet. The deal Friday effectively merged Ontario's and Quebec's requirements.

On top of demanding TransCanada look at whether the pipeline will cause higher greenhouse-gas emissions, the two provinces are demanding the company consult First Nations and other local communities, take on all environmental and economic risks, and consider the needs of natural gas customers. "We are studying these principles and look forward to working with both governments in the appropriate manner to make the project successful," TransCanada spokesman Tim Duboyce wrote in an e-mail.

Currently, the NEB does not consider whether a pipeline causes more emissions on the grounds that it's not clear whether building lines actually affects the amount of crude produced.

Speaking to reporters following a corporate lunch in Calgary Friday, federal Natural Resources Minister Greg Rickford said Ontario and Quebec can raise such issues with TransCanada or during NEB hearings.

The Quebec-Ontario energy swap, meanwhile, will see Ontario offer 500 megawatts of power to Quebec during winter; Quebec will reciprocate by giving Ontario access to the same amount of power during summer. Ontario Energy Minister Bob Chiarelli said the program could lead to more energy trading in future, but he said the province has a lot more work to do – such as by building the infrastructure necessary to take more juice. "[We're] looking at more extensive trading. It's going to require more extensive research," he said.

The provinces also agreed to promote carbon pricing. Quebec runs a joint cap-and-trade system with California, while Ontario has spent years reviewing its options. Asked whether consumers are facing higher costs because of carbon pricing, Mr. Couillard said such a cost is smaller than the cost of global warming itself.

"No one talks about the cost of not fighting climate change – this cost is passed on to citizens, too, whether it's health care or coastal erosion or spectacular weather events … ," he said. "The cost of doing nothing is much more than the cost of fighting climate change."

With a report from Jeff Lewis in Calgary

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