Last week, Premier Danielle Smith and Minister of Environment and Protected Areas Rebecca Schulz proposed updates to Alberta’s Technology Innovation and Emissions Reduction (TIER) regulation. After consultations with industry stakeholders, the province outlined anticipated changes to the system.
The most notable proposal is the addition of a direct investment compliance option, beginning in 2026. Under this pathway, regulated facilities could cover up to 90% of their annual compliance obligations through a mix of emission performance credits, offset credits, and direct investments in qualifying projects. These projects would need to demonstrate innovation, local economic benefits, and measurable emissions reductions. The government pointed to initiatives such as the Pathways Alliance carbon capture and storage project as examples of the kind of investments this option is intended to support.
While the intent is to channel more capital into Alberta-based decarbonization projects, the change could weaken demand for TIER credits. With smaller emitters also gaining more flexibility to opt out of the program, Alberta’s already oversupplied credit market faces further pressure, prolonging the drawdown of banked supply and putting downward pressure on prices.
Alberta in the National Context
These updates come at a critical time for Canada’s carbon pricing framework. With the elimination of the federal fuel charge, the federal government—now under Prime Minister Mark Carney—has reaffirmed its commitment to industrial carbon pricing as the backbone of Canadian climate policy. A 2026 interim review of the federal benchmark is already scheduled, and Ottawa has signaled that it intends to use this review to strengthen and harmonize provincial and federal systems.
The benchmark sets the minimum requirements that provincial programs like TIER must meet. For the 2023–2030 period, the benchmark locks in the $170/tCO₂e price trajectory by 2030 and requires systems to cover more emissions sources while tightening performance standards. Importantly, the 2026 review is not just a check-in—it’s a chance to address divergence across the country, close gaps, and ensure that carbon pricing continues to incentivize major decarbonization investments while protecting competitiveness.
Policy moves like Alberta's earlier carbon price freeze and now the direct investment pathway create uncertainty: will Ottawa accept these modifications as equivalent, or will they trigger federal intervention? The review is also expected to surface politically charged negotiations between Ottawa and provinces such as Alberta and Saskatchewan, which have consistently pushed back against federal oversight.
ClearBlue’s Perspective
ClearBlue Markets is closely following these developments. Part 1 of our special two-part report examines how the federal benchmark is shaping provincial systems and where key risks and divergences are emerging. With regard to provincial equivalency, Alberta’s carbon price freeze and Saskatchewan’s industrial carbon tax pause diverge from the federal trajectory, placing both systems at significant risk of non-compliance. Ontario’s EPS maintains a strong credit market, but its 2024 funding mechanism, which links proceeds to emissions paid rather than performance, may weaken the price signal for emissions reductions. B.C.’s OBPS aligns closely with the federal benchmark but faces early oversupply risk, while Quebec’s Cap-and-Trade program is structurally compliant but also contends with allowance oversupply, requiring upcoming regulatory reforms to restore scarcity and strengthen signals.
Part 2 of ClearBlue’s analysis will assess potential changes to the federal benchmark, including standardized pricing to support a Canadian CBAM, potential provisions to safeguard Canadian industry from U.S trade disputes, market design implications, and incentives for low-carbon investment.
The 2026 benchmark review will be the most important regulatory milestone for industrial carbon pricing this decade—and a defining moment for the future of Canada’s carbon markets. For a copy of the report and to learn about how the benchmark review may impact your facility’s carbon position and financial exposure, please reach out to nvij@clearbluemarkets.com or contact us here.