Canada and Alberta have announced an agreement-in-principal on methane equivalency. This marks the second major deliverable from the November 2025 Canada-Alberta Memorandum of Understanding (MOU), meeting the objective ahead of the April 1 deadline.
The agreement establishes a framework for Alberta to maintain primary regulatory authority over methane emissions while aligning with federal reduction ambitions. The agreement in principle commits both governments to deliver a methane equivalency agreement featuring a 75% reduction target by 2035 (relative to 2014 levels). The 2035 target effectively grants Alberta a 5-year extension to the current Federal Methane Regulations finalized in December 2025, which are estimated to reduce oil and gas methane by 72% below 2012 levels by 2030.
Both governments committed to publish a draft equivalency agreement in 2026, with a 60-date public comment period, having the agreement take effect no later than January 1, 2027, effectively establishing a final agreement date by the end of 2026. Alberta’s existing equivalency agreement will remain in place until the new agreement is finalised, which is set to explore in October 2030.
Approach to Achieving 2035 Methane Emissions Target
While further clarity on Alberta’s approach is expected in the draft publication, the agreement-in-principle provided insights into the proposed framework. The federal methane regulations would be "stood down" in Alberta, with the province continuing to regulate methane under its own system. Alberta intends to implement a performance-based approach that combines direct regulations, offset credits, and targeted investments.
Alberta today published Path forward: implementing Alberta-Canada methane agreement, which clarifies baseline assumptions and regulatory tools. Alberta will use 2014 as the baseline year, with total methane emissions estimated at approximately 27 million tonnes of CO2e from the conventional upstream oil and gas sector.
Additionally, Alberta committed to enhancing Alberta Energy Regulators (AER) Directive 060 (D060) to include new flaring and vent control requirements. D060 is AER’s primary regulatory instrument to manage emissions from upstream petroleum industry flaring, incinerating, and venting.
Of specific interest to the TIER market is the explicit inclusion of offset credits in the proposed approach. This could potentially create new pathways for credit use but may also reduce offset generation. If Alberta aligns with federal standards by mandating that facilities use non-emitting (zero-routine-vent) pumps and instruments, additionality concerns will arise for the Greenhouse Gas Emission Reductions from Pneumatic Devices offset protocol. This protocol currently dominates available offset supply, with over 6 million credits in circulation.
Outstanding MOU Deliverables
Two critical elements of the November MOU remain outstanding as we approach the April 1, 2026, deadline:
- A carbon pricing equivalency agreement on or before April 1, 2026
- A trilateral MOU with the Pathways companies on or before April 1, 2026
Reports from earlier this week suggest that deals on the industrial carbon tax and Pathways Alliance may be delayed due to ongoing negotiations. Today’s announcement reiterated this sentiment, noting:
“Canada and Alberta continue to make good progress on all the elements of the MOU. This work will extend over the coming weeks to ensure it is done right. Both governments are focused on moving forward as quickly as possible to provide certainty.”
ClearBlue will continue to monitor these developments and update clients as new information becomes available regarding industrial carbon pricing equivalency, MOU commitments, and additional TIER updates.
ClearBlue Markets is hosting the Calgary Carbon Club social on April 8, 2026. Our local team invites you to join them for the event at their new Calgary office, which includes an expert panel discussion exploring how these developments affect the 2026 federal benchmark analysis and the future of Alberta TIER demand.
REGISTER for the in-person event or join the livestream session.
