Alberta Premier Danielle Smith held a press conference this week with Minister of Environment and Protected Areas Rebecca Schulz, where she outlined proposed changes to the Technology Innovation and Emissions Reduction (TIER) regulation. These proposed updates follow a stakeholder engagement process with industry leaders from various sectors, including oil and gas, oil sands mining, manufacturing, and biofuels, to review the TIER system and gather feedback on how the industry can succeed. Smith stated that the goal of modernizing TIER is to drive investment at large industrial facilities, enhance competitiveness, protect jobs, and enable industries to invest in on-site emissions reduction technology.
Direct Investment Pathway
Under the current Technology Innovation and Emissions Reduction (TIER) system, regulated facilities that do not meet their emissions intensity target have several pathways to fulfill their annual compliance obligations. These pathways include:
- Emissions Performance Credits: These credits are produced and traded by regulated facilities that have exceeded their own emissions reduction obligations.
- Emission Offsets or Sequestration Credits: These are generated by projects that have successfully reduced their greenhouse gas emissions by following an approved quantification protocol.
- Making a payment into the TIER fund: As of January 1, 2025, this payment is set at $95 per tonne of carbon dioxide equivalent (CO2e). The TIER fund is then invested in measures that support further emission reductions or enhance resilience to a changing climate.
For 2025, the credit-use limit for meeting compliance obligations is up to 80%, which will increase to 90% in 2026.
A new direct investment compliance option is set to be introduced as an alternative for regulated facilities. Beginning in 2026, these facilities will be able to satisfy up to 90% of their annual TIER compliance obligations by utilizing a combination of emission performance credits, emission offset credits, and/or direct investments. This new pathway aims to reward companies for investing directly in technology that fosters innovation, supports local employment, and contributes to emissions reductions. Smith mentioned the Pathways Alliance CCS project as a prime example of one such investment, and the potential emissions reductions associated with the direct investment option.
Proposed Opt-Out Changes
Further proposed changes to the TIER system include allowing smaller facilities that currently participate in the TIER system to leave or opt out for 2025. This aims to reduce costs and red tape, as smaller facilities below the regulatory emissions threshold can face disproportionate compliance costs under the TIER system, which is mainly designed for larger facilities. Smith stated that this change would help smaller industries save money and redirect resources into emissions reduction investments or other operational improvements, protecting jobs across Alberta. This move aligns with broader trends, as provinces like Ontario are also revising their industrial carbon pricing programs to allow smaller emitters to opt out earlier and expand eligibility for voluntary exits. For instance, Ontario's Emissions Performance Standards (EPS) program now allows facilities qualifying as voluntary participants to choose to exit at the time of their request, a shift from previous restrictions, and sets March 31, 2025, as the effective exit date for applications submitted by December 31, 2025.
ClearBlue recently released a special report: Voluntary Opt-Outs and the Changing Landscape of Industrial Carbon Pricing in Canada, which quantified the potential estimated demand leaving the TIER program from previously opted-in facilities.
The proposed TIER changes could dampen activity within Alberta’s TIER program. By introducing direct investment as a compliance option and allowing smaller emitters to opt out, demand for credits will likely soften, adding challenges to an already oversupplied market, stretching out the drawdown of current supply and putting additional downward pressure on prices.
During the press conference, Danielle Smith was asked about her meeting with Prime Minister Mark Carney last week and whether these changes were discussed. Danielle Smith stated, "We let him know we were moving in this direction, saying this won't be a surprise to the federal government".
Regarding timelines for additional information, a new standard is currently being developed for the direct investment program, with more details and the standard to be made available in the near future. Furthermore, instructions and application forms for opted-in and aggregate facilities to request to opt-out for 2025 or submit a partial year compliance report for 2025 will be provided later this week. Alberta’s government plans to introduce the updates to the TIER system in the fall of 2025.
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