ClearBlue has prepared a two-part Special Report offering analysis of the Canadian Federal Carbon Pollution Pricing Benchmark. The benchmark plays a central role in shaping Canada’s carbon pricing landscape, guiding how provincial and territorial systems are designed and assessed. With a 2026 interim review on the horizon, policymakers, market participants, and industrials are closely watching for clarity on the framework that will carry carbon pricing through to 2030 and beyond.
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Why This Matters
The federal benchmark is more than just a set of technical criteria; it is the central driver of industrial carbon pricing design across Canada. It determines whether provincial and territorial systems are considered “equivalent” and therefore allowed to operate independently. Yet despite its importance, the benchmark has long been marked by ambiguity. While the criteria for assessment are public, the underlying modeling and decision-making process remain opaque, fueling uncertainty and political tension. Ensuring the benchmark is strong, fair, and transparent is therefore critical not only for emissions reductions, but also for competitiveness, investment certainty, and the credibility of Canada’s carbon markets.
Why Now
Following the elimination of the federal fuel charge, Prime Minister Mark Carney has made it clear that strengthening and harmonizing industrial carbon pricing will be a top priority for his government. The upcoming 2026 interim review will be the vehicle for that agenda and an opportunity to ensure industrial pricing systems maximize emissions reductions, drive investment in low-carbon technologies, and provide the necessary incentives for deep decarbonization.
At the same time, provinces are diverging in their approaches, and the patchwork of systems across Canada risks undermining consistency. With engagement between federal, provincial, and industry stakeholders expected to begin soon, now is the critical moment to evaluate how the current benchmark is working and where adjustments may be needed.
Part 1: Current Landscape
The first report in our series, Current Landscape, explores Canada’s federal carbon pricing benchmark and its influence on industrial emitter programs. It analyzes both price-based and cap-and-trade systems, evaluating how provincial and federal programs align with national standards.
At its core, the federal benchmark sets minimum national criteria that every province and territory must meet. The intent is to ensure consistency and comparability across Canada, while still leaving room for regional flexibility in program design.
From 2023 to 2030, the updated benchmark raises the carbon price trajectory to $170/tCO₂e by 2030 for explicit price-based programs, while also strengthening coverage and stringency requirements. Importantly, the 2026 interim review will give regulators the chance to address program gaps and push further harmonization across the country.
Provincial Divergences
While all major provincial programs were initially deemed equivalent to the benchmark, recent developments have created important differences:
- Alberta’s freeze on the carbon price and Saskatchewan’s pause of its industrial carbon tax diverge from the federal trajectory, putting both at significant risk of non-compliance.
- Ontario’s EPS remains robust, supporting a strong credit market. However, its 2024 funding mechanism, tying proceeds to emissions paid rather than performance, may weaken the emissions reduction signal.
- British Columbia’s OBPS is closely aligned with federal requirements but faces early oversupply risks.
- Quebec’s Cap-and-Trade program also maintains compliance structurally, though an ongoing allowance oversupply underscores the need for regulatory reforms to restore scarcity and strengthen price signals.
Transparency Challenges
Another key insight from Part 1 is the uneven state of market transparency. While Alberta and Quebec publish detailed, regular market data, limited information from other provinces and the federal OBPS restricts visibility. This gap highlights the importance of supply-demand monitoring, program design updates, and transparency measures to sustain alignment with the benchmark.
Looking Ahead: The Importance of 2026
The 2026 interim review is not simply a technical check-in—it will determine the trajectory of Canada’s carbon pricing framework through 2030. With major provincial programs under scrutiny and the federal OBPS itself facing design questions, the review carries significant implications for both compliance systems and industrial markets.
Setting the Stage for Part 2
While Part 1 lays the groundwork, the real turning point lies in what comes next. Part 2, Potential Scenarios and Impacts, will examine possible changes to the benchmark and outline scenarios for Canada’s carbon markets through 2030 and beyond. Topics will include:
- How harmonization efforts could pave the way for a Canadian Carbon Border Adjustment Mechanism (CBAM)
- Opportunities to direct stronger carbon pricing signals toward low-carbon investments
- The role of industrial carbon markets in supporting compliance and innovation
- Potential impacts of U.S. trade challenges and the Carney government’s approach to protecting Canadian industry while maintaining robust carbon pricing
With federal-provincial engagement expected to begin soon, followed by consultations with industry and other stakeholders, timing is critical. Clarity on benchmark alignment will be key for anticipating regulatory and market shifts in the years ahead.
Stay tuned for Part 2—it will be essential reading for anyone tracking the future of Canadian carbon pricing and its role in global competitiveness.
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