- within Environment topic(s)
- with readers working within the Banking & Credit and Chemicals industries
- within Transport and Tax topic(s)
- with Senior Company Executives, HR and Finance and Tax Executives
On September 16, 2025, the Government of Alberta announced upcoming changes to its Technology Innovation and Emissions Reduction (TIER) Regulation (the "Regulation").
The proposed amendments provide companies with a new way to comply with Alberta's TIER system. Once the changes are made, companies will have an additional avenue to meet their compliance obligations by investing directly into on-site emissions reduction technologies. The changes will also allow smaller companies that have opted into the TIER system to opt out, in an attempt to reduce the disproportionate compliance costs which smaller facilities may face under the current system.
Overview of Current TIER System
In 2019, the Federal Government established a carbon pricing regime comprised of two parts: (1) a charge on fuel; and (2) a regulatory trading system, referred to as the federal Output-Based Pricing System ("OBPS").1 Under the federal regime, entities that are regulated by the OBPS are exempt from the federal fuel charge.
The OBPS is used for industrial carbon pricing and sets standards for emissions for large industrial emitters. Companies who do not meet the standard must pay,2 and companies that emit below the standard can earn credits which can be used to meet future compliance regulations or traded to another company.3
Under the federal system, provinces and territories can create and implement their own form of an output-based pricing system, provided their system meets the standards set by the federal benchmark.4 If a provincial or territorial program does not meet the federal benchmark, the federal regime will operate as a backstop.
The TIER system is Alberta's industrial carbon pricing system and has been in place since 2020.5 Under the Regulation, companies that emit "100,000 tonnes or more of carbon dioxide equivalent" per year or "those that import more than 10,000 tonnes of hydrogen annually" are considered regulated facilities and must abide by TIER requirements.6 Smaller facilities may opt into the TIER system if they directly compete with another regulated facility, emit 2,000 tonnes or more of carbon dioxide equivalent annually, and belong to an emissions-intensive, trade-exposed sector.7
Companies' emissions reduction obligations are determined through a benchmark system.89 If a company does not reduce its emissions enough to meet the benchmark, it can come into compliance by:10
- Submitting emission offset credits (generated by projects that have voluntarily reduced their emissions using methodologies approved by the Government of Alberta);11
- Submitting emissions performance credits (generated and traded by companies that have exceeded their obligations);12 and/or
- Purchasing fund credits by paying into the TIER fund.
Amounts paid into the TIER fund are distributed by the Government of Alberta to various initiatives, such as emissions reduction and carbon capture and storage projects.
TIER is allowed to operate in place of the federal OBPS because it currently meets the federal benchmark.13 On May 12, 2025, however, the Government of Alberta froze the TIER price at $95 per tonne.14 The TIER price was set to increase to $110 per tonne in 2026 to align with federal pricing.15 If Alberta does not increase its price, it will no longer meet the federal benchmark, and accordingly, the federal OBPS system will apply.16
Proposed Amendments
In the spring of 2024, the Government of Alberta undertook consultations to review TIER, resulting in the proposed amendments. The proposed amendments would allow:
- Companies to meet compliance obligations by investing directly into on-site emissions reduction technologies (the "direct investment amendment"); and
- Smaller companies to opt-out of TIER within a current year (the "opt-out amendment").17
The direct investment amendment provides regulated companies with another option for meeting their obligations, in addition to the submission of emission offset credits, emission performance credits, or purchasing fund credits by paying directly into the TIER fund. With this option, companies can now invest into projects of their own choosing that are aimed at on-site emissions reductions.18 If companies choose not to invest in such on-site technologies, any required payments will go to the TIER fund, as per the current TIER system. While details of how such investments will be recognized have not yet been released, certain capital-based projects that may be eligible for direct investment credits could include retrofitting stationary equipment for increased energy efficiency or fuel switching, low carbon fuel production for internal facility use, carbon capture and storage or heat recovery, as well as study-based projects, including technical studies, financial studies or studies that support an eligible capital-based project.
Regarding the opt-out amendment, companies must fall below the regulatory emissions threshold to opt-out.19 This change is designed to reduce compliance costs and provide flexibility for small businesses.20 This amendment came on the heels of the federal government announcing the reduction of the federal fuel charge to $0, effective April 1, 2025.21 Small companies, which would otherwise be subject to the now $0 federal fuel charge had they not chosen to opt into TIER, are now permitted to opt out of TIER in 2025 (as opposed to waiting until 2026).
Next Steps
The proposed amendments will be drafted and incorporated into the Regulation this fall.22 Once the changes are approved, the amendments will be announced via Order in Council.23
Initial industry feedback for the amendments has been positive.24 Many industry executives feel that the changes will enhance competitiveness, attract investment, advance emission reduction infrastructure, and create jobs in Alberta.25
Footnotes
1 Canada, Ministry of Environment and Climate Change, Output-Based Pricing System (modified 03 November 2025) "Ministry of Environment and Climate Change, OBPS" .
2 Ibid.
3 Ibid.
4 Canada, Ministry of Environment and Climate Change, Industrial carbon pricing in Canada (modified 03 November 2025) "Ministry of Environment and Protected Areas, Industrial carbon" .
5 Technology Innovation and Emissions Reduction Regulation, AR 133/2019.
6 Alberta, Ministry of Environment and Protected Areas, Technology Innovation and Emissions Reduction Regulation
"Ministry of Environment and Protected Areas, TIER" .
7 Ibid.
8 Alberta, Ministry of Environment and Protected Areas, TIER regulation Fact Sheet (17 August 2023) "Ministry of Environment and Protected Areas, Fact Sheet" .
9 Ibid.
10 Ibid.
11 Alberta, Ministry of Environment and Protected Areas, Alberta Emission Offset System.
12 Ministry of Environment and Protected Areas, Fact Sheet, supra note 8.
13 Ministry of Environment and Protected Areas, Industrial carbon, supra note 4.
14 Alberta, Government of Alberta, Defending Alberta industry during U.S. tariffs (12 May 2025).
15 Technology Innovation and Emissions Reduction Fund Credit Amount Order, MO 62/2022.
16 Greenhouse Gas Pollution Pricing Act, SC 2018, c 12, s 186 at schedule 4.
17 Ministry of Environment and Protected Areas, TIER, supra note 6.
18 Ibid.
19 Ibid.
20 Ibid.
21 Ministry of Environment and Climate Change, OBPS, supra note 1.
22 Ministry of Environment and Protected Areas, TIER, supra note 6.
23 Ibid.
24 Alberta, Government of Alberta, Modernizing TIER to secure tomorrow (16 September 2025).
25 Ibid.
The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.
© McMillan LLP 2025
