On May 12, 2025, the Alberta government announced that it is indefinitely freezing the price of carbon emissions from large emitters under the Technology Innovation and Emission Reduction Regulation (TIER Regulation) at $95 per tonne of carbon dioxide equivalent (CO2e). The decision comes in the midst of growing concerns of keeping Alberta's industry competitive in an increasingly uncertain economic environment, including dealing with the effects of U.S. tariffs.
The carbon price under the TIER Regulation was previously scheduled to rise year-over-year to $170 per CO2e tonne by 2030, in line with the Greenhouse Gas Pollution Pricing Act (GGPPA). The GGPPA is the federal legislation that governs and sets the "backstop" for emission pricing regimes across Canada.
Now, in freezing the price of carbon under the TIER Regulation to $95 per CO2e tonne, it is uncertain whether the TIER Regulation will continue to be deemed equivalent to the GGPPA – and consequently, whether the federal government will require facilities in Alberta to comply with the emission pricing scheme under the GGPPA.
Overview of the TIER Regulation
The TIER Regulation, enacted under Alberta's Emissions Management and Climate Resilience Act, governs Alberta's industrial greenhouse gas emissions pricing regime and emissions trading system.
The TIER Regulation applies to large emitters and those who have opted in to the system, requiring regulated facilities to reduce emissions to meet certain facility benchmarks. The TIER Regulation also establishes the Alberta Emission Offset System for emission performance credits (EPCs) and emission offsets (Offsets) available to emitters to meet their reduction targets. Facilities subject to the TIER Regulation that are unable to meet their emissions benchmarks by reducing their emissions or using EPCs and Offsets must pay into the "TIER Fund" and purchase fund credits for each tonne of excess CO2e emissions.
Under the previous Ministerial Order 62/2022 issued by the Minister of Environment and Protected Areas in December 2022, the cost of a fund credit under the TIER Regulation was set to rise by $15 per year, culminating in a price of $170 per CO2e tonne in 2030:
- $50.00 for the year 2022;
- $65.00 for the year 2023;
- $80.00 for the year 2024;
- $95.00 for the year 2025;
- $110.00 for the year 2026;
- $125.00 for the year 2027;
- $140.00 for the year 2028;
- $155.00 for the year 2029; and
- $170.00 for the year 2030.
This regime essentially mirrored the federal "excess emission charge" price set out under the federal GGPPA.1 We discuss in our previous blog post certain amendments the Alberta government made to the TIER Regulation that came into force in 2023 to maintain its compliance with federal stringency standards.
Now, the fund credit price under the TIER Fund will indefinitely be set to $95 per CO2e tonne and will not increase annually, as will be established by a new Ministerial Order shortly.
The Federal Backstop
At the federal level, the GGPPA sets out the regulatory framework for the federal carbon pricing system, which consisted of two components: (i) a levy on fossil fuels (Fuel Charge); and (ii) the output-based pricing system for greenhouse gas emissions stemming from large industrial emitters (OBPS). The Government of Canada recently made regulations to cease the application of the consumer-facing Fuel Charge as of April 1, 2025, but the current OBPS – including the price of an "excess emission charge" and its annual increases through 2030 – largely remains unchanged.
In 2021, the Supreme Court of Canada (SCC) ruled that the GGPPA is constitutional (see our previous blog post on the decision here).2 In its decision, the SCC characterized the Fuel Charge and the OBPS as constitutionally-permissible "backstops" to provide minimum national standards of greenhouse gas price stringency. If a province fails to meet the minimum national standards, the GGPPA imposes a backstop pricing system to the extent necessary to remedy the deficiency in provincial regulation to address the province's failure to act or to set sufficiently stringent standards. The federal government must designate the provinces in which the federal OBPS regime applies.3
Accordingly, facilities in Alberta subject to the TIER Regulation are exempted from the OBPS under the GGPPA, so long as the TIER Regulation maintained federal stringency requirements. In departing from the annual price increases specified under the GGPPA, it is therefore open to the federal government to designate Alberta as a jurisdiction where facilities must comply with the federal OBPS system – assuming, of course, there is political will at the federal level to do so.
Footnotes
1. GGPPA, Sch. 4.
2. Reference re Greenhouse Gas Pollution Pricing Act, 2021 SCC 11.
3. GGPPA, s 189(1).
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