Canada–Alberta MOU Implementation Agreement: Certainty Delivered, Ambition Deferred

A 14-year TIER price schedule, the first-ever TIER credit price floor, joint carbon contracts for difference, and a federal benchmark that resets to Alberta’s trajectory under Section 1.6.1.

By Koorosh Behrang • May 29, 2026 • 10 min read

At a Glance — Our Assessment

The Agreement by the Numbers

Alberta operates Canada’s oldest and largest industrial carbon market, covering nearly 40% of national emissions. The Implementation Agreement locks a 14-year price schedule, a credit price floor, and carbon contracts for difference into TIER — and because the federal government agreed to this trajectory, it resets the national benchmark under the Greenhouse Gas Pollution Pricing Act.

The result is real pricing certainty for the first time since the political upheaval of 2024–2025. The trade-off is on the emissions reduction side: tightening rates are weaker than what a net-zero-aligned trajectory would require, and most sectors see easing after 2030. The Agreement bets that large-scale CCUS — not the carbon price ratchet — will deliver the bulk of abatement.

Canada prices industrial carbon emissions through the Greenhouse Gas Pollution Pricing Act (GGPPA). The GGPPA sets a federal benchmark — a minimum carbon price and stringency standard that every province must meet. Provinces can either fall under the federal Output-Based Pricing System (OBPS) or design their own program that meets or exceeds the federal benchmark. Alberta’s Technology Innovation and Emissions Reduction (TIER) system is one such provincial program.

On November 27, 2025, Canada and Alberta signed a Memorandum of Understanding. On May 15, 2026, they published the Implementation Agreement that gives it legal specificity. The Agreement does four things:

The Agreement sets TIER’s headline carbon price — the rate at which facilities pay for emissions above their benchmark — on a fixed schedule through 2040. It holds flat at $100 from 2027 to 2029, steps up by $3 per year from 2030 to 2035, then escalates at 1.5% annually to reach $140 by 2040. This is a softer trajectory than the prior federal benchmark, which was scheduled to reach $170 by 2030.

All values CAD per tonne CO₂e. Source: Implementation Agreement, Sections 1.2.1 and 1.2.3.

Key Insight: The $3/yr nominal ladder from 2030–2035 is likely below CPI — the real (inflation-adjusted) price declines mid-decade. The 1.5% escalator after 2035 barely keeps pace with target inflation.

Before this Agreement, TIER credits traded at $17–$41 against a $95 headline price. That gap meant the actual cost of compliance was a fraction of the posted carbon price — the largest design weakness in Canadian compliance carbon pricing.

Credits issued before the regulation takes effect are grandfathered through their original expiry — limiting near-term impact but embedding the structural principle going forward.

The headline price determines how much a facility pays per tonne of excess emissions. The tightening rate determines how fast each facility’s benchmark ratchets down — and therefore how many excess tonnes it has to pay for. Together they set the real cost of compliance.

The Agreement fixes tightening rates by sector through 2040. This gives facilities long-term visibility for planning, but the rates are not on a trajectory that would deliver emissions reductions consistent with Canada’s 2050 net-zero commitment. Most facility-specific benchmarks ease from 1.5–2.0% annual tightening pre-2030 to 1.0% post-2030. High-performance benchmarks for oil sands, hydrogen, and other sectors tighten at just 0.5% per year throughout.

FSB = Facility-Specific Benchmark. HPB = High-Performance Benchmark. Source: Implementation Agreement, Section 1.3.

Pathways Project firms — the five oil sands companies building large-scale CCUS infrastructure — drop from 2.0% to 1.0% tightening post-2030. This is a cost-recovery mechanism: once their CCS infrastructure is operational, they get looser benchmarks. Large Oil Sands operators outside the Pathways consortium stay at 2.0% throughout, making them the highest cost-takers in the Agreement. The Agreement caps the direct investment compliance pathway at 50% of eligible capital and operating costs net of all government support.

The Agreement does not rely on the carbon price to drive large-scale emissions reductions. The tightening rates make that clear. Instead, it builds an investment framework around CCUS as the primary abatement pathway. Three commitments underpin this — together forming the CCUS credit stack that upstream developers can rely on.

Section 1.6.1 of the Agreement states that Canada will ensure the federal carbon pricing benchmark is consistent with this Agreement. That means the GGPPA benchmark — the floor that every province in Canada must meet — shifts to the trajectory agreed with Alberta. The prior federal path ($15/year increases toward $170 by 2030) is replaced.

How Provincial Systems Are Affected

The floor price and CfD mechanism are Alberta-specific instruments within TIER. Other provinces are not required to adopt them. But the precedent is set: a Canadian compliance carbon market now has a regulated minimum credit transfer price and a government-backed CfD backstop. That is a new standard for carbon market design in this country.

About the Author

Koorosh Behrang Founder, Climate Decode Founder of Climate Decode with more than 10 years of experience across decarbonization strategy, corporate sustainability, Net Zero target setting, and compliance carbon markets. His work centres on the interaction between decarbonization pathways and regulated carbon systems. Koorosh has worked extensively across programs including WCI, Ontario EPS, Alberta TIER, BC OBPS, Canada’s Clean Fuel Regulations, the EU ETS, the EU Shipping ETS, and FuelEU Maritime, integrating carbon pricing exposure, credit strategy, and regulatory trajectory into capital allocation and long-term compliance planning. Speak to Koorosh → LinkedIn →