Canada’s Article 6 Framework: Provinces, Buyers and the 2035 Target

At a Glance · Where Things Stand

ECCC’s announcement of September 24, 2026 is brief on mechanics but broad in scope, covering both emission reductions and removals, naming nature-based solutions alongside carbon removal technologies, and framing the framework around Canadian companies taking part in international markets. It does not state whether Canada will acquire ITMOs toward its own 2035 target, although it refers to “the potential for international and domestic offset credits.”

Canada is well short of its 2035 target, and every tonne authorized for export will accordingly be weighed against that gap, while the experience of Switzerland, Singapore and Japan shows how sovereign and compliance buyers operate. Carbon pricing and offsets are administered province by province, so that ITMOs can only function with Alberta and BC on board, and the federal benchmark review due later in 2026 is the natural place to settle their domestic role. Part 2 of this analysis sets out the removals opportunity, where Canada’s role could be that of a seller.

On September 24, 2026, Environment and Climate Change Canada announced that the Government of Canada is developing a policy framework to enable the trading of internationally transferred mitigation outcomes, or ITMOs. Article 6 of the Paris Agreement allows countries to cooperate on their climate targets by transferring emission reductions and removals between them, the ITMO being the unit transferred, and a corresponding adjustment to both countries’ inventories ensures that the same tonne is not counted twice.

The release states that the framework would allow Canadian companies to participate in international carbon markets and invest in mitigation, and that ITMOs could mobilize investment in projects generating “high-integrity emissions reductions and removals,” with particular reference to carbon removal technologies and nature-based solutions and to Canada’s industrial expertise, geology, clean power and natural resources. It cites Carbon Removal Canada’s estimate that a scaled removal industry could add billions to GDP and hundreds of thousands of jobs by 2050, and it complements the more than $13 billion in international climate finance announced in the Spring Economic Update.

Commitments in the release

• Credits used as ITMOs must meet Article 6 requirements, including additionality and the avoidance of double counting.
• Canada needs institutional arrangements to track and account for the reductions and removals it transfers.
• ITMO activities will be aligned with Article 6 rules on environmental integrity.
• ECCC will engage provinces, territories, Indigenous organizations and other partners on how to operationalize ITMOs in Canada.

Open questions

Table 1 · Open questions in the September 24, 2026 announcement. Source: ECCC news release; Climate Decode analysis.

The announcement builds on work already under way, since ECCC’s preliminary draft federal offset protocol for direct air capture and geological storage closed for comment in March 2025 and limits storage to onshore formations covered by a provincial or territorial CO₂ storage regime, while the July 2026 Canada–BC agreement opened exploration of a National Carbon Credit Framework, as set out in the Climate Decode review of Canadian carbon markets since the 2025 election, and an ITMO framework would sit as the international layer above that domestic architecture.

Canada’s 2035 NDC, submitted in February 2025, commits to reducing emissions 45–50% below 2005 levels and leaves open the use of internationally transferred mitigation outcomes toward that target without specifying a volume, so that any plan to sell removals abroad will be read against it.

The 2026 National Inventory Report put 2024 emissions at 685 Mt, 10% below 2005, and ECCC’s December 2025 projections reach 24% below 2005 in 2035 with current measures and 32% with additional measures that are planned but not yet in place, leaving a gap of 13–18 percentage points, roughly 100–135 Mt, even in the higher case.

Figure 1 · Canada’s progress toward its 2035 NDC. Sources: National Inventory Report 2026 (1990–2024); ECCC greenhouse gas emissions projections, December 2025; Canada’s 2035 NDC. Projections include LULUCF contributions; gap in Mt is Climate Decode’s calculation against the projections’ 2005 base.

Pipeline and data centre pressures

The November 2025 Canada–Alberta MOU lays the groundwork for a West Coast pipeline carrying about 1 million barrels a day of Alberta bitumen to a BC export terminal, and the July 2026 trilateral MOU with the oil sands companies replaces a hard emissions cap with tighter TIER benchmarks and a commitment to reduce emissions by 16 Mt a year (net). Neither agreement publishes an emissions estimate for the added production, and most of the 16 Mt arrives after 2035, only the 6 Mt from Pathways CCS being due by then.

Data centre operators had requested about 19.6 GW of new load on Alberta’s grid as of July 30, 2026, roughly 1.5 times the province’s record peak of about 12,800 MW, and with the first 1,200 MW made available by the grid operator already allocated, Alberta’s Data Centre Regulation moves projects that bring their own new generation to the front of the queue. Much of that new generation in Alberta is likely to be gas-fired, adding a second source of pressure on emissions.

Table 2 · What could move Canada’s 2035 gap. Sources: Canada–Alberta MOU (via Morningstar DBRS); trilateral Pathways MOU backgrounder, July 2026; Government of Alberta, data centres and the grid; Climate Decode analysis.

Higher emissions from the pipeline and data centre load would increase Canada’s need for removals and CCS at home and strengthen the case for acquiring ITMOs as well as selling them. Large technology companies, of the kind now seeking data centre capacity in Alberta, are also already among the first buyers of Canadian removal credits, Microsoft having bought from Deep Sky.

A removal sold with a corresponding adjustment counts for the buyer and cannot also be claimed by Canada, which raises the question of why Canada should sell removals abroad while short of its own target, and three considerations support the export case nonetheless.

• Removals that Canada does not authorize for export remain in its inventory and count toward the NDC, and a published host-country share would determine the split.
• With 0.1 Mt removed to date, early foreign revenue is what builds the capacity that Canada will later count at home, since the tonnes would not otherwise exist.
• With a gap of 100 Mt or more, Canada could export high-value removals while acquiring lower-cost reductions abroad, an approach the NDC already allows.

The UNEP Copenhagen Climate Centre’s Article 6 Pipeline counted 112 bilateral agreements across 65 countries as of September 4, 2026, with 27.8 million ITMOs transacted, and five buyers account for most of those agreements as Article 6 moves from negotiation into operation.

Table 3 · Main Article 6 buyers. Agreement counts: UNEP CCC Article 6 Pipeline, September 4, 2026. Use rules: national sources listed below.

Route 1: sovereign procurement

Thailand and Switzerland completed the first ITMO transfers for NDC use in December 2023, from Bangkok’s electric bus programme, and 49,717 ITMOs from that programme were recorded in the Swiss registry for 2023 and 2024. The Swiss government does not purchase directly, since Swiss fuel importers carry a legal obligation to offset part of transport emissions and pool it through the KliK Foundation, financed by a capped surcharge of up to 5 centimes per litre. The obligation roughly doubles over 2025–2030 to an average of 5 million tonnes a year, with a larger share to be met abroad, where reductions cost about a quarter as much.

Singapore operates a more direct sovereign model, having contracted 2.175 million tonnes in September 2025 from four projects in Ghana, Peru and Paraguay, worth about S$76 million, for delivery over 2026–2030. On September 7, 2026 it opened a second-stage tender for at least 12 million ITMOs, open to nature-based and technology-based projects including carbon removal, under implementation agreements now signed with twelve countries.

Route 2: Article 6 within carbon pricing

The second route places international units inside a domestic compliance system, so that companies rather than treasuries carry the demand, as in Singapore, Japan and, under the current proposal, the European Union.

• Singapore’s carbon tax covers facilities above 25,000 tCO₂e a year, about 70% of national emissions, at S$45 per tonne in 2026–2027 rising to S$50–80 by 2030, and facilities may surrender eligible international credits for up to 5% of taxable emissions, as set out in the Climate Decode Singapore carbon tax explainer.
• Japan’s GX-ETS became mandatory on April 1, 2026 for companies emitting above 100,000 tCO₂ a year, roughly 60% of national emissions, and up to 10% of obligations may be met with J-Credits and JCM credits.
• The EU ETS review proposal of July 17, 2026 would ring-fence about 260 million allowances to purchase up to 260 Mt of high-quality Article 6 credits for 2036–2040 through a central facility rather than by operators directly, a design examined in the Climate Decode EU ETS and Article 6 analysis.

Figure 2 · Room for international credits inside carbon prices. EU share is the 260 Mt purchase as a share of 1990 net emissions, per ICAP. Sources: S&P Global; Singapore carbon tax rules; EU ETS review proposal (July 2026).

Climate Decode advises Canadian removal, CCS and low-carbon fuel developers on which Article 6 buyers fit a project and what authorization will require.

The Greenhouse Gas Pollution Pricing Act sets a federal benchmark, although the federal industrial system is largely a backstop, the federal OBPS applying only in Manitoba, PEI, Yukon and Nunavut. Elsewhere a provincial system prices industrial emissions and sets its own rules on offsets, so that Canada has neither a single carbon price nor a single offset market, and any domestic role for ITMOs has to work across that patchwork.

Figure 3 · Offset use across Canada’s industrial carbon pricing systems. Sources: ECCC; Climate Decode, Canadian Carbon Pricing series. The Northwest Territories runs its own system and is not covered here.

Among the provincial output-based systems, only Alberta and BC allow facilities to use offsets today, and the linkage that does exist runs one way, with some Alberta and BC offsets accepted in the federal OBPS as recognized units while federal credits are not accepted provincially and provinces do not accept each other’s. The three offset programs are mapped in detail in the Climate Decode guide to how Canadian carbon pricing is evolving.

Provincial role

The federal offset system serves a backstop that covers a small share of Canada’s industrial emissions, so that whichever direction ITMOs move, the provinces determine whether the framework can operate, in three respects.

• Most removal and CCS projects that would sell ITMOs are located in Alberta and BC, where the same tonne could also earn a provincial offset, and provincial rules and registry links will be needed to prevent an exported tonne from being claimed twice.
• Should Canada allow international credits to count for compliance, they would need to be accepted by TIER, BC OBPS and the other provincial systems as well as by the federal backstop, none of which accepts them at present.
• Corresponding adjustments are applied nationally, whereas the MRV, registries and offset protocols that demonstrate a tonne is real are largely provincial.

Federal benchmark review

The Canada–Alberta MOU of November 27, 2025 and its May 15, 2026 Implementation Agreement set a negotiated TIER price path of $95 rising to $140 by 2040, which ECCC has published as the national trajectory, and the July 2, 2026 Canada–BC agreement opened exploration of a National Carbon Credit Framework. A full update of the federal benchmark is due later in 2026 and will need to translate these bilateral agreements into national criteria on coverage, stringency, credit usage limits and offset eligibility, as traced in the Climate Decode review of Canadian carbon markets since the 2025 election.

Removals

On the removal side, Canada’s role could differ from its position on reductions, since the geology, injection workforce and clean power that support durable removals would allow Canada to sell authorized removals even while it may need to acquire reductions toward its 2035 target. Part 2 of this analysis sets out that opportunity, including the EU’s proposed purchase of certified removals and the link to Canada’s clean fuel industry.

Fuels Market Watch

The benchmark review, provincial offset rules and Article 6 authorization will move on different timelines, and Fuels Market Watch, Climate Decode’s market intelligence platform, follows both the compliance and the clean fuel side in one place.

A guided walkthrough can be arranged by booking a demo.

Climate Decode · Advisory

Positioning Canadian projects for Article 6 demand

Climate Decode supports buyer mapping, authorization readiness, and CRCF and CFR stacking from start to finish.

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