Canadian Carbon Markets Since the 2025 Election: A Chronological Review

At a Glance — Where Things Stand

Canadian carbon pricing entered 2025 as a two-part federal backstop — a consumer fuel charge and an industrial output-based system — sitting over a patchwork of provincial programs. Fifteen months later, the consumer half is gone, the industrial half has been retained and repriced through bilateral agreements with Alberta and BC, and the voluntary edges of the industrial systems have been opened for exit in both the federal OBPS and Ontario’s EPS.

For industrial emitters, the operating question has shifted from whether carbon pricing survives to what the stringency rules will say when the full federal benchmark update lands later in 2026. For participants in Quebec’s market, the period moved in the opposite direction — California’s extension to 2045 and the signed Washington linkage deepen the WCI market rather than loosen it.

The Greenhouse Gas Pollution Pricing Act (2018) built Canadian carbon pricing in two parts. A federal fuel charge priced fossil fuels for consumers and small emitters, and a federal Output-Based Pricing System (OBPS) priced industrial emissions above facility benchmarks. Both applied only as a backstop — in provinces and territories without their own systems, or with systems below the federal minimum stringency standards known as the benchmark.

Most provinces run their own industrial systems against that benchmark: Alberta’s TIER (the oldest, dating to 2007), BC’s OBPS (2024, replacing the industrial application of its 2008 carbon tax), Ontario’s EPS, Saskatchewan’s OBPS, and provincial programs in New Brunswick, Nova Scotia and Newfoundland and Labrador. Quebec runs a different model altogether — economy-wide cap-and-trade linked with California under the Western Climate Initiative since 2014. The federal OBPS applies in Manitoba, PEI, Yukon and Nunavut.

Figure 1 · Which system applies where, as of July 2026. Source: ECCC, Carbon pricing systems across Canada.

Fuel used at a facility covered under an industrial pricing program — federal or provincial — was exempt from the federal fuel charge, so the fuel charge and the industrial systems worked as a pair. Facilities below the mandatory coverage threshold routinely opted in voluntarily across the programs, because paying an output-based price on emissions above benchmark cost less than paying the fuel charge on every unit of fuel purchased. That trade-off is where the first post-election changes landed.

Sources listed at the end of this review.

Fifteen months of change in one timeline — and the stringency rules land later this year. Get a compliance readout on what the new trajectory does to your position.

In March 2025, the incoming federal government set the fuel charge rates to zero by regulation, effective April 1, 2025. Consumer carbon pricing ended nationally on that date. BC, whose 2008 carbon tax was tied by provincial law to the federal minimum, repealed its consumer tax with the same effective date. Saskatchewan went further on the industrial side and paused its provincial OBPS effective April 1, 2025 — per ECCC, the province “announced it was pausing its carbon pollution pricing system for industry.” The election followed on April 28, and the returned government kept industrial carbon pricing in place.

The fuel charge removal had a knock-on effect inside the industrial systems. Voluntary participants across the programs had opted in largely for the fuel charge exemption that coverage carried. With the charge at zero, that rationale disappeared, and the federal government and Ontario amended their regulations in 2025 to let voluntary facilities leave — the two programs where exit amendments have been formalised so far.

Federally, the OBPS Regulations were amended so that voluntary facilities could request cancellation of their designation at any time in 2025 without meeting the usual cessation conditions, with the 2025 compliance obligation covering only January 1 to March 31 — aligned to the fuel charge end date. Per IETA’s September 2025 business brief, 41 facilities were covered under the federal OBPS in 2025 (14 mandatory, 27 voluntary), and 11 voluntary participants opted out or ceased to be covered during the year.

Ontario followed in August 2025, amending the Greenhouse Gas Emissions Performance Standards regulation to allow any facility meeting the voluntary-participation criteria to cancel its registration. Exits requested on or before December 31, 2025 took effect retroactively at the end of March 2025, mirroring the federal treatment, with compliance obligations covering January 1 to the exit date and a two-year wait before re-registration. Ontario’s stated rationale in the regulatory posting was the federal decision to set the fuel charge to zero.

On November 27, 2025, Canada and Alberta signed a Memorandum of Understanding covering a west-coast oil pipeline, the Pathways carbon capture project and the direction of industrial carbon pricing. The Implementation Agreement of May 15, 2026 supplied the numbers: a TIER headline price schedule from $95 in 2026 to $140 in 2040, a credit price floor starting at $60 in 2030 and rising to $110 by 2040, jointly funded carbon contracts for difference covering up to 75 Mt, and fixed sector tightening rates through 2040. Section 1.6.1 committed Canada to align the federal benchmark to this trajectory. ECCC published the $95-to-$140 path as the headline trajectory for all industrial systems the same day, replacing the prior $15-per-year path toward $170 by 2030, and committed to a full updated benchmark later in 2026. Our full commentary: Canada–Alberta Implementation Agreement.

On July 2, 2026, Canada and BC signed the Cooperative Prosperity Agreement. Its carbon market chapter does two things: Canada will quantify the fiscal impact of the recalibrated benchmark on BC and negotiate a compensation arrangement by December 1, 2026 — the first such arrangement for any province — and the two governments will work with other provinces and territories to explore a National Carbon Credit Framework, with consumer retrofits, EVs and nature-based solutions named as examples and scope still undefined. Our full commentary: Canada–BC Cooperative Prosperity Agreement.

Quebec’s cap-and-trade system trades in a joint market with California, and that market strengthened over the same period. On September 19, 2025, California signed AB 1207 and SB 840, extending its cap-and-trade program through 2045 and renaming it Cap-and-Invest. The extension removed the post-2030 sunset that had hung over allowance prices in the linked market — a material change for Quebec compliance entities holding multi-year positions.

On June 25, 2026, Washington signed a linkage agreement with California and Quebec in Seattle, covering its Cap-and-Invest program under the Climate Commitment Act. Pending rulemaking in all three jurisdictions, a linked three-way market — joint auctions, mutually fungible allowances — is expected to begin operating in 2027. Quebec opened consultation on May 20, 2026 on draft amendments to its cap-and-trade regulation for the post-2030 period, including the role of offset credits.

Canadian federal and provincial output-based systems spent the period loosening at the edges and repricing downward against the prior trajectory; the WCI market Quebec belongs to extended its horizon to 2045 and added a third jurisdiction. Compliance entities with exposure in both face diverging price and policy risk.

Fifteen months after the fuel charge was set to zero, the shape of Canadian carbon pricing is narrower and more negotiated. Consumer pricing is gone. Industrial pricing survived the election and was then repriced through two bilateral agreements, with a headline path of $95 rising to $140 by 2040 for every system in the country. The stringency rules that determine what that path costs an individual facility are not yet written.

Five items carry the next twelve months. The full federal benchmark update, due later in 2026, sets minimum stringency, coverage and compliance rules for every provincial system. The BC compensation arrangement is due by December 1, 2026, and will show what a benchmark fiscal claim is worth. Saskatchewan’s paused OBPS remains unresolved — the updated benchmark will force an answer. The National Carbon Credit Framework has no deadline, and its scope will determine whether it matters to offset developers. And the WCI linked market with Washington is expected to begin operating in 2027, with Quebec’s post-2030 rules under consultation now.

For obligated facilities, the combined effect is a changed position in the compliance market and a changed basis for decarbonisation planning. The price schedule facilities discount against is different, credit values move with it, and the stringency that drives abatement economics may be updated later this year. Compliance positions and marginal abatement plans priced off the old trajectory are due for a rework. We will publish a full read of the benchmark update when it lands.

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