Implementation of the Canada-Alberta MOU: Key Takeaways for Carbon Markets in Alberta

On May 15, 2026, the governments of Canada and Alberta announced an Implementation Agreement to address several aspects of the November 2025 Memorandum of Understanding (MOU) on energy collaboration. In addition to commitments regarding a west coast oil pipeline and electricity grid growth, the Implementation Agreement codifies forthcoming changes to carbon pricing in Alberta and at the federal level. 

Here are five key takeaways for how the Implementation Agreement will impact carbon markets.

1. Long-term Agreement on the “Headline Price” for Carbon

The legislated Headline Price for carbon under Alberta’s Technology Innovation and Emissions Reduction (TIER) Regulation has been frozen at C$95 per tonne of carbon dioxide equivalent since May 2025, a departure from the annual C$15 increases prescribed by the federal Greenhouse Gas Pollution Pricing Act (GGPPA). In a significant reduction from the prior GGPPA trajectory (which would reach C$170 in 2030), the Implementation Agreement provides that the carbon price will be set at C$100 in 2027–2029 and C$115 in 2030, followed by annual increases of C$3 to reach C$130 by 2035. Thereafter, the price will increase by 1.5% per year to reach C$140 by 2040. Notably, this new trajectory will apply across Canada, with GGPPA amendments anticipated before the end of this year.

2. Price Floor to Come Into Effect in 2030

Despite the C$95 Headline Price, TIER credits have been trading as low as C$20 due, in part, to actual and anticipated oversupply. To support market stability and a predictable value for TIER credits, and to facilitate a target “Effective Price” of C$130 in 2040, Alberta will introduce a Price Floor regulation to establish a minimum transfer price for trades in the TIER market. The price floor will start at C$60 in 2030, increase between C$3 and C$5 per year until it reaches C$100 in 2039 and then increase to C$110 in 2040. Credits generated before the Price Floor regulation is enacted will be grandfathered and eligible for transfers below the price floor in accordance with their original expiry periods. The TIER credit market currently operates on an over-the-counter basis, through bilateral and confidential agreements. The Price Floor regulation is expected to be enacted by December 31, 2026, and market participants will have a keen interest in how the price floor will be enforced and any disclosure that may be required.

3. Price Support Through Contracts for Difference (CfDs)

To facilitate an Effective Price of C$130 by 2040, Canada and Alberta have committed to jointly fund CfDs for up to 75-million tonnes of emission reductions on investments made between 2030 and 2040, up to a maximum investment of C$600-million per party. CfDs were used to support investments in Alberta’s renewable energy industry through the Renewable Electricity Program and are used by the Canada Growth Fund to support clean technology investments. If Alberta or Canada fails to maintain the carbon pricing commitments under the Implementation Agreement or repeals their respective carbon pricing legislation, that government will assume full liability for the CfDs. These assurances signal long-term commitment to the CfDs and are intended to provide certainty for investors. The degree of incentive will likely be driven by the agreed-upon CfD “strike price” and the pace at which that price increases to the target Effective Price of C$130 in 2040. 

4. Refining the Direct Investment Compliance Pathway

Amendments to TIER in late 2025 introduced “investment credits” as an additional compliance pathway. Dollars invested in eligible efficiency and/or emission reduction projects (the criteria for which will be outlined in a Standard for Direct Investment, which has yet to be released) will be divided by the Headline Price to calculate the number of investment credits generated. This pathway is intended to incentivize investment in capital-intensive carbon reduction technologies such as carbon capture utilization and storage, but has been criticized by some for not being contingent on verified emission reductions and for having the potential to exacerbate the oversupply of credits. The Implementation Agreement apparently seeks to address the oversupply concern by limiting eligible investment amounts to 50% of eligible capital and 50% of operating costs directly attributable to the approved project, net of any public financial support. 

5. Adjusted Annual Tightening Rates

The Implementation Agreement establishes annual tightening or “stringency” rates for facility-specific and high-performance benchmarks applicable to different types of large emitters. These stringency rates reduce the emissions a facility may emit on an annual basis and therefore increase the need for emission reductions and/or TIER credits over time. To facilitate predictability and investment certainty, stringency rates have been established for the near-term (2027–2030) and long-term (2031–2040). The established stringency rates are lower than those that currently apply under TIER, which may be targeted at the Implementation Agreement’s overarching goal of increasing Alberta’s oil, gas and electricity production. 

For more information about these and other elements of the Implementation Agreement, please contact the author or any other member of our Energy Regulatory or Energy & Energy Infrastructure groups. 

You can also read more about the Implementation Agreement, major projects and electricity grid growth in our recent Blakes Bulletin: Canada Issues National Strategy for Electrifying the Canadian Economy: “Powering Canada Strong”.