CALGARY — CHRIS SEVERSON-BAKER, executive director of the Pembina Institute, made the following statement in response to today’s release of the Canadian Climate Institute’s 2024 emissions estimate, as well as the Government of Alberta’s announcement that the headline price of carbon will stay frozen in its industrial carbon pricing system next year:
“Today’s emission estimates show that Canada’s climate policies have been working to reduce climate-changing greenhouse gas emissions – but that our progress is, yet again, being held back by the oil and gas industry.
“Oil and gas is still Canada’s highest-emitting sector, and those emissions are largely driven by the oilsands sector – a handful of companies operating in Alberta, where emissions have increased 150 per cent since 2005.
“At the same time, emissions across Canada have decreased 8.5 per cent - a reminder of how the oilsands companies’ continued failure to live up to their emissions reduction promises is undermining the hard work being done in other areas of the economy. There is no ‘climate competitive’ future for Canada while oilsands emissions remain out of control.
“It is also a reminder that the Government of Alberta has consistently fallen short in regulating emissions from the oilsands – which could be done in a way that allows the industry to keep producing bitumen while implementing technologies, such as carbon capture, that reduce their emissions.
“It is striking that this news comes the same week as the Alberta government announced two new blows to the very policy that would catalyze private investment in emissions reductions projects – TIER. By extending its freeze of the carbon price and opening the door to polluters getting double credit under TIER, it has further destabilized the credit market and made private investments in things like carbon capture and storage even less likely.
“At a time when Alberta is negotiating hard with the federal government about major projects, it ought to be showing good faith by not weakening TIER, but committing to strengthening it. We know that strong industrial carbon pricing systems are the most effective way of ensuring big polluters direct their own dollars towards reducing the emissions they create: the cost of TIER has been shown to effectively equate to a timbit per barrel. Far from being a system that undermines industry competitiveness, industrial carbon pricing in Alberta can elegantly balance the need to make our industries globally competitive with the importance of reducing emissions and protecting the environment — all while limiting the financial burden on everyday Canadians.
“These 2024 estimates are worrying, and I am deeply concerned that Alberta – and Canada – will drift further from climate competitiveness in the years ahead if we don’t take real action. A strong industrial carbon pricing market would be one example of this.
“I echo the Canadian Climate Institute’s message that this isn’t a pass or fail situation. Any and all progress we make in reducing our carbon emissions protects our way of life not just for ourselves, but also for our children and all those who come after us.”
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Key facts on TIER
- Alberta’s industrial carbon pricing system, TIER, is the longest-running in North America, having been in place for 18 years.
- Under TIER, large emitters have the option to either invest in projects that reduce their emissions, or purchase carbon credits. The carbon credits are generated by other emitters that have invested in solutions that reduce their emissions. Being able to generate credits is part of what creates a business case for companies to invest in emissions reductions projects.
- TIER’s carbon credit market only functions correctly if the cost of a tonne of carbon emitted increases every year. This gives companies clarity into the future on how many credits they can earn under TIER if they make investments to reduce their emissions. Over time, as more such investments are made, the cost of a tonne needs to increase to keep incentivising further investment.
- A strong industrial carbon price is high enough that companies want to avoid paying it by lowering their emissions. It also means that the credits that low emitters generate are worth creating.
- In May 2025, the Government of Alberta froze TIER at $95/tonne. Yesterday, it indicated that the price would stay frozen at this level through 2026 – a move which will put TIER out of compliance with the federal backstop.
- Freezing the price further undermines the integrity of the TIER market and the value of credits. Already in 2025, the freeze has created significant investment uncertainty and likely contributed to projects being cancelled or paused in the province. Examples are not only in the oil and gas industry – they include other potential economic diversification opportunities for Alberta, such as Dow Inc.’s planned $9bn investment in a net-zero petrochemicals project, which was previously planned for construction near Edmonton.
- Emissions Reduction Alberta reports it has spent around $990 million of TIER revenue to date on projects that it estimates will reduce emissions by hundreds of thousands of tonnes per year, if the technologies are successful and deployed at scale. The distribution of these TIER funds has drawn in investments of $10.5bn from other funding sources – indicating TIER works to catalyze further investment throughout the economy.
- The new investment recognition mechanism announced earlier this week will also further reduce the demand for those credits. Overall, this will further depress credit prices and reduce the likelihood of companies making investments in emissions reductions.
- It is also unclear how Alberta will ensure actual emissions reductions occur as a result of these investments, and whether there will be double crediting for these investments (once when the investment is made, and again when project is operating).
- The Government of Canada has previously deemed TIER to be equivalent to its Output Based Pricing System (the federal backstop). Following this week’s changes to TIER, the Government of Canada should continue to assess if that equivalency agreement is valid.
Contact
Benjamin Alldritt
Senior Communications Lead, Pembina Institute
587-328-1955
Background
Media release: Alberta’s move to undermine industrial carbon pricing challenges integrity of ‘grand bargain’
Blog: Grand bargains and perilous pitfalls
