CALGARY — As tariffs, trade uncertainty and concerns about economic sovereignty are reshaping investment decisions, carbon pricing is playing an increasingly important role in industrial competitiveness. Canadian businesses are facing growing pressure to demonstrate their carbon performance and competitiveness in global markets. A new report by the Pembina Institute and Energy Futures Lab, A Carbon Signal Industry Can Use: Insights from Industry Experts on Effective Industrial Carbon Pricing in Canada, examines how industrial carbon pricing is experienced in practice and what businesses need for carbon pricing to influence investment and operational decisions.
Drawing on 21 interviews with large industrial companies, industry associations, technology and project developers, industry-adjacent and advisory organizations, regulators, researchers, non-governmental organizations and think tanks, and academic researchers, the report identifies seven key findings that suggest effective carbon pricing depends on more than price alone.
Interviewees highlighted the importance of credible price signals, confidence in future carbon values, the functioning of each carbon market, access to emissions-reduction technologies and infrastructure, trusted emissions information, and the competitive conditions in which businesses operate when making decisions about low-carbon investments and operational practices.
The research also reinforces the importance of complementary objectives that improve industrial competitiveness. Investments in electrification and energy productivity help businesses manage long-term energy costs while supporting emissions reductions and economic growth. The price on carbon is one element of a successful business case.
As governments seek to continually improve the effectiveness of carbon markets in Canada, this research delivers seven key recommendations:
- Provide a durable basis for long-term investment through greater certainty around carbon pricing, benchmarks, rules and enforcement.
- Assess the effective carbon value businesses face, not just the headline price.
- Strengthen the functioning of carbon markets through greater transparency and clearer rules.
- Improve interoperability across carbon pricing systems through better recognition of credible credits, protocols and emission reduction outcomes across Canadian carbon pricing systems.
- Address competitiveness based on actual exposure, including market and facility-level conditions, competitor policies, tariffs and changing trade relationships.
- Strengthen emissions measurement, verification and comparability across systems.
- Use complementary measures when carbon pricing alone cannot close the investment gap.
Quotes
“Industrial carbon pricing is recognized and used around the world as both an economic and climate policy tool because of its ability to drive investment and emissions reductions. As Canada seeks to diversify trade partners, it's critical that we have a strong and effective industrial carbon pricing system so we can speak the same language as our peer nations.”
— Kari Hyde, Director, Customer Energy Solutions, Pembina Institute
"Countries around the world are increasingly integrating carbon pricing into trade and industrial competitiveness strategies. While industrial carbon pricing is intended to drive emissions reductions, what really matters is the carbon price that businesses experience in practice, not just on paper. This research shows why we need carbon-pricing systems that are durable, work across jurisdictions, and send clear, credible signals that businesses can actually use to guide investment decisions."
— Alison Cretney, CEO, Energy Futures Lab
Quick facts
- 29% of global greenhouse gas emissions are covered by carbon pricing systems.
- On January 1, 2026, the EU's Carbon Border Adjustment Mechanism (CBAM) began applying carbon costs to certain imported goods based on the EU's domestic carbon pricing system. This mechanism is design to level the playing field for companies importing and or exporting to Europe.
- Canada ranks fourth, behind the European Union, the United Kingdom and California – Québec, on trade alignment for carbon emissions, based on factors such as trade-readiness, policy certainty, consistency and investment attractiveness.
- Canada's clean electricity advantage is not uniform. Goods produced in provinces with low-emitting electricity systems may have a significant competitive advantage in carbon-conscious markets.
Related resources
Report: Carbon Pricing at the Border: How system design shapes competitiveness, credibility and trade
[30]
Contact
Sarah Snowdon
Senior Comms Lead, Pembina Institute
647-797-9329
