This article was published by The Energy Mix on Dec. 9, 2025.
Alberta has introduced changes to its industrial carbon pricing that will make it harder to meet a key commitment in its new memorandum of understanding (MOU) with the federal government.
The amendments to the province’s Technology Innovation and Emissions Reduction (TIER) Regulation were announced in September but formally introduced December 5, the Canadian Climate Institute reports, scarcely a week after Premier Danielle Smith and Prime Minister Mark Carney signed the controversial MOU. In addition to—and perhaps in exchange for—laying the groundwork for a new bitumen pipeline from Alberta to British Columbia’s environmentally sensitive northwest coast, the MOU commits the two governments to increase carbon credit prices under TIER to $130 per tonne, after reaching an agreement on industrial carbon pricing by April 1.
Even though it fell short of the current federal pricing benchmark of $170 per tonne by 2030, that target was still walked back by Smith’s chief of staff, Rob Anderson, within hours of the signing. Even so, news reporting in the days after the MOU identified the industrial carbon pricing deal as the key win the federal government was looking for, even if it mean trading away hundreds of millions of tonnes of emission reductions through the federal Clean Electricity Regulations.
But days later, Smith’s government “introduced regulatory changes that will flood the province’s industrial carbon pricing market with credits and further weaken the carbon price signal for major emitters,” the Climate Institute’s Principal Economist Dave Sawyer said in a statement Friday.
“By issuing new compliance credits for direct investment and reactivating previously used credits, Alberta is adding more supply to an already oversupplied market,” he explained. “These changes work against the direction set out in [the MOU], which included commitments to strengthen Alberta’s industrial carbon pricing system. When Alberta first signalled its intent in September, TIER credit prices crashed to below $20. This change locks in that crash, and puts significant downward pressure on future prices.”
Achieving the $130 target in the MOU, by contrast, “would require immediate steps to close loopholes in the credit market and address the oversupply of credits” that drives down their value and makes the system as a whole less effective, Sawyer added. “Instead, introducing new investment credits increases oversupply, weakens the price signal, and moves Alberta further away from the path needed to reach $130 per tonne.”
“Well that didn’t take long,” veteran energy policy analyst Dan Woynillowicz wrote on LinkedIn. “When someone shows you who they are, believe them the first time.”
Although Alberta first announced the regulatory change in September, “following through was a choice, and undoubtedly one made very deliberately,” Woynillowicz added in a follow-up post. “Expect Alberta to continuously test the federal government for weakness, using moves like this to inform their approach at the negotiating table.”
In a statement to the Toronto Star, Alberta Environment Minister Rebecca Schulz said the changes would entice more companies to invest sooner in emissions reduction technology. “We’re implementing the changes announced in September to defend jobs and keep industry competitive while still reducing emissions,” she said. “This will lead to more emissions being reduced and a stronger system.”
But University of Calgary energy science professor Sara Hastings-Simon told the Star that made no sense. An oversupply of carbon credits had already brought Alberta’s “headline” industrial carbon price down to $95 per tonne, making it more palatable for companies to buy the credits rather than investing in actual emissions reductions.
“I don’t think there is a credible argument that this action is making the system stronger,” Hastings-Simon said. “It’s doing the opposite.”
Former federal environment minister Steven Guilbeault, who resigned from the Mark Carney cabinet over the MOU, agreed that the regulatory change would make it harder for Smith to keep her promises. “Is this what Premier Smith meant when she spoke of proceeding ‘with a (measure) of good faith’?” he wrote on social media.
In his Thoughtful Energy Journalism newsletter, energy transition expert Markham Hislop speculates that Smith must have known all along what she was doing.
“It is inconceivable that a policy change that directly affects a major agreement with Ottawa was brewing in the Department of [Energy and Minerals] and Smith knew nothing about it,” he writes. “A reasonable inference, then, is that she did know. And if she knew, then she negotiated the deal in bad faith.”
In the aftermath of the MOU, Guilbeault is now warning that the Carney government has put Canada’s climate targets out of reach while fuelling Quebec separatism.
“With what has been announced, there’s no way Canada can meet its 2030, even its 2035, climate change objectives,” he told the Bloomberg news agency. “And frankly, I doubt that we could even be carbon neutral by 2050.” And “there is a feeling right now that by abandoning our climate goals we are fuelling the separatist movement,” the Montreal-area MP and former Canadian identify minister warned on CBC.
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