Alberta’s TIER Regulation Modernization: Attempting to Balance Competitiveness, Infrastructure Investments, and Emissions Reduction
This fall, the Government of Alberta will introduce amendments to its Technology Innovation and Emissions Reduction (TIER) Regulation, one of the province’s most important tools for managing industrial greenhouse gas emissions. The proposed changes reflect a desire to keep Alberta industries globally competitive, attract investment, and protect jobs. These changes will be aimed at strengthening incentives for a company’s own on-site emissions reductions by allowing industry to allocate up to 90% of their compliance obligations toward emissions-reduction investments.
Framed as both an environmental and economic measure, the proposed updates underscore the province’s belief that emissions policy can serve as a lever to achieve multiple objectives at once: lowering emissions intensity, encouraging innovation, and safeguarding Alberta’s role as a reliable energy producer.
What is the TIER System?
The TIER system, established in 2007, was the first program of its kind in North America. It was designed to create a regulatory framework for industrial emitters, ensuring that facilities with significant emissions played a leading role in Alberta’s emissions reduction response.
Under the current rules, facilities emitting 100,000 tonnes or more of greenhouse gases annually must meet emissions benchmarks either by:
· Improving their own performance,
· Using compliance credits (offsets, performance credits, or sequestration tonnes), or
· Paying into the TIER fund at a rate of $95 per tonne of emissions.
According to statistics published by the Ministry of Environment and Protected Areas, TIER covers 62.5% of Alberta’s total emissions and the fund has invested over $2.8 billion in technology and innovation.
Since 2019, roughly $1.6 billion from the TIER fund has been invested in clean energy technologies such as hydrogen, geothermal, energy storage, methane reduction, and carbon capture projects. These investments are expected to reduce approximately 70 million tonnes of emissions by 2030 and support over 21,000 jobs across the province.
What is Changing?
The government’s newly announced amendments introduce two major changes designed to improve flexibility and reduce costs, particularly for smaller operators.
First, the TIER program will now recognize on-site investments made by companies who directly advance emissions-reduction technology within their own facilities. This move expands compliance options for industry beyond paying into the TIER fund or purchasing credits. By allowing up to 90% of compliance costs to be used in this way, the measure aims to reward innovation and local reinvestment, encouraging firms to develop solutions that are tailored to their operations.
Second, the proposed TIER modernization will permit greater flexibility for smaller facilities by allowing those who are presently participating in TIER to leave or opt out for this year, to lower costs and red tape. The government argues that the current structure can impose disproportionate costs on operations just above the regulatory threshold.
By permitting smaller manufacturers and rural operators to redirect resources toward emissions investments or other operational improvements, the government aims to reduce red tape and protect jobs. Together, these reforms are intended to provide industry with more tools to manage costs while maintaining Alberta’s commitment to reducing emissions.
Government Rationale and Framing
Premier Danielle Smith emphasized that TIER has always been about proving Alberta can grow its economy, expand energy production, and reduce emissions at the same time. She framed the amendments as a natural evolution:
“These amendments build on that success by giving industry the certainty and flexibility they need to invest right here at home. We know this work is not finished. We will continue to press the federal government to match Alberta’s leadership with realistic policies and timelines so that together we can keep building an economy that is strong and ready for the future.”
Environment and Protected Areas Minister Rebecca Schulz also highlighted the competitiveness angle:
“We are committed to ensuring our industry remains competitive and can once again bring in the capital investment needed to deliver safe, affordable and reliable energy to Canadians and the rest of the world. Enabling them to reinvest their dollars into their own facilities will be good for the environment while growing our economy and creating jobs.”
Similarly, Energy and Minerals Minister Brian Jean stressed that Alberta’s approach is aligned with the province’s broader Emissions Reduction and Energy Development Plan, which envisions Alberta as a global leader in both responsible production and emissions management.
Industry Response
The announcement received broad support from industry associations that have long argued for greater flexibility in compliance pathways. For example, the Explorers and Producers Association of Canada (EPAC) welcomed the government’s recognition of competitiveness concerns:
“Today’s announcement recognizes industry concerns around competitiveness and signals that the province is moving forward to support emissions reduction in a way that helps companies reduce emissions, compete for investment, and create jobs for Albertans. EPAC believes provinces are best positioned to lead on climate policy, and we look forward to continued work with Alberta.”
Pathways Alliance, representing Canada’s largest oil sands producers, also expressed support:
“Direct investment through the TIER system is expected to encourage continued investment in emission reduction technologies and advance innovative infrastructure.” – Kendall Dilling, President.
The consensus among industry groups appears to be that the changes strike a balance between emissions reduction and cost management, while also strengthening Alberta’s investment climate.
Broader Implications for Alberta’s Economy
1. Investment Climate
Alberta has positioned itself as a destination of choice for global investment in energy and resource development. By providing more compliance options and lowering costs for smaller operators, the updated TIER system may help attract new capital, particularly in emissions-reduction technologies.
2. Job Creation and Retention
The government has explicitly linked the reforms to job creation. By enabling companies to invest directly in their facilities, dollars remain in Alberta to support local construction, engineering, and technology firms rather than being paid into a central fund and dispersed back to industry.
3. Alignment with Federal Policy
The Smith government continues to emphasize that Ottawa must adopt “realistic policies and timelines.” This highlights ongoing tensions between provincial and federal approaches to climate policy. While Alberta stresses flexibility and competitiveness, federal policy has at times prioritized more rigid timelines for emissions reduction.
4. Innovation and Technology Development
Direct compliance through facility-level investments could accelerate the development of emerging emissions technologies, from carbon capture and storage to advanced energy efficiency systems. This has the potential to position Alberta not only as a resource leader but also as a technology exporter in the low-carbon economy.
Critiques and Considerations
While the proposed changes have been broadly welcomed, there are also potential critiques worth noting. With this added program flexibility, it will be safe to assume that TIER fund revenue will be lower, potentially limiting the government’s ability to fund large-scale province-wide initiatives. Additionally, exempting smaller facilities will likely weaken the program’s overall emissions coverage, even if those smaller firms’ individual contributions are modest. Lastly, concerns about verifying on-site emissions reduction and the prevention of double counting carbon credits were raised by the Pembina Institute, a climate-focused think tank, advocating for clear rules and oversight to avoid unintended loopholes.
The announcement also received criticism from Nagwan Al-Guneid, the MLA for Calgary-Glenmore and NDP energy critic, stating that the consultation process was selective, not as thorough as it should have been, and that the updates were worryingly vague.
Conclusion
The modernization of the TIER regulation represents an incremental but significant shift in Alberta’s emissions policy. By broadening compliance options and lowering burdens for smaller facilities, the government aims to strike a balance between emissions reduction, competitiveness, and investment growth.
Supporters argue that the changes will reinforce Alberta’s leadership in climate policy while keeping investment and jobs in the province. At the same time, careful implementation will be required to ensure that on-site investments deliver measurable emissions benefits and that exemptions for smaller facilities do not dilute the system’s overall effectiveness.
As global markets continue to demand oil and gas commodities at growing rates, investments towards lower-carbon intensity energy will position Alberta as a sustainable, reliable, and trusted supplier of energy products for global markets. Whether these amendments succeed in maintaining Alberta’s leadership role will depend on the province’s ability to combine flexibility, accountability, and encourage innovation in the years ahead.