Updated TIER Regulations Begin to Take Shape in Alberta
In December 2025, former Minister of Environment and Protected Areas, Rebecca Schulz, amended the Technology Innovation and Emissions Reduction (TIER) Regulation through two Orders in Council (O.C. 369/2025, O.C. 370/2025). These Orders in Council roll out a new compliance option and cost relief measures for industrial emitters to make direct investments into emissions-reducing projects and lower compliance burdens on smaller facilities. While these changes are the result of an announcement made earlier in the fall of last year, these regulatory updates mark a significant shift in how companies can meet their emissions targets under TIER in the attempt to balance economic competitiveness and environmental goals.
Background: What is Alberta’s TIER Program?
TIER is Alberta’s output-based pricing system (OBPS) for large industrial greenhouse gas emitters. Facilities emitting 100,000 tonnes or more of CO2e per year are automatically covered, and smaller sites can opt in voluntarily. Each covered facility is assigned an emissions benchmark; emissions above that benchmark incur compliance obligations. Prior to the amendments, companies could comply by paying into the TIER Fund at a fixed per-tonne price ($95 in 2025), submitting emission performance or offset credits, or reducing on-site emissions through operational or technological changes.
Alberta’s carbon pricing approach for industry has largely remained intact through successive governments because it incentivizes investment in cleaner technology while protecting competitiveness. Major projects like Dow’s petrochemical investments, Air Products’ net-zero hydrogen plant, and Shell’s Polaris carbon capture project were attracted in part due to the price signals and credits from Alberta’s industrial carbon pricing.
New Direct Investment Compliance Pathway
The most significant change is the introduction of investment credits, which allow regulated facilities to meet compliance obligations by investing directly in emissions-reducing projects at their own sites. Instead of paying into the TIER Fund or purchasing credits, companies can now generate compliance credits by making eligible capital investments that reduce emissions.
For the 2025 compliance year, every $95 invested in an approved project generates one investment credit, equivalent to one tonne of CO2e—mirroring the TIER Fund price. These credits can be used for compliance but are non-transferable, meaning they can only be applied by the facility that generated them. This design ties compliance directly to on-site emissions reductions rather than credit trading.
The Alberta government has framed this change as a way to accelerate investment in cleaner technology while keeping capital in Alberta. By allowing companies to reinvest compliance dollars into their own facilities, the province argues the policy will support innovation, local jobs, and emissions reductions simultaneously.
Eligibility and Guardrails
Not all investments automatically qualify. While the regulation defines “eligible investment projects,” detailed criteria will be set out in a forthcoming Standard for Direct Investment, expected in early 2026. Consultations suggest eligible projects could include energy efficiency upgrades, fuel switching, carbon capture installations, and certain engineering or feasibility studies tied to emissions reduction.
To maintain integrity, several restrictions apply. Projects funded through government grants, the TIER Fund, or federal investment tax credits cannot generate investment credits for the same expenditures. Facilities receiving TIER cost-containment relief due to economic hardship are also ineligible to generate investment credits during that period. These guardrails are intended to ensure credits reflect additional private-sector investment rather than recycled public funding.
Timing is also notable. Investments made on or after January 1, 2025, can qualify, with credits available for use beginning in the 2026 compliance cycle. Credits may be banked for up to five years.
Opt-Out Relief for Smaller Facilities
The second amendment addresses smaller facilities that had voluntarily opted into TIER. Many did so to avoid the federal fuel charge, but that incentive diminished when the federal fuel charge for OBPS-covered facilities was set to zero as of April 1, 2025. For some small operators, TIER compliance costs began to outweigh the benefits.
In response, the amendments allow opted-in facilities below the mandatory threshold to opt out of TIER during the 2025 year, rather than waiting until 2026. The government characterized this as targeted red-tape reduction, acknowledging that compliance costs can fall disproportionately on small manufacturers and rural operations.
Political and Policy Reactions
The UCP government has positioned the amendments as pragmatic and pro-investment, arguing they preserve Alberta’s environmental objectives while improving flexibility. Former Environment Minister Rebecca Schulz had stated the changes will defend jobs and keep industry competitive while encouraging earlier and greater investment in emissions-reducing technology.
Opposition critics, however, warn the changes risk weakening Alberta’s carbon pricing signal. Alberta NDP energy and climate critic Nagwan Al-Guneid has argued that expanding low-cost compliance options could undermine a system previously viewed as one of Canada’s most mature industrial carbon markets.
Next Steps and Outlook
With the regulatory amendments now in force, attention turns to implementation. The forthcoming Standard for Direct Investment will be critical in determining the impact of investment credits. These changes also arrive amid ongoing federal-provincial negotiations on industrial carbon pricing alignment, with a new agreement targeted for April 1, 2026.