On September 16, 2025, the Government of Alberta announced two key changes to Alberta's Technology Innovation and Emission Reduction Regulation (TIER) that allow: (i) certain facilities that had voluntarily opted in to TIER to opt back out of TIER; and (ii) on-site investments into emissions reductions facilities to be recognized towards an emitter's compliance obligations. The announcement states that these changes will be introduced by the Government of Alberta in the fall.
These updates appear to be a result of the engagement conducted by the Government of Alberta in June 2025 pursuant to the TIER Opt-out and Direct Investment Program discussion document (the June 2025 Discussion Document). This engagement commenced after the Government of Alberta announced on May 12, 2025 that it would freeze the TIER fund price at C$95/tonne without further increases.
Opting Out of TIER
The federal Greenhouse Gas Pollution Pricing Act has two key parts: a fuel charge (colloquially known as the carbon tax) and an output-based pricing system (OBPS). Entities that are regulated by the OBPS are exempt from the fuel charge. Further, provinces and territories are permitted to enact their own OBPS, so long as the provincial/territorial OBPS is at least as stringent as the federal OBPS. TIER is Alberta's OBPS.
TIER mandates that any entity that emits 100,000 tonnes or more of carbon dioxide equivalent per year or those that import more than 10,000 tonnes of hydrogen annually is regulated by TIER; however, there is also a mechanism by which an entity whose facilities do not meet that threshold may opt in to TIER. Those entities that have exercised this option have typically done so to avoid the federal fuel charge.
Effective April 1, 2025, the federal government set the fuel charge to C$0. Accordingly, there was a call from industry for the Government of Alberta to permit those that opted in to TIER to subsequently opt out of TIER in order to reduce their compliance costs (as they would be captured by the $0 fuel charge).
The announcement states that those entities whose facilities have opted in to TIER may opt out in 2025 rather than wait for 2026.
New Compliance Option
The Government of Alberta has also advised that TIER will be amended such that on-site emissions reduction investments will be recognized as a new way for entities to meet their compliance obligations. This "direct investment" pathway will be a new compliance method as, currently, facilities must either pay into the TIER fund or retire TIER compliance instruments to meet those obligations.
While the announcement does not provide much detail in respect of how such investments will be recognized, the June 2025 Discussion Document identified that "… half of the expenditure on eligible projects can be considered towards TIER compliance." We expect that, should the price of carbon remain frozen at C$95 per tonne, eligible activities will receive one credit for every C$190 spent.
The June 2025 Discussion Document also lists capital-based projects that may be eligible for direct investment credits including the retrofitting stationary equipment for increased energy efficiency or fuel switching, low carbon fuel production for internal facility use, carbon capture and storage or heat recovery. Study-based projects that may be eligible include technical studies, financial studies or studies that support an eligible capital-based project. This means that regulated emitters can satisfy their TIER obligations by conducting studies of projects aimed at reducing emissions, regardless of whether the studied project is ultimately implemented. If and when projects are built, they may in turn generate emissions performance credits or offsets under TIER (for example, under the carbon capture and sequestration protocol).
Takeaways
We expect that when these updates are in force, they will impact the liquidity of the TIER credit market. These updates may allow entities with smaller facilities to lessen their regulatory and compliance costs and allow for large emitters to achieve further emissions reductions as, once the direct investments are operational, the subject facility should benefit from emissions reductions at that time.
If you have any questions as to your organization's TIER compliance obligations, we invite you to contact one of the authors.
