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Federal Government Updates Industrial Carbon Pricing Benchmark Trajectory

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CC 4.0 Joli Rumi

The federal government has updated the headline price trajectory for industrial carbon pricing systems assessed under the federal carbon pricing benchmark. As of May 15, 2026, the headline price trajectory per tonne of CO₂e emissions for industrial carbon pricing systems is as follows: The updated trajectory is lower than the previous federal benchmark pathway through 2030, and extends the headline trajectory to 2040. A full updated federal benchmark is expected to be published later in 2026. The federal government has stated that the updated trajectory takes into account feedback from provinces, territories, industry, and other stakeholders, and is intended to provide longer-term certainty to support major decarbonization projects. The updated trajectory was announced days after the Canada-Alberta MOU Implementation Agreement, which applies the same trajectory to Alberta’s Technology Innovation and Emissions Reduction (TIER) system and includes related commitments on annual benchmark stringency rates, a regulated minimum transfer price for TIER credits (i.e., a price floor) beginning in 2030, limits on direct investment credits, and carbon contracts for difference for eligible emissions-reduction investments. The benchmark announcement does not, by itself, amend the excess emissions charge under the federal output-based pricing system (OBPS), which is set out in Schedule 4 to the Greenhouse Gas Pollution Pricing Act. We anticipate that, if the federal OBPS charge is to be aligned with the updated trajectory, further implementation would follow, including through an Order-in-Council amending Schedule 4. For further information or to discuss the contents of this bulletin, please contact Lisa DeMarco at lisa@resilientllp.com or Jonathan McGillivray at jonathan@resilientllp.com. Image: CC 4.0 Joli Rumi

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Federal Government Announces Forthcoming National Electricity Strategy

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CC2.0 Camille King

Prime Minister Mark Carney announced on May 14, 2026, that the federal government is launching consultations on a forthcoming National Electricity Strategy (the “Strategy”), intended to support a doubling of Canada’s electricity grid capacity by 2050, a national grid, jobs and training, and domestic manufacturing. The consultations are expected to include provinces, territories, Indigenous Peoples, utilities, unions, industry, and training partners. The federal government identified four main pillars of the Strategy: Building infrastructure to double Canada’s electricity generation, including generation, transmission, distribution, storage, and grid modernization. Connecting Canada’s electricity grids East-West-North through new and expanded transmission lines, including work to address barriers to interprovincial interties. Training, attracting, and retaining workers needed to build and maintain the grid, with the announcement stating that more than 130,000 high-skilled workers may be required by 2050. Supporting domestic manufacturing of technologies and components used in Canada’s electricity system. The Prime Minister’s Office expressly indicated that the federal government intends to adjust the Clean Electricity Regulations to provide additional flexibility, including in relation to natural gas, while pursuing emissions reductions and reliability and affordability objectives. The announcement highlights several electricity projects being advanced through the Major Projects Office, including the Taltson Hydro Expansion, the Iqaluit Nukkiksautiit Hydro Project, Darlington New Nuclear, the North Coast Transmission Line, and Wind West. The federal government also indicated that development of a new Transmission InterConnect Investment Strategy is expected to be referred to the Major Projects Office. The announcement also indicates that the federal government intends to expand support for energy-saving retrofits for up to one million households, including measures to support the transition from propane, oil, and electric baseboard heating to electric heat pumps. The Strategy is expected to be developed over the coming months and be tied to the Alberta MOU, which is anticipated to be released…

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Canada and Alberta Reach Agreement-in-Principle on Methane Equivalency

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The Government of Canada and the Government of Alberta have announced an Agreement-in-Principle to lower methane emissions in the oil and gas sector by 75% below 2014 levels by 2035 in Alberta. The Agreement-in-Principle builds on the Canada-Alberta Memorandum of Understanding (see our earlier bulletin here) and follows the recently published draft Co-operation Agreement between Alberta and Canada on Environmental and Impact Assessment. Under the proposed framework, Alberta would implement a performance-based approach to reduce methane emissions that combines regulations, offset credits, and targeted investments. This bulletin briefly summarizes the key commitments set out in the Agreement-in-Principle. Commitments. Alberta and Canada commit to: develop an outcome-based equivalency agreement (the Agreement) under the Canadian Environmental Protection Act, 1999 (CEPA), whereby Canada’s Enhanced Methane Regulations would be stood down in Alberta, in recognition of final provincial regulations and a provincial approach that delivers, over the term of the Agreement, 75% methane emissions reductions by 2035; act reasonably in adjusting the Agreement, if required, in the face of a force majeure event; jointly select and rely on an independent third party, contracted on an equal cost-shared basis, to conduct methane modelling, analysis of emissions reductions, and to assess methane reduction results; and agree that Alberta will publish information explaining the covered sources of methane and the province’s approach to meet its emissions reduction targets. Next Steps. Once Alberta and Canada agree on the terms of the Agreement, it will undergo a 60-day consultation period, with the goal of finalizing it by the end of the year and implementing it no later than January 1, 2027, for a 10-year period, subject to the amendments to CEPA contained in the federal Budget 2025 Implementation Act. Alberta’s existing equivalency agreement will remain in place until the Agreement is finalized.   For further information or to discuss the contents of this bulletin, please contact Lisa DeMarco at lisa@resilientllp.com.

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ECCC Publishes Discussion Paper and Launches Consultation on Effective Carbon Markets

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Environment and Climate Change Canada (ECCC) recently published a discussion paper on “Driving effective carbon markets in Canada” (the Discussion Paper). The Discussion Paper sets out proposed changes to the federal benchmark criteria ahead of the federal government’s review next year. ECCC also launched consultations on the Discussion Paper, seeking comments and responses to questions included in the Discussion Paper from stakeholders.  This bulletin briefly summarizes the key topic areas, current requirements, the federal government’s proposal and considerations, and next steps set out in the Discussion Paper. Common scope of coverage Current requirement. The current benchmark requires that carbon pricing systems maintain a common scope, covering, at a minimum, an equivalent percent of combustion emissions as the federal backstop. It also requires market-based systems to cover industrial process emissions, and to limit eligibility for OBPSs, performance rebates, or the free allocation of allowances to sectors that are at risk of carbon leakage and competitiveness impacts of carbon pricing. Proposals and considerations. ECCC notes that the removal of the fuel charge (see our earlier bulletin here) requires rethinking how scope of coverage should work. The federal government is considering the following three options to modify the benchmark to specify the common scope criteria explicitly to ensure consistent minimum coverage across systems: Option 1: A threshold-based approach that would cover all facilities in specific sectors emitting above a certain level annually. Thresholds under consideration are 10kt per year (Option 1A) and 25kt per year (Option 1B). Option 1A would cover a large number of facilities and industrial activities, which would support market function and liquidity, but could create intra-sectoral competitiveness risks in some sectors. Option 1B would reduce these risks by covering fewer industrial activities where there is a significant split between emissions above and below the threshold, but may negatively impact market function…

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Canada Announces Proposed CFR Amendments

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Environment and Climate Change Canada (ECCC) published a discussion paper to invite views and information related to targeted amendments to the Clean Fuel Regulations (CFR) on December 3, 2025. The proposed amendments are largely intended to complement Canada’s Biofuels Production Incentive (announced in September), which is expected to provide more than $372 million over two years to support the stability and resiliency of domestic producers of biodiesel and renewable diesel. This bulletin provides a brief summary of the discussion paper.  Background. The CFR require producers and importers of gasoline and diesel (i.e., primary suppliers) to reduce the life cycle carbon intensity of gasoline and diesel produced and imported for use in Canada, with the intent of reducing GHG emissions. A life cycle approach considers the GHG emissions involved in multiple stages of the fuel’s production process, from feedstock extraction or cultivation to fuel combustion. CFR credits can be created by:  compliance category 1 – undertaking projects that reduce the life cycle carbon intensity of liquid fossil fuels (e.g., carbon capture and storage, renewable electricity, co-processing) compliance category 2 – supplying low-carbon intensity fuels (e.g., ethanol, biodiesel) compliance category 3 – supplying fuel or energy to advanced vehicle technology (e.g., electricity or hydrogen in vehicles) The discussion paper notes that the majority of credits created to-date under the CFR come from the supply of low-carbon intensity fuels. While an important share of these credits comes from fuel produced in Canada, Canada does not currently produce enough low-carbon intensity fuels to meet the total domestic demand. As such, a large share of CFR credits for low-carbon intensity fuel supply reportedly come from imports, mostly from the United States (see Annex 1). Policy goal. The stated goal of the CFR amendments is to strengthen the resiliency and support the development of Canada’s low-carbon fuel sector, while maintaining the Regulations’ primary focus on…

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