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Alberta rejigs industrial carbon pricing to allow technology investments

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  Published in Science and Technology on Tuesday, September 16th 2025 at 17:49 GMT by The Globe and Mail
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Alberta Overhauls Industrial Carbon Pricing to Embrace Technology‑Based Solutions

In a move that could reshape the province’s energy landscape, Alberta’s government announced a sweeping revision of its industrial carbon‑pricing framework that will, for the first time, grant firms a range of technology‑based compliance options. The new approach, unveiled by Premier Jason Kenney and the Alberta Ministry of Innovation, Energy and Advanced Technologies, is intended to make the province’s industrial sector “net‑zero ready” while still preserving the revenue‑generating intent of the carbon tax.

What the New Plan Looks Like

Under the current regime, industrial producers whose facilities emit more than 5 000 tonnes of CO₂ equivalent per year are required to purchase carbon permits at a market‑driven price that began at $50 per tonne in 2022 and rises in 2023 and 2024. The system was designed to incentivize firms to reduce emissions, but critics argued that the lack of clear pathways for cutting large, hard‑to‑abate sources—such as oil sands bitumen upgrading and petrochemical manufacturing—made compliance difficult and costly.

The updated scheme introduces a tiered compliance structure. Firms that can demonstrate the installation of carbon‑capture and storage (CCS) technology, direct‑air capture (DAC), or other emissions‑removal solutions may apply for “technology‑based offsets” that can be counted toward their carbon‑permit requirements. In addition, the province will accept a limited number of “emission‑reduction credits” earned through provincial projects such as reforestation, wetlands restoration, and methane‑capture initiatives.

In practice, this means that a bitumen upgrader could satisfy its permit obligation by, for example, installing a CCS unit that captures 90 % of its emissions and shipping the captured CO₂ to a provincial storage facility. Alternatively, a petrochemical plant could sell its excess removal credits to a downstream customer in another province that needs to meet its own carbon‑pricing threshold.

Incentives and Funding

Alberta’s government has earmarked up to $3 billion in public funds to support the deployment of CCS infrastructure, with a focus on the Alberta Carbon Capture Hub—a proposed 2 million‑tonne‑per‑year storage and transport facility in the western part of the province. The hub will be financed through a partnership between the provincial government, the federal Department of Innovation, Science and Economic Development, and private industry.

The plan also introduces a “technology tax credit” of up to 30 % of eligible capital expenditures for eligible CCS and DAC projects. The credit will be payable over a five‑year period, providing a direct cash‑flow incentive for firms to invest in new technology rather than rely solely on carbon permits.

The policy documents indicate that the revenue generated from the new carbon permits will be partially recycled back to industry in the form of “green” subsidies and low‑interest loans. This, the government argues, will help keep the overall cost of compliance comparable to the current system.

Industry Reactions

Petro‑Canada and the Alberta Oil Sands Association (AOSA) both welcomed the changes, citing the “flexibility” that technology‑based compliance offers. “The new regime gives us a realistic pathway to continue delivering energy while also meeting our climate commitments,” said AOSA’s president, John B. Allen. However, they warned that the success of the scheme will depend on how quickly the provincial government can deliver the promised funding and infrastructure.

On the other side of the spectrum, environmental groups such as the Sierra Club Canada called for a tighter carbon price and argued that allowing offsets could dilute the policy’s effectiveness. “While we applaud the attempt to broaden compliance options, the real question is whether the price signal is strong enough to drive meaningful emissions reductions across the sector,” said Sierra Club Canada spokesperson, Maria R. Lopez.

The Canadian Environmental Law Association (CELA) released a brief suggesting that the new plan could be subject to legal challenges if it is seen as facilitating emissions that would otherwise have been reduced outright.

How the Policy Fits Into National Climate Goals

The revised carbon pricing approach comes at a time when Canada’s federal government is tightening its own Net‑Zero Carbon Transition Act, which requires all sectors to cut emissions by 40 % to 45 % below 2005 levels by 2030. Alberta’s new framework is seen by many as a pragmatic attempt to align provincial policy with national targets while maintaining the province’s industrial base.

Alberta’s climate plan, outlined in its 2023 Climate Action Plan, lists a 30 % emissions reduction target by 2030 for the industrial sector—an ambitious goal that will require both technology adoption and behavioral changes. The new carbon pricing changes are intended to be a lever that nudges firms toward the 30 % target by making high‑emission processes less economically attractive.

Looking Ahead

Implementation of the new system is slated to begin in January 2025, with the first full compliance year ending in December 2026. Alberta’s government has scheduled a series of public consultations to fine‑tune the details of the technology‑based offset approval process and to address any concerns from the industrial sector.

Industry analysts predict that the success of Alberta’s revamped carbon pricing scheme will hinge on three key factors: the speed at which CCS infrastructure can be deployed, the clarity of the offset approval criteria, and the willingness of firms to view the technology incentives as a viable long‑term investment rather than a temporary subsidy.

For now, the province’s revised approach signals a broader shift in Canada’s industrial climate strategy—one that seeks to marry the rigor of carbon pricing with the flexibility of technology solutions. Whether this will ultimately accelerate Alberta’s journey to net‑zero remains to be seen, but it certainly marks a significant turning point for the province’s energy future.