The recently released Implementation Agreement under the Canada–Alberta Memorandum of Understanding dated November 27, 2025, has immediate implications for the headline carbon price trajectory applicable to industrial carbon pricing systems across Canada and raises new considerations for long-term project planning. Under the updated federal trajectory, the headline carbon price is $95 per tonne of CO2 equivalent (CO2e) in 2026, increasing to $115 per tonne by 2030 and $130 per tonne by 2035, before escalating at 1.5% per year to reach $140 per tonne by 2040.
The agreement also distinguishes between the headline carbon price, which rises to $140 per tonne by 2040, and the effective market price of TIER credits, which is targeted at $130 per tonne in 2040 and supported by a new credit floor mechanism increasing from $60 per tonne in 2030 to $110 per tonne in 2040. For the purposes of this article, the use of the term headline carbon price is appropriate. Depending on the client audience, however, it may also be useful to note that the effective credit price is expected to remain below the headline trajectory in Alberta. It is still currently unclear whether these updates will be included in the revised federal benchmark for Canada.
For many clients, the key issue is how to approach carbon pricing assumptions beyond 2040. The wording in both the Implementation Agreement and related federal communications leaves room for interpretation. As a result, industry does not yet have the degree of certainty many project evaluations require. While the federal government has indicated that a fully updated federal benchmark will be released later in 2026, participants are left to make near-term planning decisions before that guidance is available.
| YEAR | CANADIAN HEADLINE CARBON PRICE | ALBERTA CARBON CREDIT PRICE FLOOR |
|---|---|---|
| 2026 | $95 | N/A |
| 2027 | $100 | N/A |
| 2028 | $100 | N/A |
| 2029 | $100 | N/A |
| 2030 | $115 | $60 |
| 2031 | $118 | $63 |
| 2032 | $121 | $67 |
| 2033 | $124 | $71 |
| 2034 | $127 | $75 |
| 2035 | $130 | $80 |
| 2036 to 2040 | Escalating 1.5% per year inflationary escalator starting in 2036 and ending at $140 in 2040 | Increasing $5 per year reaching $100 in 2039 then by $10 reaching $110 in 2040 |
Sources: Industrial carbon pricing – Canada.ca & Implementation Agreement for the Canada-Alberta Memorandum of Understanding of November 27, 2025 | Prime Minister of Canada
The federal Greenhouse Gas Pollution Pricing Act (GGPPA), enacted in 2018, remains the governing federal statute for carbon pricing in Canada. It establishes the federal benchmark that functions as a backstop across the country.
Provinces may administer their own industrial carbon pricing systems, provided those systems are approved by the federal government as meeting the applicable benchmark requirements.
The Alberta government’s spring 2025 announcement to hold the provincial headline price at $95 per tonne of CO2e prompted questions regarding whether the province’s actions could displace the federal framework. In practice, any divergence from the federal benchmark would only have become a direct issue when the scheduled federal increase took effect in 2026. Because the Canada–Alberta MOU was already in place before that point, both governments had committed to negotiate within the existing federal framework before any misalignment arose.
The federal government was already scheduled to conduct an interim review of the benchmark in 2026 following the prior update in 2022. That process has already included a round of public consultation on the discussion paper “Driving Effective Carbon Markets,” which closed at the end of January 2026. In other words, the current discussions have taken place within an established federal benchmark review process rather than outside it.
For project developers and industrial operators, this reinforces that the federal government remains the primary authority shaping the national carbon pricing framework under the GGPPA. In addition, constitutional challenges to the Act were resolved by the Supreme Court of Canada in 2021. The federal government therefore remains the primary source of future direction on industrial carbon pricing, and industry will continue to look to the updated benchmark for clarity.
Historically, the federal government has reviewed and updated the carbon pricing framework on a periodic basis, and that approach is likely to continue. Current federal communications provide a published trajectory through 2040, but do not yet provide guidance beyond that date. Additional policy discussions will likely occur before 2040 to establish the next phase of the carbon price trajectory. This is consistent with previous updates of the policy.
GLJ’s view is that clients relying on post-2040 assumptions for decision-making should evaluate two scenarios. The first assumes the carbon price remains flat after 2040. If the carbon market is functioning as intended, a future review could conclude that no further adjustment is required. The second applies the same 1.5% annual escalator used from 2036 to 2040. In our view, these scenarios provide a practical range for planning until further federal guidance is issued.
These scenarios assume broad continuity in the federal policy framework. While future election outcomes could affect the pace or design of industrial carbon pricing, a more conservative policy direction would likely moderate the trajectory rather than accelerate it. On that basis, the recommended scenarios remain a reasonable planning range.
GLJ continues to monitor developments in the federal benchmark and participate in comment periods on proposed updates where appropriate. As additional guidance becomes available, GLJ will continue providing practical interpretation and planning insight for clients navigating industrial carbon pricing uncertainty.
Connect with our team to understand what carbon pricing uncertainty means for your business and how to respond with confidence.
