New Climate Progress Indicators show Alberta’s TIER market has moved steadily toward greater oversupply since 2020.

Tracking climate progress 

Carbon markets work best when they create scarcity. Scarcity is what gives carbon credits value and creates the economic incentive to invest in emissions cutting technologies.

Alberta’s industrial carbon pricing system, called TIER (or Technology Innovation and Emissions Reduction Regulation), is Canada’s largest industrial carbon market, covering roughly one quarter of national greenhouse gas emissions. With major changes now underway, including the Canada-Alberta Implementation Agreement and trilateral MOU with industry, it’s important to understand how the market itself is responding.

And the market has been sending a clear signal. Carbon credits that were trading above $40 per tonne at the start of 2026, before the Canada‑Alberta Implementation Agreement was finalized, are now trading at roughly $27 per tonne, a decline of more than one‑third. Market expectations have clearly settled around a much lower forward price.

Recent policy changes provide one explanation for that repricing. New compliance pathways—including direct investment credits and carbon capture utilization and storage (CCUS) subsidies, a halving in benchmark trajectories, and a price floor that is likely to reduce market liquidity—all point toward lower future demand for credits and downward pressure on price. 

But price alone does not tell us what is changing below the surface, in the market fundamentals.

This Insight introduces 440’s Industrial Performance Signal, built from a series of Climate Progress Indicators (CPIs) that measure the strength of Alberta’s industrial carbon market to incent emission cuts through technology investment. TIER publishes timely public registry and compliance data, allowing us to track market performance in a way that is not currently possible in other jurisdictions. 

The Industrial Performance Signal is one of five that 440 is developing under a new Climate Progress Tracker to be released in November.

Three Climate Progress Indicators

To develop the CPIs, we combine Alberta’s public carbon registries—including emissions performance credits and offsets—with Alberta’s reported annual compliance demand and credit retirements to track the market over time on a monthly basis starting in 2020. The CPIs, therefore, measure what has actually happened to credit supply and demand, rather than modelling how the market might behave.

The Industrial Performance Signal combines three Climate Progress Indicators related to TIER, each answering a different question to take stock of TIER’s overall direction of travel: 

• CPI 1: Market Balance (scale of oversupply): How many years of compliance demand are sitting in the credit bank? Market Balance compares the size of the active credit bank to annual compliance demand. A ratio of one means the bank holds enough credits to cover one full year of demand; a ratio of two means it holds two years. As this ratio increases, it undermines the value of each credit because future obligations can increasingly be met using existing credits. The larger the credit bank is relative to compliance needs, the weaker the signals are for firms to reduce emissions or seek out new credits. Market Balance measures the size of the surplus, but not what caused it: oversupply can reflect credits from abatement, generous benchmarks, weak compliance demand, or some combination of all three.
• CPI 2: Credit Persistence (durability of oversupply): Are credits clearing through annual compliance or aging in the bank? Credit persistence measures the share of active credits that are more than three years old. Temporary surpluses can be expected as part of normal compliance cycles, but when credits survive multiple cycles without being used, it indicates that excess supply is persisting rather than clearing. A growing share of older credits means credits are not moving through the system, which indicates weak demand.
• CPI 3: Market Direction (whether the market balance is getting better or worse): Is the market moving toward scarcity or further away? Market Direction measures the year-over-year change in Market Balance, capturing changes in both banked supply and compliance demand. Positive Direction means the market is tightening; negative means it is moving further into oversupply. If the bank grows faster than demand, years of available compliance coverage increase and Direction turns negative. Critically, a slowly growing bank can still leave the market more oversupplied if demand is falling faster.  So, a decelerating bank is not the same as an improving one.

Taken together, these CPIs provide an independent assessment of Alberta’s industrial carbon market and a way to track how market performance changes over time.

What the indicators tell us

The three indicators tell a consistent story. Alberta’s industrial carbon market remains structurally oversupplied; the long-term trend is moving toward greater oversupply; while the recent pace has deteriorated more slowly the overall fundamentals remain weak. 

The clearest signal comes from Market Balance. Banked supply has increased from less than one year of compliance demand in September 2020 to approximately 2.6 years of compliance demand in July 2026. Immediately before the annual June 2026 compliance deadline, banked supply exceeded three years of compliance demand for the first time.

Even the market’s largest annual demand event, the June and July compliance cycle, no longer restores scarcity. While recent data shows millions of credits are retired each year, the market emerged from compliance with more than two and a half years of future compliance demand sitting in the bank.

That deterioration in Market Balance defines the long-term trend. The market has moved from less than one year of banked demand to more than two and a half years today. 

Credit Persistence tells the same story. Nearly three quarters of active credits are now more than three years old, up sharply from just over half when the series began. Even after easing from its highest point, persistence has settled at a level well above where it started.

Together, Market Balance and Credit Persistence show a large and durable surplus that has built up since 2020, rather than a temporary imbalance associated with normal compliance cycles.

Market Balance has moved further from scarcity in every year measured, although the pace has varied considerably. Market Direction deteriorated by 16.5 per cent in 2022 and 25.2 per cent in 2023, before slowing to just 3.6 per cent in 2026, the smallest deterioration in the series. 

Slower deterioration is not the same as improvement. The market is still moving toward greater oversupply, just more slowly. Genuine tightening would require years of compliance coverage to fall, something that has not happened in any year measured. The pace of deterioration has improved while the market has not yet turned.

Taken together, the assessment indicates:

• Latest (where things stand today): Persistently oversupplied, with 2.6 years of compliance demand banked and nearly three quarters of active credits more than three years old.
• Trend (whether things are getting better or worse over time): Oversupply deepening, with Market Balance and credit age deteriorating substantially since 2020.
• Pace (whether recent change is moving fast enough to improve the outcome): Deteriorating more slowly, adding to oversupply at a lower rate than in previous periods.

What we’ll watch

This first release of the Industrial Performance Signal establishes a baseline for tracking Alberta’s industrial carbon market over time.

We will know the market is tightening when the credit bank begins shrinking relative to compliance demand, reducing years of compliance coverage; older credits begin clearing rather than aging across multiple compliance cycles; and Market Direction turns positive and remains there.

When those three indicators begin moving together, we will have the first clear evidence that scarcity is returning to Alberta’s industrial carbon market.

Until then, we can expect credit prices and investment signals to remain low.