cCarbon's Alberta TIER Credits Demand & Supply Model hinges on the buildup of incremental CCUS capacity in the years to come. Alberta’s Technology Innovation and Emissions Reduction (TIER) regulation remains the central compliance carbon pricing framework for large industrial emitters in the province, covering emissions intensive sectors including oil sands, refining, power generation, cement, chemicals, and other heavy industries. The TIER system establishes facility-level carbon intensity benchmarks that decline over time, requiring regulated entities to either reduce emissions intensity, purchase credits, or utilize eligible offsets and sequestration credits to meet compliance obligations. Within this structure, the development of Carbon Capture, Utilization and Storage (CCUS) capacity is expected to play a critical role in shaping long-term credit supply dynamics, as sequestration credits generated from captured emissions provide a significant source of compliance instruments within the TIER market. The pace and scale at which CCUS projects reach commercial operation therefore directly influences credit market balance, allowance bank levels, and price stability over the medium to long term horizon. The three mentioned scenarios (Accelerated, Baseline and Slow) forecast the bank of credits capacity under varying degrees of CCUS buildup rates. Scenario-based modelling is particularly important in the Alberta TIER market due to the project-driven nature of credit supply expansion. Unlike allowance-based systems where supply trajectories are largely predefined through emissions caps, the TIER market relies heavily on project development timelines, investment decisions, and technological deployment rates. The model indicates a surplus of credits in the latter half of the decade. CCUS projects, which the Alberta Government has been promoting, are expected to increase offsets' supply significantly. Government policy support for CCUS includes fiscal incentives, regulatory clarity, and infrastructure planning intended to accelerate deployment across the oil sands and industrial emissions landscape. However, the development of CCUS remains uncertain – a timely opening of the proposed plants would saturate the market. Project development timelines for large-scale CCUS facilities involve significant capital expenditure, regulatory approvals, transportation infrastructure development, and long construction lead times, all of which introduce uncertainty into supply forecasts. In our baseline scenario, the additional CCUS plants from 2027 push the market into an EPC + offset surplus of over 80 million, up from roughly 49 million circulating allowances today. This reflects the expected increase in sequestration credit generation as capture facilities become operational and begin delivering verified emissions reductions. In the accelerated scenario, surplus allowances grow to 95 million as the approximately 130 million sequestration credits from 2025 to 2030 saturate the market. This scenario also sees a reduced need for credits and offsets due to an increased decline in carbon intensity. Improvements in facility level emissions performance, operational efficiency enhancements, and technological deployment contribute to declining carbon intensity benchmarks, reducing compliance demand growth even as supply increases. Only in the slow scenario, sluggish growth in oil output, would the market be tight in 2030. Slower expansion in industrial production reduces emissions growth, limiting demand for credits and partially offsetting the impact of slower CCUS deployment. The interaction between industrial output growth and project-based credit generation therefore becomes a central driver of market balance outcomes across scenarios.

Model Change Log:

This version of the scenario simulator incorporates program changes from Alberta's Q2 2025 compliance workshop. The Q2 2025 workshop introduced updates related to benchmark trajectories, credit eligibility considerations, and program implementation timelines, all of which influence projected compliance demand and credit generation volumes. Incorporating these regulatory updates ensures alignment between modelling assumptions and evolving policy design, allowing the scenario simulator to reflect current program parameters. As the Alberta Government continues to position CCUS as a key decarbonization pathway for emissions intensive sectors, scenario modelling remains essential for understanding how different deployment pathways may influence credit bank levels, market liquidity conditions, and long-term price signals within the TIER compliance carbon market.