Mark Carney’s decisive victory in Canada’s federal election has sparked a wave of optimism for the nation’s carbon markets.

Leading the Liberal Party to 169 seats (just shy of a majority), Carney has secured a strong mandate to blend economic growth with climate action. Carney is known for his support of carbon pricing, and his leadership promises to bring in a new era of both stability and opportunity for Canada’s carbon markets, while working to align environmental goals with economic competitiveness.

Carney wasted no time when stepping into office by eliminating the consumer-facing carbon fuel charge, effective April 1, 2025. This policy shift lifted a burden off smaller emitters who have long struggled under previous pricing systems. By easing financial pressures without retreating on climate goals, Carney is fostering a business-friendly policy environment.

For emitters, especially those on a smaller scale, this means immediate relief, predictability, and a signal that Canada’s carbon markets are evolving to work for them, not against them under Carney.

Now, all eyes are on the Prime Minister, how his administration may shift federal policies, and how the provinces and markets will react.

Carney’s Cabinet Selections

Carney’s newly announced cabinet as of May 12 further bolsters confidence in Canada’s carbon market future. His appointments reflect a blend of expertise:

• Julie Dabrusin, as Minister of Environment and Climate Change, brings rigorous environmental focus.
• Tim Hodgson’s corporate experience at Energy and Natural Resources strengthens ties between industry and innovation.
• François-Philippe Champagne’s steady leadership at Finance and Anita Anand’s diplomatic skill at Foreign Affairs round out the team as well.

This seemingly diverse and experienced cabinet signals to provinces and emitters alike that Canada’s carbon markets can thrive under stable, forward-thinking governance.

Alberta’s TIER Freeze

Meanwhile, Alberta’s decision to keep its carbon price steady at CAD 95 per metric ton under the Technology Innovation and Emissions Reduction (TIER) program, announced on May 12, is viewed as a smart and calculated step. Premier Danielle Smith and Environment Minister Rebecca Schulz framed the freeze as a practical move to ensure affordability and economic stability, promoting TIER as a strong “made-in-Alberta” carbon pricing system.

The decision has sparked questions about whether TIER still meets federal equivalency standards under the output-based pricing systems (OBPS) benchmark. However, some industry stakeholders see the freeze as a strategic negotiation tactic rather than a step toward dismantling the program. No changes were made to the tightening performance standards (intensity curves), which will continue to increase annually.

Schulz also hinted at future reforms to offsets, carbon capture (CCUS), and program design. This freeze may be a venue to provide policy stability, especially after earlier fears that the program might be gutted post-election.

Alberta seems to be balancing internal political pressures, maintaining investment appeal (particularly for hydrogen and carbon removals), and strengthening its position in federal negotiations on policies like the oil and gas emissions cap. The federal government has not yet responded, but the freeze may test Ottawa’s willingness to accept provincial policy divergence and could lead to closer scrutiny of equivalency agreements. TIER is expected to undergo review by the end of 2026.

Quebec’s Cap-and-Trade Standing Tall

Quebec’s carbon market also remains strong despite recent challenges. Some price volatility, which has been largely driven by regulatory delays in California and uncertainties from US political shifts, has tested the market. However, Quebec’s system is fundamentally strong.

Supportive court rulings in the past (such as when Trump tried to dismantle the U.S.-Canada carbon relationship in 2019) have affirmed the WCI’s legality and work to ensure its resilience. For Quebec, this means continued access to a vital cross-border trading platform.

External pressures, such as President Trump’s recent executive order targeting U.S. state-level climate programs, pose challenges for Quebec’s WCI ties. Trump’s declaration of a national emergency could alter the trajectory of litigation against carbon markets under the current administration, and his efforts to challenge cap-and-trade may gain more legal footing this time. Yet, some legal experts still expect minimal disruption of these markets, citing established legal precedents.

When it comes to Canada, Carney’s diplomatic agility and Canada’s strong policy frameworks may still be able to keep cross-border markets steady. Quebec is expected to release their new rulemaking in 2026, and formally link with Washington’s Cap-and-Invest under the WCI in 2027.

Saskatchewan Challenges Carney’s Agenda

On May 13, Saskatchewan Premier Scott Moe issued a letter to Prime Minister Carney outlining ten major policy demands under his “Strong Saskatchewan, Strong Canada Plan.” Building on the repeal of the federal consumer carbon levy, Moe called for an end to the carbon tax on home heating and for provinces to assume control over the output-based pricing system (OBPS) for industrial emitters. He argued that provinces are better positioned to tailor emissions policy to their economic realities.

The letter also called to repeal clean electricity rules and the oil and gas emissions cap, which Moe says don’t work for fossil-fuel-reliant provinces.

While criticized by environmental groups, the proposal resonated with Moe’s rural base and reflects a growing pattern. Provinces may push back against centralized climate policy in favor of regional control.

Alongside some weakening carbon price support in Quebec amongst the general public, the letter raises questions about whether Carney can hold together a unified national approach in the face of rising provincial resistance.

Expanding Clean Tech Incentives

Carney is also expected to prioritize clean technology deployment through expanded investment tax credits (ITCs), particularly in sectors like CCUS, clean electricity, and hydrogen. His government has signaled plans to finalize outstanding ITC frameworks and extend CCUS ITC eligibility through 2035, ensuring long-term capital support for industrial decarbonization.

These credits are being positioned as a scalable, politically durable complement to carbon pricing, offering financial certainty that enables large emitters and innovators to make high-impact investments with confidence.

Integrity via C-59

Bill C-59, Canada’s proposed greenwashing and competition reform legislation, is also expected to gain new momentum under Carney. The bill aims to strengthen rules around environmental claims and deceptive marketing, and although the Competition Bureau is still developing guidance, Carney’s allies are viewed as strong supporters of the legislation’s core provisions.

Stakeholders should expect the government to defend and refine C-59, especially as it intersects with ESG transparency, product labeling, and broader carbon market integrity.

Potential Aspirations for CBAM 

At the same time, Carney has begun using EU-aligned language by referring to Canada’s future “carbon border adjustment mechanism” (CBAM), indicating plans to better integrate climate and trade policy.

This shift suggests Canada may try to join other G7 nations in developing CBAM frameworks that protect domestic industry while leveling the playing field with high-emissions trading partners.

For provinces and emitters, this signals that future federal climate tools may be framed through a competitiveness lens, which would strengthen international alignment without the political friction of standalone climate mandates.

However, pursuing this approach may be challenging for Canada, given the current geopolitical climate and existing U.S.-Canada tariff issues, which could create significant obstacles to the implementation of a CBAM.

Charting a Confident Path Forward

Ultimately, Mark Carney’s election marks a new chapter for Canada’s carbon markets. His early policy shifts, clean tech investments, and emphasis on provincial cooperation signal a future grounded in both stability and ambition.

Provinces stand to benefit from a more respectful, collaborative federal approach, while emitters may gain the predictability and incentives needed to both innovate and decarbonize. Canada’s carbon markets are well-positioned to thrive even amid global uncertainty.

If Carney can maintain policy cohesion while reinforcing market integrity, Canada could emerge not only as a climate leader but as a model for aligning environmental ambition with economic pragmatism across jurisdictions with competing priorities.