Canadian market participants eye EU ETS, CBAM and Article 6 opportunities as domestic carbon markets stall
By Michael Mathres
With Canada’s domestic carbon markets weakened by fragmentation and low credit prices, Canadian market participants are looking abroad. They see opportunities in the EU Emissions Trading System, the EU’s Carbon Border Adjustment Mechanism and Article 6. The shift coincides with Ottawa’s recent move to develop a national ITMO framework, which could make Canada a seller of internationally recognised carbon credits, particularly from carbon removal.
According to the Carbon Pulse briefing, Canadian carbon market players are turning their attention to international opportunities linked to the EU ETS, CBAM and Article 6, as domestic markets struggle.
Canada’s industrial carbon pricing has become fragmented. ClearBlue Markets analysis found that while the compliance price stands at CAD 95 per tonne, market credits have traded at around CAD 18. That gap points to a credit surplus and weak demand. Cheap offsets from Alberta’s TIER system have pulled prices down in parts of the federal Output-Based Pricing System. A 2026 federal benchmark review could reshape the system.
On 24 September 2026, Environment and Climate Change Canada announced it is developing a framework to allow international transfers of emission reductions and removals under Article 6. The government said any credit used as an ITMO must meet Article 6 requirements and that it will also explore international and domestic offset credits. Industry group Carbon Removal Canada argues the domestic pool of removal buyers is too small for the investment the sector needs. It says an Article 6 framework would let Canadian projects produce credits that become international assets.
Signals to watch
- Canada as an ITMO seller: A national ITMO framework would allow Canadian projects, especially carbon removal, CCS and nature-based activities, to be authorised for export with corresponding adjustments. Watch for the framework’s design: eligible activity types, authorisation criteria and how much mitigation Canada will keep for its own NDC.
- EU demand after 2030: The EU is debating a role for international credits towards its 2040 target, and researchers have urged it to start securing them well before 2036. Canadian removal developers could become early suppliers if EU rules recognise high-quality Article 6 removals.
- CBAM exposure drives decarbonisation: Canadian exporters of steel, aluminium, fertiliser and cement face CBAM costs. Demonstrating effective carbon pricing at home, and possibly negotiating recognition of Canadian carbon costs, matters for trade competitiveness. That gives Canada an incentive to strengthen domestic markets alongside its international strategy.
- Domestic market fixes still needed: The large gap between compliance and credit prices undermines investment signals. The outcome of the 2026 benchmark review, including tightening standards, limiting cheap offsets and aligning provinces, will affect whether Canadian credits are seen as credible abroad.
- LNG and Article 6 claims: Some in Canada have argued that LNG exports should earn credits for displacing coal abroad. Analysts note this view is increasingly out of step with Article 6 additionality rules. Expect this debate to continue as the ITMO framework is designed.
Sources:
- Carbon Pulse – Canadian market participants eye EU ETS, CBAM, Article 6 opportunities
- Government of Canada – Framework for international cooperation on carbon markets
- Engineering News – Canada to develop carbon removal market framework
- CarbonCredits.com – Canada’s carbon pricing reset in 2026
- Canadian Climate Institute – Trading strength: Canada, clean tech and global carbon markets
- Carbon Pulse – EU should start securing international credits before 2036
