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Carbon and Greenhouse Gas Legislation in Alberta

April 2018

Alberta Climate Leadership Plan  Emissions limit on oil sands.   Reducing methane emissions from oil and gas operations.

Alberta’s approach to reducing carbon emissions was announced in the November 20, 2016  Climate Leadership Plan. This plan introduces an economy-wide price on carbon, phases out coal-fired generation and incents the development of renewable energy. Alberta’s regulations previously focused on reducing carbon emissions from industrial emitters.

Climate Leadership Plan

Key elements of the Climate Leadership Plan include:

Carbon pricing 

  • The Climate Leadership Implementation Act implements a key cornerstone of the Climate Leadership Plan, being a carbon levy on sale, import, flaring, etc. of fuels by all consumers.

  • Beginning on January 1, 2017, a $20/tonne carbon price was implemented across all sectors. The carbon price rose to $30/tonne on January 1, 2018, and is expected to continue to increase in real terms, suggested to be inflation plus 2%, each year after that.

  • The levy applies throughout the fuel supply chain, including: at the point of purchase; when fuel is being imported; at the point of removal of fuel from a refinery, terminal, plant or oil or gas battery and flaring or venting of fuel.

  • Rebates will be provided to low and middle-income Albertans to offset costs associated with the carbon levy. Alberta’s small business corporate income tax rate is being reduced by one third, from 3% to 2% effective Jan 1, 2017, to help businesses adjust to the carbon levy.

Coal & electricity

  • Coal-fired electricity will be phased out and replaced by renewable energy and natural gas-fired electricity, or by using technology to produce zero pollution, by 2030.

  • Starting in 2018, coal-fired generators will pay a $30/tonne carbon price based on an industry-wide performance standard.

  • By 2030, renewable sources like wind and solar will account for 30% of electricity generation in Alberta.

  • On November 23, 2016, Alberta announced the introduction of a capacity electricity market, which is intended to provide a reliable supply of electricity at a stable rate. In a capacity market, private power generators are paid through a mix of competitively auctioned contracts which pay their fixed capital costs and revenue from the spot electricity market. Alberta currently has an “energy-only” market, in which generators are paid for the electricity they produce based solely on the wholesale price of electricity. The new capacity market framework will be in place by 2021.

  • The Government of Alberta also entered into agreements with TransAlta, Capital Power and ATCO to end coal-fired emissions on or before December 31, 2030.

Oil sands emissions

  • The oil sands will be subject to a legislated emissions limit of 100 mega tonnes (Mt) per year under the Oil Sands Emissions Limit Act. Today, the oil sands emit approximately 70 Mt per year. There was previously no limit on oil sands emissions, either by facility or industry-wide.

  • Oil sands emissions will be subject to the carbon price based on results already achieved by high-performing facilities.

  • Under the Oil Sands Emissions Limit Act, greenhouse gas emissions attributable to upgraders are exempt, to a combined maximum of 10 Mt/year. This exemption only applies to upgraders that complete their first year of commercial operation after December 31, 2015 or an upgrader that completed its first year of commercial operation on or before December 31, 2015 but increased its capacity after December 31, 2015.

  • Alberta has put together an Oil Sands Advisory Group (OSAG) comprised of leaders from the oil sands industry, environmental groups and affected communities. In June 2017, OSAG provided its first round of consensus advice [PDF] on implementing Alberta’s 100 mega tonne oil sands emissions cap. OSAG’s report focuses “on encouraging lower emission intensity production and building the necessary reporting and forecasting systems for compliance with the limit.”

Methane emissions

  • Methane emissions from oil and gas operations will be reduced by 45% by 2025.

  • Methane reduction targets will be achieved through new emissions design standards for new facilities, a five-year voluntary Joint Initiative on Methane Reduction Verification and regulated mandatory standards effective in 2020 to ensure the 2025 target is met.

Financial support for renewables

  • The government tasked the Alberta Electric System Operator (AESO) with the development and implementation of a plan to bring new renewable electricity generation capacity to the grid by 2030, through a competitive process.

  • The AESO’s Renewable Electricity Program (REP) is intended to encourage the development of 5,000 MW of renewable electricity capacity by 2030. The REP incents the development of renewable electricity generation through a series of competitions whereby government incentives are awarded.

  • The first procurement under the REP, conducted in 2017, resulted in three successful bids that are together expected to add approximately 600 megawatts of renewable power and $1 billion of private-sector investment in wind projects throughout Alberta. The competition awarded Indexed Renewable Energy Contracts, which are a way of paying renewable generators who win contracts through REP for the renewable attributes that they produce. Companies bid competitively for the all-in price they need to develop a project. From this price, the AESO subtracts the pool price and the difference is how much is paid in support.

    In early February, 2018, AESO announced details on the second and third rounds of competition, both of which will be conducted this spring and see successful bidders announced by the end of the year. The second round requires bidders to be partnerships of companies and Indigenous communities. The third round will follow the same format as the recently completed first round. In total, the two new rounds of competition are expected to add 700 megawatts of renewable energy. 

The Climate Change and Emissions Management Act and the Carbon Competitiveness Incentive Regulation

Effective January 1, 2018, the province replaced the Specified Gas Emitters Regulation (SGER) under the Climate Change and Emissions Management Act (CCEMA) with a new regulation—the Carbon Competitiveness Incentive Regulation (CCIR). The CCIR has some similarities to CCEMA but also several important differences. 

While the SGER created an emissions reduction requirement that was based on a particular facility’s historical and idiosyncratic emissions profile, the CCIR imposes an output-based benchmark on all competitors in the same emitting industry.

The CCIR will also tighten the free emissions allocations in the industry by 1% per year and put an expiration date on emission offsets and performance credits. However, it does maintain the four compliance options that had been available to large emitters under the SGER:

  1. Improvements in facility operating efficiency;
  2. Emission performance credits;
  3. Emission offsets; and
  4. Fund credits. 

For a more detailed discussion of the CCIR and how it differs from its predecessor, see this Osler Update.

In October 2016, the federal government announced a national carbon pricing floor. This pan-Canadian approach to pricing carbon will require all Canadian jurisdictions to have carbon pricing in effect by 2018, or Ottawa will impose a federal carbon tax. Alberta’s Climate Leadership Plan is intended to meet the federal requirement for a provincial carbon price by 2018.

How does this policy compare with other regions in Canada?

View infographic

To discuss how to best manage emissions compliance, contact our Climate Change team.

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