On November 22, 2015, Alberta released its long-awaited Climate Leadership Plan (Climate Plan).  Contemporaneously with the Climate Plan, the Government released the Climate Change Advisory Panel’s (Climate Panel) Report to the Minister, Climate Leadership. As background, previous blogs on the Climate Panel’s mandate and the Climate Leadership Discussion Document can be found here and here.

Not surprisingly, carbon pricing has been identified by the Climate Panel as the primary policy tool for reducing emissions in the province. In particular, the Climate Panel recommends that the existing Specified Gas Emitters Regulation (SGER) be replaced in 2018 by a Carbon Competitiveness Regulation that will broaden the reach of the province’s existing carbon pricing regime and implement additional policies to reduce the emissions intensity of the province’s electricity supply and its oil and gas production. Further, the Climate Plan will promote energy efficiency and add value to provincial resources through investments in technological innovation. To protect the competitiveness of Alberta’s core industries, the Climate Panel has recommended the allocation of emissions credits for industrial emitters.

Under the Climate Plan, Alberta will:

  1. Phase out coal emissions by 2030:  Emissions from coal are to cease by 2030 either through the retirement of units or by owner action to fully sequester carbon dioxide. In its place, the goal is to replace two-thirds of the existing coal electricity with renewable energy.  Starting in 2018, coal-fired generators will pay $30 per tonne of carbon dioxide on emissions above what Alberta’s cleanest natural-gas fired plant would create for the same amount of electricity.
  2. Offer incentives for renewable generation:  Alberta has set a goal of replacing two-thirds of the existing coal electricity with renewable energy (e.g. wind, solar, biomass, etc.), one-third of which will be replaced by natural gas. The 2030 goal is for renewable sources to account for 30% of Alberta’s total operating generation capacity.

While the Government has set ambitious renewable goals, they have provided little detail on how they intend to do this within our current electricity market, except to state that it “will accomplish its transition with policies that fit Alberta’s unique energy market [and] ensure that the electricity system continue to be reliable.”

  1. Implement an economy-wide carbon price:  Under the SGER, facilities that emit 100,000 tonnes or more of greenhouse gas emissions are currently required to annually reduce their site-specific emissions intensity by 12% (which will increase to 15% as of January 1, 2016 and 20% as of January 1, 2017). This captures approximately 45% of provincial emissions.  Regulated facilities have several compliance options available to them, including making a contribution to Alberta’s Climate Change and Emissions Management Fund (the Fund). Facilities that pay into the Fund pay $15 for every tonne over their reduction target. The price will increase to $20 as of January 1, 2016, and $30 as of January 1, 2017.

Under the Climate Plan, Alberta will replace its present emissions intensity carbon pricing program under the SGER with one that is based on a product-based, emissions performance standard. It is anticipated that Alberta’s new approach will cover 78 to 90% of provincial emissions and include the following:

  • A carbon price will be applied across all sectors, starting at $20 per tonne on January 1, 2017 and moving to $30 per tonne on January 1, 2018. This price will increase in real terms each year after that. On-site combustion in conventional oil and gas will be levied starting January 1, 2023 while that sector works to reduce methane under the government’s new Joint Initiative on Methane Reduction and Verification (discussed in further detail below).
  • Emissions from transportation and heating fuels will be priced at the distributor and importer stage.
  • Carbon pricing revenue will be invested back into Alberta for clean research and technology, green infrastructure and to help finance the transition to renewable energy and efficiency programs. The carbon tax will also be used for an “adjustment fund” to help individuals and families adjust as the new policy is implemented. The adjustment fund will also be used to help small business, First Nations and people working in the coal industry. Media estimates the costs of the Climate Plan to an average Alberta household as $320 per year in 2017 and $470 in 2018.
  1. Legislate a cap on oil sands emissions:  Currently, the oil sands sector accounts for approximately one-quarter of Alberta’s annual emissions and these facilities are currently charged a levy based on each facility’s historical emissions under the SGER.

Under the Climate Plan:

  • An oil sands specific emission performance standard will replace the current approach. A $30/tonne carbon price will be applied to oil sands facilities based on results already achieved by high performing facilities.
  • A legislated maximum emissions limit of 100Mt in any year will be implemented, with provisions for cogeneration and new upgrading capacity, with the goal of driving technological progress and ensuring operators have time to develop and implement new technology.

The Alberta Government claims that while the 100 Mt per year limit provides room for growth and development it will also incentivize change. They have also promised to immediately consult with industry, regulators, environmental organizations and Indigenous and metis communities on the implementation of the 100 Mt limit.

  1. Implement a new methane emissions reduction plan: Alberta intends to cut methane emissions by 45% from 2014 levels by 2025. This target matches the US’s recently announced targets on methane. Alberta’s largest source of methane emissions is from the oil and gas industry (venting, fugitive emissions from natural gas driven pneumatics and leaks and from flaring). To cut methane emissions, Albert’s Climate Plan uses two approaches.
  • It will apply the new emissions design standard to new Alberta facilities (i.e. applying standards at the planning stage).
  • It will develop a 5-year voluntary Joint Initiative on Methane Reduction and Verification. This initiative will be tasked with taking action on venting and fugitive emissions from existing facilities, including enhanced measurement and reporting requirements for new and existing facilities.
  1. Implement an Energy Efficiency Program: Alberta is currently the only province without an energy efficiency program. Carbon pricing revenue will also be used to fund energy efficiency programs.

In its report, the Climate Panel succinctly states the challenge: “[w]e must demonstrate how an energy-producing jurisdiction can implement climate policy that reduces emissions, protects the competiveness of key industries and spurs innovation.” While the Climate Plan has created significant chatter, the devil is in the details and many ambiguities remain.  Such unanswered questions include: how will the renewable energy be procured and what will happen to the SGER credits and the cogeneration credits? What will the process look like for addressing climate impacts on Aboriginal communities in climate change mitigation and adaptation plans? Further, what emission reductions will the plan in fact achieve?  The Climate Panel suggests that its plan will achieve reductions of 20 Mt by 2020 and 50 Mt by 2030.  Only time will tell whether these policies will deliver meaningful emission reductions.

Stay tuned for more detailed commentary on Alberta’s new climate approach in the coming days.