Alberta's Climate Change and Emissions Management Act and its associated Specified Gas Emitters Regulation set province wide emissions reduction goals and provide the framework and regulatory enactment authority for the regulations that set out the details of Alberta's emissions reduction and trading regime.
Alberta has set targets based on emissions intensity (emissions reductions per unit of output). Its legislative regime requires mandatory reporting for all releases of specified gas (the term used to define greenhouse gases ("GHGs") and their global warming potentials) from facilities that emit more than 100,000 tons of GHGs per year (referred to as Large Final Emitters). There are approximately 106 Large Final Emitters in the province. By sector, these Large Final Emitters are Power Plants (45%), Oil Sands (21%); Heavy Oil (7%), Gas Plants (7%) and Chemicals (6%) and "Other" (14%).
Large Final Emitters were required to apply for the establishment of a "baseline emissions intensity" by December 31, 2007. The baseline is calculated based on the ratio of total annual emissions to production. A Large Final Emitter must not exceed 88% of its baseline emissions intensity (i.e. 12% below the facility-specific baseline). Reduction amounts are currently static, but more stringent targets are contemplated in the future. The regime contemplates that all new facilities will be subject to gradual reductions starting the fourth year of operation, reducing emissions by 2% per year until a 10% reduction is achieved. Those found to be out of compliance may be subject to a $200/ton fine. Other penalties for contravention of specified sections of the regulation could result in penalties up to $50,000 in case of an individual and $500,000 in the case of a corporation e.g. failure to submit the required compliance report - s. 11. Emitters can also be subject to administrative penalties.
If they are unable to make the mandated reductions on-site, Alberta's system allows regulated entities to buy credits from other regulated entities, purchase offset credits or make a payment into the technology fund. Payment into the technology fund is currently set at $15/ton of CO2e. Offset project assurance occurs after Offset credits are created. Offset credits do not have to be preapproved before they are used, however they must be verified by a third party and the reduction must:
- Occur in Alberta;
- Not otherwise be required by law;
- Have a project start date not earlier than January 1, 2002;
- Be real and demonstrable; and
- Be quantifiable and measurable.
Alberta offset projects use government approved protocols to establish the scientific basis for the ultimate assertion that GHGs have been reduced or removed. as a result of the project. In Alberta there 24 approved protocols and approximately 14 more are in the review process.
Verified offsets ("Emissions Offsets") can be registered with the Alberta Emission Offset Registry and sold to Large Final Emitters in Alberta. Offset owners may also choose to register and sell their Emissions Offsets inter-provincially and internationally. In such cases, trading occurs through bi-lateral contracts outside the Alberta Emission Offset Registry. The Alberta system does not allow offsets from any source outside of Alberta.
Large Final Emitters that emit less than their allocation can trade their Emissions Performance Credits or bank them for future use.
Payment into the technology fund was a popular method of compliance in the first round of the program, ensuring that the price of carbon would not move much higher than $15/ton. In the first compliance period, 1.5 million Emissions Offsets were created and over 2.6 million tons worth of payments into the technology fund were made. In 2007, 1 million Emission Performance Credits were created, but only 250,000 were used for compliance purposes. In 2008, 1.9 million tons of Emission Performance Credits were generated and 1.3 million of those were banked for future use. 2008 also saw 5.47 million tons worth of payments into the technology fund and 3.4 million offset credits generated, 2.7 million of which were used for compliance purposes.
There have been over 5 million offset credits created under the Alberta system. Alberta Emitters have spent more than $155 million on technology fund credits and offsets. The program saw 32% of compliance attained by real intensity reductions in 2007 and 38% in 2008.