New “Rewards” for Low Carbon Emissions from Alberta’s Largest Greenhouse Gas Producers

By JoAnn P. Jamieson and Brittany Scott

The Alberta Government on December 6, 2017 formally unveiled its plans to reboot the carbon levy for Alberta’s largest emitters of greenhouse gases – those who emit more than 100,000 tonnes of carbon per year. This plan, known as the Carbon Competitiveness Incentives (“CCI”), will give companies credits if their facilities produce less than a benchmark amount of emissions, while those that exceed the threshold will have to buy offsets or pay $30 for every tonne of emissions over the limit. The CCI plan comes into effect on January 1, 2018 and replaces the Specified Gas Emitters Regulation. In order to ease the transition and to avoid “big hits” to industry, the government is going to phase in the full impact of the CCI plan over the next three years where industry will pay 50% of costs in 2018, 75% of costs in 2019, and the full amount of costs in 2020.

The aim of the CCI is for the Alberta government to protect its largest industries from competitive impacts that could simply shift production to other jurisdictions without a carbon levy. The idea now is that Alberta's heavy emitters will receive a reserve of "free" greenhouse gas emission credits, to be determined by a sector emissions benchmark. Benchmarks will be set relative to high-performing industrial projects that produce the same or similar products. Most industries will have a benchmark set at 80% of production-weighted average emissions. In the oil sands, emissions intensity will be measured by the amount of greenhouse gas produced in extracting one barrel of oil and the benchmark will be the top quartile of projects or 57.7 kilograms of carbon dioxide equivalent per barrel. Previously under the Specified Gas Emitters Regulation, heavy emitters were judged based on how improved they were from their historical performance – now, they will be judged against their competitors under an output-based allocation system that will be called the CCI.

The Alberta Government expects that, as a result of CCI, greenhouse gas emissions will be cut by 20 million tonnes by 2020 and 50 million tonnes by 2030. However, costs are also expected to be high, with the Alberta Government estimating the total value of levies per year coming in at upwards of $1.2 billion annually when in full force in 2020, though offsets and credits mean the NDP Government expects to take in closer to $800 million.

If you have any questions or concerns about how this will affect you, the Energy, Environmental and Regulatory Group at McLennan Ross would be happy to assist you.