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Carbon Pricing in Alberta

3/9/2020

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Carbon Pricing in Alberta

Climate Change is a central issue for businesses.  Mitigating and adapting to its effects is causing far-reaching transitions in sectors such as energy, land and agriculture, banking and finance, infrastructure, transport and industry.  As a result, we are seeing provincial and national attempts to price greenhouse gases (GHGs) such as Carbon Dioxide.[i]  These pricing mechanisms and their laws will impact businesses resulting in both opportunities and challenges.  It is increasingly valuable for any business looking to work directly or indirectly with natural resources to understand carbon pricing.  This is especially the case in Alberta.
 
Carbon Pricing in Alberta
1. Alberta’s Technology Innovation and Emissions Reductions (TIER) Regulation[ii]
The TIER regulation came into force on January 1, 2020 and applies to facilities that emitted 100,000 tonnes of CO2e or more per year of greenhouse gases (GHGs) in 2016, or a subsequent year.[iii]
As a start-up or small business involved in the natural resources sector, you may be thinking the scope of TIER does not apply to you.  However, a facility with less than emitted less than 100,000 tonnes of CO2e may be eligible to opt-in to the TIER if it competes against a facility regulated under the TIER regulation or emits 10,000 tonnes of CO2e or more per year and belongs to a sector with high emissions intensity and trade exposure.[iv]

2. Why Opt-in? Benefits of being regulated:
By opting in, facilities may apply to become exempt from the application of the federal Greenhouse Gas Pollution Pricing Act (GGPPA) for fuels whose emissions are included in their site reporting.  Currently, the GGPPA charge applies to fossil fuels used in Alberta, including those in the conventional oil and gas sector.  However, the GGPPA includes provisions to exempt facilities subject to provincial policies that meet the federal benchmark criteria.[v]  TIER meets federal requirements and therefore can protect regulated facilities from full costs of complying with the GGPPA, while achieving emissions reductions that is cost-efficient and tailored to Alberta’ industries/ priorities.
3. How to Opt-in?
a. Opt-in key dates[vi]:
  • November 1, 2019 - Facilities which are opted-in under the Carbon Competitiveness Incentive Regulation for 2019 are automatically opted in to TIER
  • December 1, 2019 - Opt-out for 2020
  • January 1, 2020 - Federal fuel charge in force in Alberta - Start of TIER 2020 compliance period
  • September 1, 2020 - Opt-in for 2020 or 2021 - Opt-out for 2021 - Facility specific benchmark application for 2020
  • June 30, 2021 - Compliance report due for 2020
  • September 1, 2021 - Facility specific benchmark application for 2021 - Opt-in/opt-out for 2022
b. Eligibility[vii]:
There are two pathways for a facility with emissions fewer than 100,000 tonnes of CO2e per year to opt-in to TIER:
  • Pathway 1 - Direct Competition: The intention for allowing these facilities to opt-in to the Regulation is to address situations where facilities with less than 100,000 tonnes of CO2e compete directly with larger facilities that are automatically subject to the Regulation. Without opting-in, these smaller facilities could face higher per unit carbon cost, impacting competitiveness. If the facility produces a product listed in Table 1 from the TIER Opt-in Fact Sheet, it is eligible to opt-in.[viii]
  • Pathway 2 - EITE Facilities: Facilities that belong to an EITE sector as defined in Section 4(1)(a) of TIER and had total regulated emissions of 10,000 tonnes in any year since 2017 or is expected to exceed 10,000 tonnes in its third year of commercial operation are eligible to opt-in. Table 2 from the TIER Opt-in Fact Sheet provides a list of EITE sectors that include at least one facility that met or exceeded the 10,000-tonne CO2e threshold.[ix]
​Renewable electricity facilities are also eligible to opt-in, unless any of the following criteria applies to the facility[x]:
  1. The facility has a total nominal capacity of less than 5 megawatts.
  2. The facility has entered into a renewable electricity support agreement under section 7(4) of the Renewable Electricity Act.
  3. An economic benefit is being provided under a program or other scheme that is attributable to the electricity produced at the facility having been produced from a renewable energy resource 
Stay up to date on Carbon Pricing
Carbon Pricing in Canada is evolving.  There are current constitutional challenges against the federal GGPPA which may impact what rules apply to your business.  Additionally, consider that while TIER is the current carbon pricing regime in Alberta you may be subject to the GGPPA if you fail to opt-in.
 
It is beneficial to understand the applicable rules on carbon pricing.  There are legal and business implications depending on what rules you are subject to.  For more information on carbon pricing obligations and your business, it’s a good idea to consult with a qualified lawyer.
 
For more information on TIER and how it works, visit:
https://www.alberta.ca/technology-innovation-and-emissions-reduction-regulation.aspx
 
For more information on the GGPPA and how it works, visit:
https://www.osler.com/en/resources/regulations/2015/carbon-ghg/canadian-government-carbon-and-greenhouse-gas-legi
 
Bradley Mills is a member of the BLG Business Venture Clinic and is a third-year law student at the Faculty of Law, University of Calgary.

REFERENCES:
[i] Norton Rose Fulbright, “Climate change and Canadian federalism: examining the constitutional dispute sparked by Parliament’s Greenhouse Gas Pollution Pricing Act”, online at: <https://www.nortonrosefulbright.com/-/media/files/nrf/nrfweb/knowledge-pdfs/climate-change-and-canadian-federalism.pdf?la=en-ca&revision=>
[ii] Technology Innovation and Emissions Reduction Regulation, 2002, (Alberta) online at: <http://www.qp.alberta.ca/1266.cfm?page=2019_133.cfm&leg_type=Regs&isbncln>
[iii] Government of Alberta, “Technology Innovation and Emissions Reduction Regulation, Information for industry on Alberta’s approach to reduce emissions from large industrial emitters”, online at: <https://www.alberta.ca/technology-innovation-and-emissions-reduction-regulation.aspx>
[iv] Ibid.
[v] Government of Alberta, “TIER Regulation Fact Sheet”, online at: <https://www.alberta.ca/assets/documents/ep-fact-sheet-tier-regulation.pdf>
[vi] Government of Alberta, “TIER Opt-In Fact Sheet”, online at: https://www.alberta.ca/assets/documents/ep-fact-sheet-tier-opt-in.pdf
[vii] Ibid.
[viii] Ibid.
[ix] Ibid.
[x] Ibid.
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