Alberta mulls changes to CO2 rules

By Valerie Volcovici, Point Carbon

Alberta regulators will explore raising the price its largest emitters can pay into a technology fund to comply with provincial carbon regulations, a move could that also boost carbon offset prices.

Bob Savage, director at Alberta Environment’s climate change secretariat, told Reuters Point Carbon the ministry will test the potential impact of raising the price, lowering the emission reduction targets and widening the program to more participants over the next month or two. 

He said that when the carbon regulations were first rolled out in 2007, Alberta expected that its rules would be preempted by federal climate change regulation. 

But five years later, the Conservative party government has backed off plans to launch an economy-wide carbon reduction program, opting instead to address emissions on a sector-by-sector basis. 

“If you wind back the clock and think of the context at that time, it looked like the government was moving forward with Turning the Corner (its national climate plan). So the thinking at the time was that we would eventually be at tougher targets and see stronger carbon price signals,” he said. 

Under the oil-rich western province’s climate change law, facilities that emit more than 100,000 tonnes of greenhouse gas emissions a year must reduce their emissions intensity by 12 percent. 

The 90-100 facilities that must comply with the law have three options for meeting the intensity target, including paying C$15 ($14.96) for every tonne they emit over the limit into a government fund that will help commercialize new technologies, such as carbon capture and storage. 

The firms also have the option of buying Alberta-based carbon offsets or emission performance credits (a type of emission permit), but the C$15 fund price effectively sets a ceiling price on the other instruments. 

TIME FOR CHANGE 

Savage said that the province always intended to revisit its targets and fund price, but a recent change of government has added some impetus to a reevaluation of the existing program. 

Premier Alison Redford’s Progressive Conservative party held on to power in an overwhelming victory in April elections. 

Minister Redford has asked Alberta Environment to model different targets, thresholds and prices as part of the program review, as well as compare Alberta’s program to those in other provinces and the state of California. 

She also wants to make sure that Alberta’s regulations do not conflict with federal regulations for greenhouse gases that are being developed for Canada’s biggest sectors. 

“She is very interested and concerned with the federal policy pieces and how those will play out. She is very committed to the program and to ensuring that it is cost effective,” Savage said. 

Once the ministry finalizes its analysis, it will present its findings for Redford’s cabinet to discuss and likely launch a public stakeholder comment process. 

NEW APPROACH 

Savage said  Alberta’s energy industry will need to make major technology choices for the next decade and need stronger price signals to drive investment. 

The sectoral approach that the Ottawa government is rolling out will not stimulate that kind of investment, he added. “The problem with the sectoral approach is that it will take longer for industry to make commitments to invest in the right technology,” he said. 

Phil Cull [from Offsetters], a carbon offset specialist focusing on Alberta and British Columbia added that the powerful oil and gas sector, which is responsible for Alberta's rapid emissions growth, will not make changes without stronger price drivers. 

"The current price of C$15 on 12 percent (emissions reduction) is too low to incentivize changes that require high capital costs, and these are the kinds of change the oil and gas sector needs to control their emissions growth," said Cull, portfolio manager at British Columbia firm Offsetters. 

Valerie Volcovici – valerie.volcov...@thomsonretuers.com