Climate Change Legal Roadmap: Carbon Pricing Recommendations for Alberta

Climate Change Legal Roadmap: Carbon Pricing Recommendations for Alberta

This is the tenth post in the Environmental Law Centre’s new blog series exploring climate change law in Canada. This blog series will provide updates on climate change law developments and will include insights from our related law reform research. This blog series is generously funded by the Alberta Law Foundation.

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This blog post summarizes our latest publication in the series “Climate Change Legal Roadmap” that focuses on carbon pricing in Alberta and several other jurisdictions.

In November 2015, the Alberta Government released the Climate Leadership Plan (the “Climate Leadership Plan”) which is a high-level policy document outlining the government’s vision for combating climate change in Alberta (see our previous post on the Climate Leadership Plan here here). The Climate Leadership Plan targets four strategies to impact the effects of climate change, one of which is to implement a new carbon price on greenhouse gas (GHG) pollution.

Alberta’s new carbon pricing regime is composed of the Specified Gas Emitters Regulation (SGER) and a newly implemented carbon tax. Alberta’s SGER, originates from 2007 and is now undergoing amendment. The current SGER regime has been critiqued for, among other things, its minimal emissions reductions and too low price on carbon (currently $20 per tonne). The general design issue of the SGER regime is its focus on emissions intensity. Critics correctly argue that this approach generally generates lower emission reductions than absolute emissions caps. Since Alberta has no absolute emissions cap, it is not surprising that actual emissions have risen since the SGER was introduced. The SGER offers several methods for compliance with the emission limits. One option to achieve compliance is through a payment into the Climate Change and Emissions Management Fund (CCEMF). Critics argue that this levy is too low and consequently, for many large final emitters, it is more economical to let their emissions rise, even in excess of their net emission intensity limit, because the payment into the CCEMF is cheaper than improving their technology.

As announced in the Climate Leadership Plan, Alberta has started to implement a new carbon tax, with a design similar to the BC carbon tax. The government claims that Alberta’s carbon tax is designed in such a way that it is revenue neutral. From a perspective of emission reductions, Alberta’s carbon tax includes the transportation sector which, due to the high emission threshold level, is not subject to the SGER regime. The Alberta government has not released any projections as to expected emission reductions due to the carbon tax. Only time will tell the actual impact it has on the objective of emission reductions in the province.

This paper looks outside of Alberta at other jurisdictions such as British Columbia, Ontario, Quebec and California (all are partners with the Western Climate Initiative (WCI)) with regard to their latest trends in carbon pricing. From the trends in these jurisdictions, we identify recommendations for Alberta’s amended carbon pricing regime.

Recommendation #1: Alberta should strengthen its overall reduction target. Alberta’s current regime is well short of reaching its climate goal and, in fact, provides for increased emissions.

Recommendation #2: In order to meet its emission reduction targets and to make real reductions, Alberta’s amended SGER should apply an absolute emission cap.

Recommendation #3: The amended SGER should lower its threshold from 100,000 to 25,000 tonnes of CO2e with a resulting dramatic increase in industry coverage.

Recommendation #4: In order to provide for real emission reductions, Alberta should limit or abolish the use of the fund payment option. The price per tonne for the fund payment has historically been too low at only $15, the increase to $20 may still be too low. An alternative and/or additional option is to introduce a limit on the use of the other compliance methods namely, performance credits and offset credits.

Recommendation #5: In order to seriously pursue a linkage of the Alberta carbon market with that of Quebec and California, Alberta must first become a partner of the WCI. In addition, the SGER regime needs significant modification by adoption of the suggested WCI ETS design features which allow harmonization and linkage of ETS regimes of different jurisdictions.

While our latest publication does not provide a deep level analysis of the very complex issues of carbon pricing, our comparison with selected WCI partners (British Columbia, Ontario, Quebec and California) provides useful conclusions which can provide guidance for Alberta’s evolving carbon pricing regime.

 

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