Climate Change Blog Series: Legislative Updates on Alberta’s Climate Leadership Plan

30 Nov Climate Change Blog Series: Legislative Updates on Alberta’s Climate Leadership Plan

Climate Change Blog Series: Legislative Updates on Alberta’s Climate Leadership Plan

This is the fourteenth post in the Environmental Law Centre’s blog series exploring climate change law in Canada. This blog series provides updates on climate change law developments and includes insights from our related law reform research. This blog series is generously funded by the Alberta Law Foundation. In this post, we look at climate change legislative updates.

The provincial government is continuing to take steps to implement its Climate Leadership Plan announced last year.  The Climate Leadership Plan consists of 4 main pillars:  phasing out coal-fired electricity and replacing with renewables, introducing a carbon levy, capping oil sands emissions and reducing methane emissions.  This month has seen legislative updates being taken with respect to all these pillars (except for reducing methane emissions).

 Bill 25: Oil Sands Emissions Limit Act

Bill 25: Oil Sands Emissions Limit Act has been introduced in the legislature.  This is the instrument whereby an annual 100MT emissions limit will be placed on the oil sands industry (s.2).  It is notable that several aspects of the oil sands industry will not be considered in calculating whether or not this limit has been reached.  These include:

• cogeneration emissions attributable to the electric energy portion of the total energy generated;
• upgrading emissions attributable to upgraders that complete their first year of commercial operation after December 31, 2015 or attributable to the increased capacity resulting from the expansion (after December 31, 2015) of upgraders that complete their first year of commercial operation on or before December 31, 2015;
• prescribed experimental schemes;
• prescribed primary production; and
• prescribed enhanced recovery operations.

Bill 25 does not define experimental schemes, primary production, and enhanced recovery operations (these definitions will come in a later regulation).

Section 3 of Bill 25 outlines the regulatory power of the Cabinet under this Act.  These powers include the authority to make regulations “establishing and governing mechanisms to keep greenhouse gas emissions from oil sands with the limit established by s.2”.  This includes prescribing thresholds (including limits, triggers, ranges, measures or indices) and establishing a system of greenhouse gas emissions allowances for purchase, auction, trade and retirement.

With respect to establishing a firm annual 100 MT cap on the oil sands industry, this Bill appears to be “kicking it down the road” as expressed by Nigel Bankes.  Without supporting regulations, it is not clear exactly which aspects of oil sands activity will be included in calculating the 100 MT limit (as Bill 25 creates a discretion to exclude certain as yet undefined activities). Furthermore, while Bill 25 sets an emission limit, it does not provide any detail on the approach and mechanisms to stay within this limit. Such details await future regulations.

Bill 27: Renewable Electricity Act

 Bill 27: Renewable Electricity Act provides the legislative vehicle for promoting renewable electricity generation.  Section 2 of Bill 27 sets a target that at least 30% of electricity produced in Alberta will be from renewable energy resources.  This target is to be met by the end of 2030.  A renewable energy resource is defined in section 1(l) as:

an energy resource that occurs naturally and that can be replenished or renewed within a human lifetime, including, but not limited to,

• moving water,
• wind,
• heat from the earth,
• sunlight, and
• sustainable biomass.

In conjunction with proposed Bill 27, the government also released the Recommendations on Renewable Electricity Program prepared by the Alberta Electric System Operator (AESO).   These recommendations have been accepted by the Alberta Government (see press release).  The AESO made recommendations on:

• the Renewable Electricity Program (REP) design;
• the form and content of the competitive process that will be used to implement the Program; and
• key features of the first competition, including a payment mechanism.

The goal of the REP is to increase the amount of renewable electricity generation on Alberta’s grid.  The AESO indicates that the REP design is meant to “maximize competitive tensions, to the extent possible, to drive down the [Government of Alberta’s] cost of support for renewable electricity generation” (page 9).  Furthermore, the REP must not jeopardize the performance and reliability of Alberta’s electric system and must consider the uniqueness of Alberta’s energy market.   The AESO recommended that the REP (page 9):

• apply to renewable generation, as defined by Natural Resources Canada;
• target utility-scale generation (≥5 MW); and
• be restricted to new or expanded projects that physically reside in Alberta.

The AESO recommended that the REP be implemented using a three-stage competitive process overseen by an independent fairness advisor.  These stages are:

1. A Request for Expressions of Interest (REOI), a discretionary stage where the AESO can gauge interest in participating in the competition;
2. A Request for Qualifications (RFQ), where bidders submit their qualifications including their project proposals; and
3. A Request for Proposals (RFP), where bidders qualified in the preceding stage confirm no changes to their bid teams or their projects and submit a final offer for support.

An Indexed Renewable Energy Credit (REC) is recommended as the payment method for this competitive process.  An Indexed REC is explained by the AESO as follows (page 16):

… a winning bidder is paid a $/MWh payment for renewable attributes produced as follows:

• Winning bidder bids a price that is, in essence, its lowest acceptable cost for the renewable project the bidder plans to advance;
• The dollar value of support paid to the winning bidder for renewable attributes produced by that project is not the bid price. It is calculated by subtracting a reference price12 (e.g. the pool price) from the bid price.

As an example, the AESO provides the following:

In other words, if the reference price (i.e. the pool price for electricity) falls below the bid price, the government provides a support payment for the difference.  If the reference price increases above the bid price, the operator pays the difference to the government.  The Indexed REC is designed to avoid to minimize the program costs for Alberta consumers and to avoid windfalls for operators while still creating an attractive market for investors.

Climate Leadership Regulation

The Climate Leadership Regulation was released earlier this month.  This Regulation is not yet in force (it comes into force with the Climate Leadership Act on January 1, 2017).

This Regulation provides detail on the implementation and application of the carbon levy enabled by the Act.   The Regulation specifies which activities are subject to the carbon levy and at what stages of the fuel supply chain the carbon levy is payable.  Among others, this includes details on locomotive diesel, aviation gas and jet fuel, and raw gas and natural gas.  The determination of the amount of fuel on which the carbon levy is payable must be done using a method acceptable to the Minister (section 10, Regulation).

Section 11 of the Regulation sets out which fuels are exempt from the carbon levy:

• A consumer is exempt from paying a carbon levy on fuel used in the operation of a specified gas emitter if the emissions from the fuel are direct emissions as defined in the Specified Gas Emitters Regulation (only if marked fuel is used).
• A consumer is exempt from paying the carbon levy on fuel that is used in a production process before 2023 if the fuel is not flared or vented (only if marked fuel is used).
• A consumer is exempt from paying the carbon levy on fuel that is flared or vented in a production process before 2023.

Section 24 of the Regulation also provides detail on the carbon levy rebates under the Act. Requirements for the remittance, refund and recovery of the carbon levy are set out in sections 26 to 29 of the Regulation.  Administrative matters such as record-keeping and reporting  are addressed in the Regulation.

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