Alberta’s Climate Leadership Plan (Plan) was released on November 22, 2015. The Plan represented a dramatic and fundamental shift in Alberta’s approach to climate change and greenhouse gas (GHG) issues, including to achieve the government’s stated objective of gaining support and “social licence” for the pipeline takeaway capacity needed to support Alberta’s oil and gas production and export industries. With the delivery of the province’s budget on April 14, 2016 (Budget), Alberta has taken tangible steps towards the implementation of the Plan. Notably, the Budget addresses the following key items related to the Plan: (i) implementation of a broad-based carbon levy; (ii) proposed replacement of the current emissions intensity regime with product-based emissions performance standards; and (iii) proposed reinvestment into energy-efficient initiatives. The Budget’s consideration of these items is summarized below.

CARBON LEVY IMPLEMENTATION

The Plan dismissed the notion that a GHG regime only apply to large emitters, which account for approximately 45 per cent of provincial GHG emissions. Alternatively, the Plan is intended to apply to 78-90 per cent of provincial GHG emissions, including not only large emitters, but also small emitters and consumers. In implementing this aspect of the Plan, the Budget introduces a broadly applicable carbon levy on certain fuels consumed for combustion purposes as of January 1, 2017. This levy will be included in the price of transportation and heating fuels, such as diesel, gasoline, natural gas and propane, but will not apply directly to consumer purchases of electricity. Starting on January 1, 2017, the carbon levy will be applied to fuels at a rate of C$20 per tonne of carbon dioxide-equivalent emissions and will increase to C$30 per tonne on January 1, 2018.

The carbon levy will apply to individual fuels based on the amount of emissions released upon each fuel’s combustion. The rates on major fuels are as follows:

The Budget specifies several exemptions to the carbon levy, including:

1. Heating fuels used on sites subject to the Specified Gas Emitters Regulations (SGER) or performance standards regime, as applicable
2. Natural gas produced and consumed on site by conventional oil and gas producers (until January 1, 2023)
3. Fuel used in industrial processes that is not combusted
4. Fuel sold for export
5. Purchases of fuel on-reserve by eligible First Nations individuals and bands for personal and band use
6. Marked gasoline and diesel used by farmers in farming operations
7. Biofuels, including biomethane, biodiesel and ethanol
8. Inter-jurisdictional flights

With respect to the collection and remittance of the carbon levy, the Budget outlines that the natural gas levy will be collected and remitted by entities in the natural gas distribution system. For gasoline and other refined fuels, the current system for collection and remittance of fuel tax will continue to apply. For other products, such as natural gas liquids and coal fuels, the Budget states that the entities that either produce and sell, or import and sell the products will collect and remit the levy.

Legislation enacting the carbon levy is expected to be introduced this spring, with regulations and further details to come later in 2016.

PROPOSED REPLACEMENT OF EMISSIONS INTENSITY REGIME

A key component of the Plan was the replacement of the current emissions intensity program with product-based emissions performance standards. The Budget clarifies that although this is still the intent, the current emissions intensity program in place pursuant to the SGER will continue to apply until the end of 2017.

The SGER is predicated upon an individual facility becoming more efficient as compared to its particular baseline. As of January 1, 2016, facilities that emit 100,000 tonnes or more of GHG are required to reduce their site-specific emissions intensity by 15 per cent annually. This percentage increases to 20 per cent as of January 1, 2017.

Facilities can comply with the SGER by:

1. Making technical improvements to reduce emissions intensity
2. Using emission performance credits generated at facilities that achieve more than the required emissions intensity reductions
3. Purchasing Alberta-based carbon offset credits
4. Contributing an amount equal to C$20 for every tonne over the facility’s reduction target (the price changes to C$30 as of January 1, 2018) to Alberta’s Climate Change and Emissions Management Fund

Following the end of 2017, facilities that are currently subject to the SGER are expected to transition from a facility-specific emissions intensity reduction requirement to a product-based emissions performance standard.

The product-based emissions standard is intended to be an alternative regime to the carbon levy, such that large emitters who fall under the SGER would be exempt from payment of the carbon levy on their heating fuels.

PROPOSED REINVESTMENTS INTO ENERGY-EFFICIENT INITIATIVES

According to the Budget, the province expects that the gross revenue collected from the carbon levy and compliance payments from large industrial emitters will be C$9.6-billion over the next five years. The revenue will be reinvested in the priority areas identified in the Budget, which include:

• C$3.4-billion for large scale renewable energy, bioenergy and technology
• C$2.2-billion for green infrastructure (i.e. transit)
• C$2.3-billion for consumer rebates to help lower and middle-income families
• C$865-million to pay for a cut in the small business tax rate from three per cent to two per cent
• C$195-million to assist coal communities, Indigenous communities and others with adjustment

In addition, and in response to criticism that Alberta is one of the only provincial jurisdictions without a significant energy efficiency initiative, the Budget indicates that C$645-million will be reinvested over the next five years in Energy Efficiency Alberta, a new provincial agency that will support increasing energy efficiency for homes and businesses.

CONCLUSION

The Budget represents a key step towards the full implementation of the Plan. It remains to be seen whether Alberta’s new reputation as a leader in its approach to climate change will persist through the years to come and whether implementation of the Plan will achieve the government’s stated objective of gaining support and “social licence” for the pipeline takeaway capacity needed to support Alberta’s oil and gas production and export industries.