Alberta Carbon Emissions Allowance System - Weekly Compliance Digest

April 07, 2017
By Jean-Grégoire Manoukian

In this edition of the Weekly Compliance Digest, we cover an update issued by Alberta to the province’s carbon emissions allowance system that takes effect in 2018.

Alberta Output-based Allocation System Engagement

What is it?

Alberta is the fourth largest province in Canada and accounts for approximately 12% of the Canadian population. In addition, Alberta accounts for 16% of the country’s GDP (in 2015) and is home to Canada’s Oil & Gas industry.

In November 2015, Alberta announced a Climate Leadership Plan that outlines the areas where the province will take action to reduce greenhouse gas emissions. The plan also outlines a regulatory transition from a historical baseline approach under the Specified Gas Emitters Regulation, to a product-specific (output-based) emissions allocation approach that will be put into place through a carbon competitiveness system beginning in 2018.

The system will use an output-based emissions allocations approach for emissions-intensive, trade-exposed industries. Any facility that emits 100,000 tonnes or more of greenhouse gases will be included in the new greenhouse gas management system. Facilities involved in the following types of activities are included in the plan:

  • Electricity production
  • Heat production and use
  • Oil extraction, upgrading and refining
  • Natural gas processing and transmission
  • Chemical manufacturing

Under the output-based allocation system, a facility will receive performance credits if greenhouse gas emissions are less than the amount freely permitted. If emissions are above the amount freely permitted, they will be required to take one or more of the following actions to bring the facility into compliance:

  • Make improvements at their facility to reduce emissions intensity
  • Use emission performance credits generated at facilities that achieve more than the required reductions
  • Purchase Alberta-based carbon offset credits
  • Contribute to Alberta’s Climate Change and Emissions Management Fund

What is the latest update?

Last month, Alberta’s Climate Change Office issued policy decisions regarding the implementation of the system in 2018. The following measures were announced:

  • A requirement for regulated facilities that emit equal to, or over one megatonne of carbon dioxide equivalent per year, to report and submit their compliance on a quarterly basis. These facilities will also be required to provide an annual emissions and production forecast with an indication of their anticipated method of compliance.
  • A limit will be implemented on the use of offsets and emission performance credits for compliance. Starting in 2018, 30% of a facility’s compliance obligation can be met through the use of compliance credits (i.e. Emission Offsets and Emission Performance Credits).

Regulated facilities that are affected will thus have greater reporting requirements, and face restrictions on the use of emissions credits and offsets. The latter means that facilities will face greater pressure to reduce emissions intensity if they are above the amount of allowed greenhouse gas emissions.

Next Friday is a holiday, so the next Weekly Compliance Digest will be published on April 14, 2017.

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