Written By Thomas W. McInerney, Duncan M. McPherson and Katie Miller

Today the Alberta government announced its Climate Leadership Plan (Plan) and released to the public the Climate Leadership Report to Minister (Report) it commissioned from the Climate Change Advisory Panel. While details of the Plan's implementation and the extent to which the government adopts the specific recommendations of the Report remain to be seen, the key policies of the Plan are as follows:

1. An Alberta economy-wide price on greenhouse gas (GHG) emissions of $30/tonne.
2. The phasing out of all coal-fired electricity generation by 2030, to be replaced by electricity generation from renewables and natural gas.
3. A methane reduction strategy to address methane emissions in the oil and gas sector.
4. A cap of 100 megatonnes (MT) on GHG emissions from oil sands operations, subject to certain exceptions for cogeneration power sources and new upgrading capacity.

Carbon Pricing

Central to the Plan is broad-based carbon pricing based on the Panel's proposal to replace the existing emission intensity based Specified Gas Emitters Regulation with a Carbon Competitiveness Regulation (CCR).

Under the proposed CCR:

• The price of carbon in 2017 will be $20/tonne, escalating to $30/tonne by 2018, with the potential for annual increases equal to inflation plus two percent, depending on the cost of carbon in competing jurisdictions.
• Elements of cap and trade and carbon tax regimes are used, depending on the type of GHG emissions, which fall into two basic groups: emissions from large industrial emitters and end-use emissions.
• Large industrial emitters consist of facilities that emit more than 100,000 tonnes of GHG emissions annually, as well as aggregated oil and gas production facilities or gas processing plants whose GHG emissions do not meet such threshold but who choose to opt-in to such regime. Large emitters are to be allocated emissions permits based on sector specific top-quartile performance with such allocations decreasing at a rate of one to two percent annually to account for expected energy efficiency improvements.
• End-use emissions are characterized as GHG emissions from the combustion of transportation and heating fuels. The price of carbon is assessed on distributors of such fuels (much in the same way the British Columbia carbon tax is applied) to account for the emissions which will result from the combustion of such fuels by end-users.

Complementary Policy – Electricity

Under the Plan:

• Commencing in 2018 coal-fired generators will pay $30/tonne on emissions above what Alberta's cleanest natural gas-fired plant would emit for equivalent power generation.
• By 2030 all coal-fired generation will be phased out, with such capacity to be replaced two-thirds by renewable energy and one-third by natural gas, such that by 2030 30 percent of Alberta's electric power will come from renewable sources.

Complementary Policy – Oil & Gas

Noting that the climate change impact of methane is 25 times greater than carbon dioxide over a 100-year period, the Plan contemplates a 45-percent reduction in methane emissions in Alberta by 2025.

Under the Plan:

• New methane emissions design standards will be created and applied to new oil and gas facilities.
• A five-year voluntary Joint Initiative on Methane Reduction and Verification will be implemented with industry and other groups, tasked with improving standards for venting and fugitive emissions from existing and new facilities, including through improved measurement and reporting requirements.
• On-site combustion (i.e., flaring) at conventional oil and gas facilities will be subject to the carbon pricing regime starting in 2023.

Cap on Oil Sands GHG Emissions

In addition, the Alberta government announced plans to introduce a legislated oil sands emissions limit of 100MT per year, compared to current oil sands GHG emissions of approximately 70MT per year. The Plan states such 100MT limit will be subject to exceptions for cogeneration and new upgrading capacity.

Energy Efficiency

In addition to the foregoing, the Plan contemplates further emissions reductions through the implementation of a province-wide energy efficiency program.

Next Steps

The release of the Plan comes on the eve of the First Ministers' meeting, during which Canadian climate change policy will be discussed. On November 30th, the Canadian delegation, including Premier Notley and Prime Minister Trudeau, will attend the United Nations Climate Conference in Paris (COP 21). Prime Minister Trudeau has indicated that a further First Ministers' meeting will be held within 90 days of COP 21.