‘Step Backwards’ on Carbon Rules Saves Alberta’s Big Emitters $330 Million Per Year
Alberta has introduced a new C$30-per-tonne carbon cap-and-trade system that covers most of its biggest industrial greenhouse gas emitters, but will cost them $330 million less next year because of looser compliance requirements.
The rules cover tar sands/oil sands, natural gas, chemical, and fertilizer operations that account for 55 to 60% of the province’s emissions, CBC reports.
Like this story? Subscribe to The Energy Mix and never miss an edition of our free e-digest.
The new Technology, Innovation and Emissions Reduction (TIER) system unveiled Tuesday has no effect on the federal government’s consumer carbon tax, which Alberta is still trying to fight in court but takes effect January 1. Environment Minister Jason Nixon said the new plan would cut the province’s emissions by about 32 megatonnes, compared to 50 megatonnes under a plan developed by the province’s previous NDP government that included a consumer tax.
“Our projections are that we’re looking at getting similar results for less price for industry,” he said. CBC says most of the cuts are expected to come from electricity generation, based on separate rules that set a single, industry-wide emissions benchmark.
For the other large emitters, “most facilities, such as oilsands plants or concrete manufacturers that produce more than 100,000 tonnes of CO2, are to be assigned an individual carbon emissions benchmark based on past performance. Smaller emitters will be able to opt in to that program in order to avoid federal regulations,” CBC explains. “The plants will be expected to reduce their emissions by 10% below the benchmark the first year and 1% every year after that. If they don’t, they will have to pay $30 a tonne or buy emissions credits. Facilities under their benchmark will be allowed to stockpile or sell credits.”
While “some of the money is to go into a fund to support greenhouse gas-reducing technology,” the national broadcaster adds, “half of every dollar raised after the first $100 million is to go to debt reduction or to the province’s ‘war room,’ a newly-created, $30-million office to counter criticism of the oil and gas industry.”
The province will be raising its carbon tax from $20 to $30 per tonne, a higher level than Premier Jason Kenney promised on the campaign trail earlier this year, after industry unanimously asked for the increase, the Globe and Mail writes. “We did hear loud and clear that they wanted us to go to $30 now,” said Nixon. “They wanted equivalency, they wanted to be regulated in the province of Alberta and not by the federal government. That’s what we’ve accomplished for January 2020.”
Pembina Institute analyst Jan Gorski called the focus on individual emitters “a step backwards” that is “unfair and less efficient. It punishes companies that have had good performance that have already taken steps to reduce emissions, and it rewards those that haven’t.”
In a release late Tuesday, he stressed that the new plan “is weaker than what is currently in place, and creates uncertainty at a time when we need the exact opposite. Investors are looking for strong and consistent policy that decarbonizes production and drives innovation across all sectors of Alberta’s economy.”
“The ones that stand to save the most are the worst performers, from a carbon perspective,” agreed University of Calgary research fellow and former Pembina staffer Sara Hastings-Simon.
“That’s because those new targets will be easier to meet for the most carbon-intensive facilities,” CBC explains. “Instead of being compared to their peers, as a group, facilities will be compared to their own past performance….Instead of being measured against an industry-wide standard, a facility will be measured against its own average emissions intensity from 2013 to 2015. Its target will then be set at 10% below that level for 2020.”
For facilities that have been working on their emissions in recent years, “there will also be a ‘high-performance’ target that facilities can choose to compare themselves against instead,” the national broadcaster adds. “The government says facilities can opt for whichever target is ‘less stringent’ in their own case.”
[So the plan essentially ignores the four years from 2016 to 2020 during which anyone who was awake during the Paris climate conference would have expected fossils and other emitters to step up and reduce their greenhouse gas emissions. And, as usual, it’s an intensity-based target, so fossils’ emissions can increase in step with their production.—Ed.]
But even so, the new provincial plan “is a change but not a complete retreat,” Hastings-Simon said. “It’s not like a 180. It’s a shift.”
Nixon said his initial understanding is that the new plan will meet federal standards and prevent Ottawa from applying its own backstop price to big emitters, even though the federal plan requires a $10-per-year carbon price increase. “At the civil servant level, we’ve been in constant contact all the way through,” he said. “We’re fairly comfortable with our conversations with them, that we’re at equivalency.”
Gorski countered that “unless the $10-per-year increase is included in the policy (reaching $50 per tonne in 2022), TIER risks failing to reach equivalency with the federal system.” Nixon said he will consult on future increases in the provincial rate.
Of the $478 million in carbon charge revenue it expects to take in next year, Alberta will put $200 million into innovation and technology, CBC says, with another $189 million earmarked for deficit reduction and the province’s PR “war room”. But the focus of the “innovation” spending is set to change, said Steve Macdonald, CEO of Emissions Reduction Alberta, the arm’s-length agency that has been funding programs with large emitter fees since 2009, and will administer a large share of the new funds.
“Rather than pushing green technologies, which was the former NDP government’s policy objective, Mr. Macdonald expects ERA to pivot toward more research projects around carbon capture and storage, as well as reducing agricultural emissions,” the Globe and Mail writes.
“We hope the government is going to give us the flexibility to pick the best projects,” Macdonald said. “We pick the best projects based on: How close are they to commercialization, is there a customer, GHG reductions, is it against the laws of physics or technologically possible, how long to development? As long as we get that flexibility, to me it’s good public policy.”
The announcement comes on the heels of a provincial budget that cuts funds for environmental regulation, creates continuing uncertainty for two dozen energy efficiency and renewable energy previously funded by the province’s carbon tax, but leaves the previous NDP government’s $1.1-billion petrochemical tax credit unscathed. Alberta Environment’s office of science and monitoring, which oversees tar sands/oil sands and other industrial development, sustains a 5% cut, rising to 20% by 2023, meaning that “we will have diminished capacity,” said NDP environment critic Marlin Schmidt. “We won’t know if we’re meeting environmental standards or not.”
The cutback will leave Albertans to rely increasingly on industry self-reporting, when “I don’t think that’s their job,” he added. “It should be the government of Alberta who manages and reports on our climate change strategy.”
The province is cancelling $1.5 billion in fossil industry diversification programs, with Energy Minister and former fossil executive Sonya Savage asserting the mix of loan guarantees and grants carried higher risk for the province, while Finance Minister Travis Toews cast efforts to diversify revenues as a long-term “luxury”. Instead, Alberta is cutting its corporate tax rate from 12 to 8% by 2022.
“We’re taking the approach to broadly improve our competitiveness and business environment,” Toews told a Calgary Chamber of Commerce luncheon Friday. “We believe that is the most defensible approach to ensure that capital flows in the right places, that we diversify and grow our economy in a sustainable way, that government isn’t picking winners and losers.”
NDP Opposition Leader Rachel Notley countered that Toews’ budget delivered “tax breaks to big corporations while squeezing post-secondary students and people living with disabilities,” The Canadian Press writes, and would do little to get Alberta off the “royalty revenue roller coaster”.
“You don’t diversify the economy by shutting the doors of our post-secondary institutions, making major cuts in the quality of the education people receive, at the same time that you significantly increase the cost to students of walking through the doors of those post-secondary institutions,” she said.
When he tabled the budget last week, Toews said he was counting on a modest fossil industry recovery leading to higher production and oil prices, but added that “this is not a boom-time scenario. This is a very cautious revenue scenario.”
National Post columnist Colby Cosh says the budget also includes a stealth increase in personal income taxes and reduction in welfare funding that could produce an unlikely alliance of convenience between the NDP and the Canadian Taxpayers Federation. “If you elect people who have spent a long time studying and opposing sneaky tax increases,” the Post headlines, “they will know how to deploy them against you.”
“Surely nothing in the budget is as surprising and tragicomic as the choice to de-index tax bracket boundaries, tax credits, and adult welfare payments, Cosh writes. “This is something that nobody, I think, saw coming—something it would have been positively difficult to imagine the [United Conservative Party] government doing.”
In what the columnist describes as “terse, cagey language,” a provincial budget document compares Alberta’s $19,369 basic personal tax exemption to rates of $10,682 in British Columbia and $10,582 in Ontario, then reduces that entitlement to save $98 million next year, rising to $600 million by 2022/23. Cosh says it’s exactly the kind of “tax bracket creep” the federal Reform Party and the Taxpayers Federation—including Jason Kenney himself—“made endless sport with it in the 1990s.”
The change is “more a nibble than a chomp, in a land of income taxes that are relatively low and flat,” he concedes. “But the UCP ran in the election on a no-teeth platform,” and “the unfairness is a little more obvious to those whose seniors’ benefits and Assured Income for the Severely Handicapped cheques have also been de-indexed. I know it’s obvious to our premier.”