The New Democratic Party (NDP) government said the competition-based plan was devised in consultation with industry, but as Digital Journal reported on Wednesday, the opposition United Conservative Party is saying the new rules will end up cutting jobs already affected by a slump in oilsands production.
Called the Carbon Competitiveness Incentives (CCI), Environment Minister Shannon Phillips said the regulations will reduce Alberta’s emissions by 20 million tons by 2020 and 50 million tons by the end of the next decade. The new rules will apply any facility emitting more than 100,000 metric tons a year of carbon.
The new rules will come into effect June 1, 2018, and will be phased in over a period of three years. Some of the industries affected by the rules include the oilsands industry, cement plants, and fertilizer production facilities. The new rules replace the Specified Gas Emitters Regulation currently in place, and will mean a big jump in costs, said Tim McMillan, head of the Canadian Association of Petroleum Producers, according to CBC News.
“It looks like, by our calculations, about a five-fold increase in costs to our industry from the current carbon levy. And at a time when attracting capital is challenging and we’re seeing increasing amounts of capital that traditionally came to Canada going to the U.S. and elsewhere, we’re very sensitive to cost implications.”
And while the NDP government did not disclose the names of the biggest emitters, the oilsands industry accounts for 24 percent of Alberta’s total emissions.
Competitiveness and the benchmark
“The fact is that investors are demanding credible climate action,” Phillips said. “This whole policy is designed around protection of jobs and ensuring that companies remain competitive.” The new policy is expected to bring in $500 to $800 million a year to the province, while Alberta will make over $1.3 billion available to support emissions-cutting projects.
Most of the industries will have a benchmark set at 80 percent of production-weighted average emissions. This means that any facility producing emissions higher than the benchmark will be subject to “compliance obligations.” In this case, they will have three options to consider – They can pay $30 a ton for those emissions, reduce the emissions or buy offsets.
On the other side of the coin, those companies producing emissions below the benchmark set for them will be able to accumulate credits that can be used to offset future costs. In the oilsands, emissions will be measured by the amount of greenhouse gas produced in extracting one barrel of oil. The benchmark will be set at 57.7 kilograms of carbon dioxide equivalent per barrel.
“This plan is an important step forward in addressing climate change as it will incent those facilities with the lowest emissions intensity,” said Cenovus Energy spokeswoman Sonja Franklin, according to Reuters.
As for the energy companies involved, like Suncor and Phillips, they are still evaluating the announcement and assessing the impacts of the rules.
