The Alberta government remains committed to industrial carbon pricing, allaying concerns that the province’s existing Technology Innovation and Emissions Reduction System (TIER) could be dismantled following next week’s Canadian federal election.
“The Government of Alberta remains committed to a strong and competitive industrial carbon pricing system that balances economic growth with emissions reduction,” said Rebecca Schulz, Alberta’s Minister of the Environment and Protected Areas, in an Apr. 8 letter sent to Calgary-based data platform and analysis firm Carbon Assessors and seen by Carbon Pulse.
Shulz said the government is looking to evaluate and enhance TIER’s design to support industry and drive innovation, as part of an upcoming regulatory review of the programme.
Carbon pricing programmes in Canada face uncertainty ahead of the Apr. 28 election, after Mark Carney last month eliminated the country’s revenue-neutral consumer carbon tax on fossil fuels as one of his first acts as Prime Minister.
Conservatives have pledged to go a step further and will scrap the federal industrial carbon pricing scheme if elected, while the Liberals and NDP said they plan to maintain the programme with adjustments.
Alberta Premier Danielle Smith has publicly endorsed the Conservative plan.
Alberta operates its own industrial carbon pricing system, and recent media reports suggested that the provincial government was considering killing it too.
Introduced in 2020, TIER sets sectoral emissions benchmarks, and companies that fail to achieve those can pay into a fund, or buy and surrender Emissions Performance Credits (EPCs) or offsets.
An email from the Canadian Renewable Energy Association (CanREA) reported by The Narwhal reveals that government officials outlined three options for TIER during a closed-door meeting in late March.
Carbon Pulse independently confirmed that the three possible solutions presented were as follows:
- Keep the system largely the same as TIER, but include a new compliance pathway that allows emitters to directly invest in emissions reduction technology at their facilities
- Scrap the current system and compel companies to invest in emissions reduction technologies, eliminating the option to pay into the TIER fund or buy and sell credits
- Allow companies to opt into staying with the current system, or opt into compulsory investments in on-site emissions reduction technologies
CanREA said none of the options would comply with current federal rules, which were established to ensure provinces and territories that opt to introduce their own industrial carbon pricing systems meet a minimum set of requirements.
The Canadian Climate Institute estimates the federal industrial carbon pricing system is responsible for 20-48% of Canada’s projected 2030 emissions reductions, while experts have warned that the country’s renewable energy sector – heavily reliant on credits tied to this system – could face significant investment risks if it is dismantled.
A survey conducted by Carbon Assessors earlier this year found widespread support for TIER from industries including oil and gas, power, finance, project development, and consulting.
Carbon Assessors wrote to the Alberta Ministry of the Environment and Protected Areas in March, highlighting that the findings showed “overwhelming support for an output-based pricing system that allows for the open trading of EPCs and offsets [in Alberta]”.
“Industry supports industrial carbon pricing in Alberta, 95% of respondents believe Alberta should have an industrial carbon market and a lot of those respondents are in the oil and gas sector,” Albert Ho, manager of carbon intelligence at Carbon Assessors, told Carbon Pulse.
Carbon Assessors made three recommendations to improve price stability in the TIER programme:
- Increase credit use limits to 90% or more for the 2024 compliance year
- Increase tightening rates
- Establish a balancing mechanism to stabilise supply and demand
In her response, Schulz wrote that the feedback – particularly on credit usage limits, tightening rates, and mechanisms for price stability – was valuable as the province continues to evaluate and enhance TIER’s design to support industry and drive innovation.
Carbon Assessors’ survey found that TIER has enabled capital investments in emissions reductions projects between C$1 million ($720,000) and C$1.4 billion for 77% of companies.
Additionally, 80% of respondents believed TIER was effective at lowering carbon emissions, and some 83% expected TIER to continue attracting investment.
The Alberta government completed its latest review of the programme in Dec. 2022, with the TIER Amendment Regulation coming into force at the beginning of 2023.
These amendments will stay in place until 2030, but are subject to an interim review that must be completed by the end of 2026.
By Chris Ward – chris@carbon-pulse.com
