“HOW EACH NATION ADAPTS TO A CARBON-CONSTRAINED WORLD WILL, TO A LARGE EXTENT, DETERMINE ITS FUTURE ECONOMIC COMPETITIVENESS AND ABILITY TO CREATE PROSPERITY FOR ITS RESIDENTS.”
—— The Climate Institute & E3G in “G20 Low Carbon Competitiveness”
INTRODUCTION
Alberta
As the largest natural gas producer of Canada and 4st producer of the world, Alberta, is also the first province creates a multi-sector regulation-based demand for carbon reductions, not only in Canada but also in the North America.[i] Several actions has been done by Alberta Government such as “Albertans and Climate Change: Taking Action” in October 2002 and “the Climate Change, Emissions Management Act” in 2007 and “Alberta’s 2008 Climate Change Strategy”.
Alberta Emissions Profile
Alberta has become the largest GHG emitting province in Canada, emitting more than 200 Mt in 2009, which is an increase of almost 100 Mt compared to the emission amount in 1990. It is due to the increase is an increased production of petroleum resources for export markets.[ii]
Source: http://environment.alberta.ca/0915.html
Its emission is closely related with the energy industry in the province. According to Alberta’s emission profiles in 2008, emission from energy sector which includes coal, oil, and gas, oil sands, and electricity, accounts for 62% of the total emissions. [iii]
Climate Change Action
Alberta’s 2008 Climate Change Strategy indicated that their target reduction in GHG emissions is a 50 per cent reduction by 2050, compared to business as usual, or a 14 per cent reduction below 2005 levels by 2050.
Alberta, the first province to develop legislation regulating GHG emissions, has developed four approaches to reduce GHG emissions:
- Reduction Program (Specified Gas Emitters Regulation)
- Reporting Program (Specified Gas Reporting Regulation)
- Alberta-based Carbon Offset Market
- Climate Change and Emissions Management Fund
According to the Specified Gas Emitters Regulation, which took effect on July 1st, 2007, Alberta Environment required all facilities in Alberta emitting over 100,000 Mt of CO2e per year to reduce 12% of their emissions intensity every year. The facilities have 4 available options, which listed below:
- Demonstrated Emission Reductions
- Contributions to the Climate Change Fund
- Purchase of Alberta Based Offsets
- Purchase of Emissions Performance Credits from another facilities in Alberta
Since “Contributions to the Climate Change Fund” has the same function as a carbon tax, and “Purchase of Alberta Based Offsets” and “Purchase of Emissions Performance Credits” belongs to the province’s carbon offset market, our discussion will focus on those three topics.[iv]
CARBON TAX – Climate Change and Emissions Management Fund
Policy Description
As one of the alternative compliance of SGRE, the Climate Change and Emissions Management Fund requires companies who didn’t meet the provincial reduction target for GHGs gas emissions can choose to pay $15 a tonne into the Fund for emissions they are required to reduce, which means a maximum 12% of last year’s emission paid by $15 a tonne.
The Fund will be used as a support of the development and application of transformative technologies as well as improving Alberta’s ability to adapt to climate change, which is part of Alberta’s Climate Change Strategy (CCS).
Climate Change and Emissions Management (CCEMC) Corporation is collecting the Fund Money and holding activities.
Comments
From one hand, based on the special majority category of industry in Alberta, the government of Alberta sets the tax at $15 per tonne only for the exceed emissions is quite reasonable. Compared to British Columbia’s carbon tax of $25 per tonne on every tonne of GHG emission as of July 2011[v], companies in Alberta benefits from the low tax and making much appropriate economic benefits.
From the other hand, Economists and environmentalists claim that this kind of carbon tax is too low to make the companies realize how severe the situation of GHGs emission is. It is also hard to change their way of producing. Companies are rather paying money than reducing their emissions, which may cause more damage to the environment.
CAP-AND-TRADE – Alberta-based Carbon Offset Credit System
Policy Description
Options of purchase Alberta-based offset credits and purchase or use Emission Performance Credits (EPCs). Alberta-based offset credits are considered as cap-and-trade system. Offsets are GHG emissions reductions occurred by facilities that are not covered by the Specified Gas Emitters Regulation (i.e.: those facilities emitting less than 100,000 tonnes CO2e per year). Credits must be created using protocols approved by the Alberta government. These emission reductions qualify as offsets when they are registered with the Alberta Offsets Registry and can be sold to facilities that need for their emissions reduction target. Examples of government-approved protocols are: decomposition of Agricultural materials, Instrument Gas Conversion to Instrument Air, and Wind Power Electricity. As of October 2011, there were 32 approved protocols, of which 12 were under development.
Emission Performance Credits (EPCs) are GHG emissions reductions allowance occurred by facilities that are covered by the Specified Gas Emitters Regulation (i.e.: those facilities emitting less than 100,000 tonnes CO2e per year) when they reduce its emissions below their limit.
RESULTS
After four rounds of compliance year since Alberta’s action on climate change, 23.8 Mt of emissions were avoided, $257 million dollars were contributed to the Climate Change Emissions management Fund, and 11 Mt of offsets were used.
Source: http://environment.gov.ab.ca/info/library/8416.pdf
FINDINGS
- The government of Alberta realized the importance of green gas emission and started series of actions in a very early time, which make the system much more efficient after long period observation and improvement.
- Regulation requires for facilities that emit more than 100,000 tonnes (0.1 Mt) CO2e per year to reduce their emissions per unit GHG output by 12% every year. It regulates facilities that emit more than 50,000 tonnes only need to report their emissions amount.
- Exemption: A new facility that have completed its first year of commercial operation on or after December 31, 2000,[vi] has lower target of 2 per cent per year starting in its fourth year of operation. Facilities that emit lower than 100,000 tonnes are not required to reduce their emissions under regulation. It creates a facility, of which emission level is significant, has an incentive to move its operation to Alberta because it might face higher emission reduction cost in other province such as in British Columbia. As a result total amount of GHG emission will rise.
- Cost Effectiveness: In principle, when all firms and households face the same carbon tax over space and time, costs are minimized. Carbon policy in Alberta regulates only large emitters. Furthermore, compliance requires only 12 per cent of emissions that regulated facilities emit. So the policy does not appear to achieve cost minimization because it does apply to every emitter and the tax rate is not the same.
- It is quite easy for us to observe that government of Alberta is trying to get much more economical benefits in the case of partially losing its environmental benefits according to the over low carbon tax they applied.
- Trade-off between economic growth and GHG emissions: A study shows that with 2 ˚C emissions target, Canada can achieve emissions reduction of 25 per cent below the 1990 level by 2020, and its annual GDP growth will be 2.1% between 2010 to 2020. However, with business as usual, the annual GDP growth will be 2.4% and GHG emissions will rise to 47 per cent above the 1990 level.[vii]
- Distributional effect: British Columbia’s carbon tax policy considers distributional effect of the tax revenue such income tax credit based on the income level. However, the Alberta policy does not appear to have consideration of distributional effect as it outlines that the revenue form the contribution to the fund is invested in research and development. Then the low income individuals continue to bear a disproportionate burden because industries will pass on most of the carbon tax to consumers. the increased burden from society will get benefit from the technology improvement in the long run, but price increase such as in gasoline or electricity will be passed on to individuals no matter the rich or the poor, which means a disproportion.
[iv] http://carbonoffsetsolutions.climatechangecentral.com/policy-regulation/alberta-offset-system
[v] British Columbia, 2008_Budget_Fiscal_Plan.pdf [vi] http://www.environment.alberta.ca/documents/Baseline_FAQ.pdf
