Canada: Alberta's GHG Emissions Control System: A Model For Others?

Last Updated: October 18 2012
Article by Gray E, Taylor

Since 2007, the Canadian province of Alberta has operated a unique, economy-wide approach to greenhouse gas ("GHG") emissions control that (while imperfect) has functioned to incentivize emission reductions and the development of low-carbon technologies. This Alberta system focuses on emission-intensity reductions, offsets, trading in market instruments, and technology innovation, positioning Alberta to achieve the dramatic GHG emission declines required over the next years and decades.

Although criticized for (1) the low level of its existing emission reduction targets, (2) defects in its offset development and certification process, and (3) potential over-reliance on carbon capture and storage ("CCS"), the Alberta system successfully:

  • Imposes costs on larger scale industrial GHG emissions,
  • Creates market incentives to reduce or sequester GHGs,
  • Directs funds into critical new low-carbon technologies, and
  • Is likely capable of accommodating much more stringent targets without wholesale redesign.

Moreover, as the Alberta system is compatible with significant economic growth and generates both government and private sector income, it can obtain political support across the province, including rural areas. With all of these benefits, the Alberta system could provide a template for GHG emission control systems in rapidly industrializing countries with large rural, agriculturally focused economic sectors.

Alberta Background

Alberta covers a large inland area in the west of Canada, including the eastern part of the Rocky Mountains and its foothills, and the prairie forest regions to the east. Becoming a Canadian province in 1905, Alberta was an agricultural province which changed dramatically into a resource extraction and industrial economy after World War II due to the discovery of fossil fuels (first oil and subsequently gas) in large quantities in a number of regions. In addition, Alberta has been described as the "Saudi Arabia of coal", and currently uses coal to generate the vast majority of its electricity. The rapid growth of Alberta's population (now over 3.5 million), in particular the cities of Calgary and Edmonton, as well as the development of large petroleum, petrochemical, resource extraction and recently oil sands projects have resulted in billions of dollars being invested in modern facilities energized almost entirely by locally-sourced fossil fuels.

Alberta's Growing GHG Emissions

In 2010, Alberta GHG emissions (expressed in CO2e terms) were 236 megatonnes (Mt), accounting for over one third of the GHG emissions in Canada, up from approximately 28% in 1990. This percentage appears likely to continue increasing in the future, with approximately 40% of Canada's GHG emissions from Alberta in 2020 and oil sands emissions of 104Mt, triple the level in 2005. The federal government predicts such an increase due to the expected growth in petroleum production from oil sands, which relies on a large amount of fossil fuel combustion for heat to separate the petroleum product out of the "oil sands".

Climate Change and Emissions Management Act1 ("CCEMA") and CCEMA Regulations

In 2003, Alberta put CCEMA in place. CCEMA prescribes significant reductions in "specified gases" (CCEMA's term for GHGs, specifically including the six Kyoto Protocol categories of GHGs) on an "intensity" basis with reduction target of 50% or more for GHGs emitted per unit of Alberta's gross domestic product by 2020, as compared to 1990 levels. Alberta's 2008 Climate Change Strategy also contains an "expectation" statement suggesting a 14% reduction on an absolute basis below 2005 GHG emission levels in 2050. Alberta describes its targets as seen in Figure 1.

It should be noted that over time, CCS is expected to play the greatest role in reducing emissions from "business as usual" levels, accounting for 50 Mt/year by 2020.

GHG Emissions Reporting

Under CCEMA, a GHG reporting regulation was put in place in 2004 that required facilities with annual emissions of 100,000 tonnes CO2e /year or more to file a verified emissions report. In 2011, this threshold was reduced to 50,000 tonnes CO2e /year or more. Industrial GHG emissions in Alberta are estimated to account for more that 50% of all GHG emissions in the province, and approximately 100+ large emitting facilities are obligated to report (often referred to as large final emitters or "LFEs"), which represent 70%+ of all industrial emissions. Reporting is coordinated with the federal government's GHG emission reporting requirements through a "single window" reporting arrangement.

Specified Gas Emitters Regulation

On July 1, 2007, the Specified Gas Emitters Regulation ("SGER") went into effect and created the emissions reduction and market instrument portion of the Alberta system.

Intensity Reductions for LFEs

SGER imposed GHG emission intensity reduction requirements on the LFEs (for this purpose, the 50,000 tonne/yr threshold has not been adopted). The emissions intensity approach (which is similar to that used by CCEMA) was adopted to permit regulated facilities that make up a major portion of the Alberta economy to continue to expand while simultaneously addressing GHG emission reductions. For plants existing in 2000, a 12% reduction from a baseline intensity (calculated as the average of the emissions intensity in the facility's 2003, 2004 and 2005 operations) was prescribed for each compliance period.1 For facilities commencing operations after 2000, the baseline intensity is that of the third year of operations, and the reduction obligation is 2% per annum starting in the fourth year of operations, to a maximum of 12%. A frequent criticism of the SGER requirement is that as facilities become more energy efficient over time, the fixed 12% obligation becomes less onerous. Alberta has indicated that it is considering increasing the percentage reduction requirement as part of the pre-September 2014 SGER review referred to below. It is also possible that differential rates for different economic sectors could be instituted as part of such a reform.


To permit the rest of the Alberta economy to participate in the SGER scheme and to provide a potential cost relief valve for industrial facilities required to reduce their GHG emissions intensity, an offset credit system was established. Reductions in GHG emissions, as well as GHG sequestrations, outside of the regulated industrial facilities are eligible to produce such offset credits.

Currently, offset credits used for compliance in the Alberta System can only be produced in Alberta, preventing the use of offset credits generated elsewhere. However, the offset requirements of the Alberta System substantially incorporate ISO 14064, which makes Alberta offset credits potentially comparable with offsets from other jurisdictions. Thus, the potential for linking the Alberta system to other systems, such as those being developed and/or operated in Alberta's neighbouring provinces and the Western Climate Initiative (WCI), has not been eliminated.

The additionality requirements for offsets under the SGER are limited to prescribing that the activity producing the reduction is not required by law. However, as offset credits can only be used when produced in accordance with government-approved protocols, a decision by Alberta Environment & Water ("AEnv") to develop and modify protocols with additionality in mind has forced the Alberta offset credit system to consider issues similar to those that have arisen in the CDM.2

As of July 2012, there were over 30 protocols approved for developing Alberta offset credit projects, with many of these protocols relating to:

  • Agricultural activities such as conservation cropping (no-till or low-till farming), N2O emission reductions in agricultural applications, manure management and aspects of animal husbandry,
  • Industrial and resource activities of importance to Alberta such as enhanced oil recovery and acid gas injection, and
  • Traditional energy efficiency and renewable energy opportunities.

Notwithstanding the large number of protocols potentially useable, offsets actually generated and used in the SGER system have been concentrated on a handful, particularly conservation cropping. In 2011, AEnv announced that it will permit two tonnes of credits to be created for every tonne of CO2 sequestered by a large-scale CCS project intended to inject CO2 captured from an oil sands upgraded directly into geological formations; this project is receiving $745 million from the Alberta government and $120 million from the federal government, indicating the size of the financial challenge of CCS. It is not clear that this two-for-one approach will be available to others. Another project to capture CO2 from an Alberta coal-fired electricity generating facility that was to receive a similar amount of government funding support was abandoned by its proponents which indicated that uncertainty in offset credit valuation was a significant factor in the abandonment decision.

Fund Credits

To keep the cost of emission reductions for LFEs lower, LFEs are allowed to acquire "fund credits" (which act like offset credits) by contributing $15 per tonne to a fund (the "Technology Fund") operated by the government-controlled Climate Change and Emissions Management Corporation ("CCEMC"). Fund credits can be used in an unlimited amount by LFEs. Both the price and the unlimited use have been criticized, most likely resulting in these aspects being part of the review of SGER and the Alberta system now underway in preparation for a pre-September 2014 decision on the system's fate.

Emission Performance Credits

"Emission Performance Credits" ("EPCs"), which were authorized as a compliance mechanism by SGER, are available to any regulated facility that reduces its emissions below its emissions intensity requirement. One EPC is available for each tonne that the facility's emissions are below its prescribed target. EPCs can be used by the facility generating them in future years (i.e. banked) or by any other LFE but only for the same year it which it was created.

The results of the operations of SGER can be seen in Chart 1, provided by AEnv.

Effectiveness of the Alberta System

The targets for Alberta's climate change emissions control plan are criticized as inadequate and most likely incompatible with Canada's Copenhagen Accord/Cancun Agreements GHG emissions commitment of 17% below 2005 emission levels by 2020. Critics of the Alberta system point to the fact that an emissions intensity system is prone to permitting GHG emission increases if and when production increases (as is expected in Alberta, particularly from the oil sands). However, these comments can be countered by highlighting the need to keep challenges managable during the "learning by doing" stage while GHG and market capabilities are being built and political support is necessary. Moreover, the Alberta system functioned effectively throughout the economic downturn, showing that reduced production does not, and did not, take the "bite" out of intensity reduction requirements.

Lack of Price Discovery

Since offset credits and EPCs are frequently traded in Alberta, a market for them clearly exists. However, as these instruments are moved over-the-counter without any public reporting of prices paid (even on an aggregated basis), the benefits of price discovery are not available. The $15/tonne price of fund credits effectively caps the price, but little is know of the prices actually paid. The issue is likely to be reviewed in the near future, particularly if linking to neighbouring provinces or other jurisdictions is to occur.

Nature of Tradeable Units

CCEMA states that offset credits, fund credits and EPCs are "revocable licenses" usable in the Alberta system to meet the LFEs' prescribed emission targets. The uncertainty inherent in that definition has lead to difficulty in characterizing the units for legal purposes and in establishing a commodity for use in financing arrangements.

Auditor General Report

The Auditor General of Alberta ("AG") reported on various aspects of the SGER system in November, 2011, following up on two earlier reports. In this report, the AG identified a number of concerns. In particular, the AG reported that guidance from AEnv to facilities, verifiers, offset project developers and offset protocol developers was not as clear as it should be. As well, the process for developing offset protocols needed improvement, particularly transparency and ensuring that protocol development standards were met.

The AG found a wide variation in methodologies applied to quantify emissions from tailings ponds, leading to potentially significant variability in results. With respect to offset credits from changes in cultivation practices to "reduced till" or "no-till", the AG found a wide variety of evidence used to validate offset credits, with at least one protocol requirement not sufficiently addressed in any of the approaches. Th AG was also critical of a number of other practices related to protocol and offset credit creation.

AEnv has indicated that the AG's findings and recommendations have been taken into consideration and are being dealt with effectively for current and future years. However, there is a widespread concern amongst market participants that further changes will be needed to satisfy the AG, resulting in uncertainty that is adversely affecting the enthusiasm of potential participants.

Offset Credit Issuance

The SGER system contains no step where an offset credit is "issued" (i.e., certified as in existence by a government official) prior to its attempted use buy an LFE. As a result, project developers go through the offset credit creation cycle, assemble the documents required to demonstrate that existence of an offset credit, obtain third party verification, and pass on their right to the offset credit without any assurance from the government that the offset credit is valid. When the offset credit materials are provided to the government, they may be rejected, creating the potential for the LFE to be out of compliance. Even more concerning for all participants is that offset credit documentation is subject to audit by the government for a period of at least two years. If the offset credit is found to not comply, the offset credits can be disallowed. This exaggerated form of buyer liability could lead to penalties being imposed beyond the requirement to replace the disallowed offset credits ($200 per tonne of excess emissions), creating the risk of significant potential liability. As a result of the AG's report referred to above, the level of assurance required from verifiers will be increased going forward.

Verification of Offset Credits

When the SGER system was put in place, the accreditation of verifiers under ISO 14065 did not exist. Accountants, engineers and other qualified entities were permitted to do verifications if approved by AEnv. The varying approaches adopted by these entities have led to apparent inconsistencies in verification results. It has also led to audit concerns, where the original verification was done by, for example, an engineering company and the audit/re-verification is performed by an accounting firm using different methods.

The Technology Fund

The Technology Fund is to be used for purposes related to reducing emissions or improving Alberta's ability to adapt to climate change. CCEMC, the Fund's operator, envisions this being achieved through the discovery, development and deployment of clean technologies. As fund credits are replacements for emission reductions, but do not represent in and of themselves any reductions, the use of the funds needs to result in emission reductions (ideally comparable to or greater than those that would have been achieved in the absence of the issuance of the fund credits). This could mean that the investments are directed into near-term emission reduction projects. On the other hand, the Alberta system (and particularly the Technology Fund) is designed to produce transformative changes through the creation of new technologies, which includes funding risky ventures into new technologies, like CCS. These investments may not pay off in emission reductions, either in the short term or ever. As well, while some investments for adaptation projects have been announced, this focus remains a challenge for CCEMC. Lessons from the operation of the Technology Fund for the structure and operation of the UNFCCC Green Climate Fund are likely worthy of exploration.

Interaction with Federal Climate Change Policy

The Canadian federal government has indicated that its program to achieve GHG emissions reductions to meets its Kyoto Accord/Cancun Agreements target of a 17% reduction for 2005 levels by 2020 will consist primarily of a sector-by-sector performance-based regulatory approach. Following on from new vehicle emission standards, the federal government is close to putting requirements on the coal-fired electricity generation sector that will require new facilities built post-July 1, 2015, as well as existing facilities exceeding a defined "useful life" (likely 45 or 50 years), to meet the GHG emissions standards appropriate for a modern combined-cycle natural gas electricity generation production facility (by using CCS or otherwise) or to shut down. As the vast majority of electricity in Alberta is coal-fired generation, this requirement may deprive the SGER of a significant demand component. Moreover, the next sectors planned for federal performance regulations include oil and gas and chemicals, both mainstays of the Alberta economy and of the SGER system. The federal government had indicated its willingness to enter into equivalency agreements that would suspend the application of federal GHG regulations in Alberta if the Alberta system achieves comparable results. This interaction deserves watching as CCEMA prohibits signing any inter-jurisdiction GHG agreement unless the agreement is consistent with CCEMA and its GHG emissions target.

2014 Review

SGER is set to expire on September 1, 2014, but provides for a review to determine its ongoing relevance and necessity. The option of repassing SGER in its current or an amended form is available. This review is currently underway and it is understood that all options are being considered, including a carbon tax, a modified SGER system or an end to the SGER (including its emissions trading component).


The Alberta GHG emissions control system has operated for over five years and has achieved a number of desirable results, including the creation of trained personnel and service providers, as well as an economy-wide focus on GHG emissions, reductions, and sequestrations, that may be unparalleled in the world. It has demonstrated that requiring emission-intensity reductions offers a potentially successful approach for an industrializing economy and that such an approach can incorporate offset projects and credits that are very similar to offsets used in a cap-and-trade allowance-based system. The Technology Fund, which focuses funds paid for fund credits (similar to allowance auction revenues) into new clean technologies and adaptation, may also be attractive to others. That 5.3 million tonnes of offset credits have been issued and used, arguably representing at least that amount of emission reduction, is also positive. 


1 i.e., the remaining 6 months of 2007 and every calendar year thereafter

2 To date, financial additionality has not been required by AEnv

Published in the International Emissions Trading Association's (IETA) Greenhouse Gas Market 2012: New Markets, New Mechanisms, New Opportunities, p. 50.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Gray E, Taylor
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions