Canada: Calibrating Your Climate Change GPS – How to Navigate Alberta’s New Emissions Reduction Regime

Last Updated: August 24 2007

Article by Selina Lee-Andersen, © 2007, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Energy - Oil & Gas, July 2007

As the first province to introduce legislation requiring large emitters to reduce their greenhouse gas (GHG) emissions, Alberta is moving swiftly to implement its new regulatory regime. Approved by the provincial legislature in April 2007, Alberta’s Specified Gas Emitters Regulation (the Regulation) will come into force on July 1, 2007, requiring large emitters of GHG gases in the province to meet new intensity-based reduction targets. For facilities established prior to 2000, this means that as of July 1, 2007, they must have achieved emission reductions of 12% off their baseline emissions intensity (which is based on their average emissions intensity from 2003-2005). While there is no grace period for established facilities to achieve this 12% reduction, there will a ramp-up period for new facilities established after 2000. For more information on Alberta’s new regulatory regime for GHG emissions, please see our March 2007 Blakes Bulletin on Energy – Oil & Gas, Regulatory Update: Alberta First to Introduce Legislation to Reduce Greenhouse Gases.

What Are "Emissions Intensity" And "Intensity Targets"?

Emissions intensity is the ratio of GHG emissions to a measure of economic output:

GHG Intensity

=

GHG Emissions

Economic Output

Typically, emissions intensity is expressed as emissions per dollar of gross domestic product in the context of an entire economy. However, emissions can also be measured against barrels of oil, per million cubic feet of natural gas, per tonne of coal, or per megawatt hour of electricity. GHG intensity targets are policies that specify emission reductions relative to productivity or economic output. Intensity targets may be contrasted with absolute targets, which specify reductions (in metric tonnes) relative to a historical baseline.

Does The Regulation Apply To Your Business?

The Regulation applies to all industrial facilities in Alberta that emitted 100,000 tonnes or greater of CO2 equivalent (defined under the Regulation as the 100 year time horizon global warming potential of a specified gas expressed in terms of carbon dioxide (CO2) equivalency as set out in the Regulation) in 2003 or in any years since. In particular, the Regulation stipulates that a 12% intensity reduction will be applied to that facility’s average 2003-2005 baseline emissions intensity for established facilities. To ensure the most accurate calculation of a facility’s baseline, Alberta Environment (AENV) has made the distinction between established facilities and new facilities. "Established facilities" are those that completed their first year of commercial operation before January 1, 2000 or have completed eight years of commercial operation. "New facilities" are those that completed their first year of operation on December 31, 2000 or a subsequent year and have completed less than eight years of commercial operation. The baseline emissions intensity for new facilities will be established based on their third year of operation. Once the new facility’s baseline is established, that facility will be required to reduce emissions starting the fourth year of commercial operation by 2% and then by 2% every year after until the 12% reduction target has been achieved.

Facilities which do not meet the 100,000 tonne threshold can still participate by reducing their GHG emissions intensity and reporting their emissions under the government’s Specified Gas Reporting Program. In addition, these facilities can participate by creating emissions offset projects. Reductions that are generated by an emission offset project can generate credits, which can then be sold to facilities subject to the Regulation.

Baseline Application Process

If it is determined that the Regulation applies to a particular facility, the appropriate baseline application form must be completed. Guidance on how to prepare a baseline application form is set out in AENV’s Technical Guidance Document for Baseline Emissions Intensity Applications, issued in May 2007 (the Guidance Document). The establishment of a baseline is a fundamental step in the regulatory process because without a proper baseline, the ability of any facility to make meaningful emission reductions will be tempered by inaccurate information.

Two different baseline application forms are available – one for established facilities and one for new facilities. The following documents must be submitted to AENV on or before December 31, 2007 (pursuant to an Order in Council dated July 17, 2007, the baseline submission deadline was adjusted from September 1, 2007 to December 31, 2007):

  • completed Baseline Emissions Application form and supporting documentation;
  • signed Statement of Certification form;
  • signed Statement of Qualification form;
  • signed Statement of Verification form; and
  • a Confidentiality Request (if selected by the applicant).

Additional supporting documentation may be requested by AENV. Once the baseline application is submitted, AENV will inform the facility in writing whether the baseline emissions intensity for the facility has been accepted or whether the Director has prescribed either a facility baseline or an audit.

Reporting Of Specified Gases

The Regulation applies to any facility that releases 100kt or more of CO2 equivalent based on the sum of direct emissions of carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFC), perfluorocarbons (PFC) and sulphur hexafluoride (SF6). Each reporting facility is required to disaggregate and report emissions of CO2, CH4 and N2P by the following source categories:

  • stationary fuel combustion
  • industrial process
  • venting
  • flaring
  • other fugitive emissions
  • waste and wastewater
  • on-site transportation
  • raw gas
  • CO2 emissions from biomass combustion.

It is worthy to note that under the Regulation, the term "facility" (any plant, structure or thing where an activity listed in section 2 of the Schedule of Activities to the Environmental Protection and Enhancement Act occurs) is defined narrowly to include all buildings, equipment, structures, machinery and vehicles that form an integral part of the facility’s activities. Essentially, this definition limits the calculation of emissions to a single process from any given facility, meaning that companies with multiple facilities can only calculate emissions from each individual facility and not from their facilities overall. Prior to reporting, companies will not be able to move the benefit of efficiencies achieved at one facility to another, less efficient, facility. However, once reporting is completed, a company may use any credits earned by one facility to offset against the total emissions of another facility (assuming that both facilities are located in Alberta). This will require companies to make process improvements at each facility and ensure that the facility is operating more efficiently over time.

Estimating Your Emissions

AENV has identified four methods for estimating emissions, which are described below in order of accuracy:

  • Monitoring or direct measurement, which uses emission monitoring systems, predictive emission monitoring (correlations developed between measured emission rates and process parameters) or source testing (e.g., stack sampling).
  • Mass balance, which determines emission from the difference in the input and output of a unit operation, where the accumulation and depletion of a substance is included in the calculations.
  • Emission factor, which is a value that relates the rate or quantity of a specified gas release with an activity associated with the release of that specified gas.
  • Engineering estimates, which use: engineering principles, knowledge of the chemical and physical processes involved, the design features of the source, or an understanding of the applicable physical and chemical laws.

While the methodologies selected to calculate emissions do not need to be identical to those used by other facilities in the industry, AENV has indicated in the Guidance Document that the methodologies must be: (i) widely accepted by the industry to which the facility belongs; or (ii) consistent with the guidelines approved for use by the United Nations Framework Convention on Climate Change on the Preparation of National Greenhouse Gas Emissions Inventories by Annex 1 Parties (Decision 18/CP.8).

In future years, facilities must use the same methodologies that were used for the establishment of the baseline emissions intensity in order to properly determine compliance. However, changes in methodology may be warranted as a result of changes in the characteristics of a source, which will likely result in the need to restate the facility’s baseline emission intensity.

Third Party Verification

AENV has not pre-approved third parties who are qualified to perform verification under the Regulation. However, minimum qualifications are set forth in section 18 of the Regulation, which requires third party auditors to be registered in a province or territory of Canada (or otherwise approved by AENV in a jurisdiction outside of Canada) as (i) a professional engineer, (ii) a chartered accountant, or (iii) a member of a profession that has substantially similar competence requirements as a profession referred to in (i) and (ii) above. In the Baseline Application form, the applicant will need to identify how the third party satisfies the requirements of the Regulation.

Literature on the topic of greenhouse gas emissions typically uses the term "verification" to describe the process by which an objective third party reviews an assertion (such as a regulatory submission) and provides an opinion or conclusion on that assertion. While AENV uses the term verification in its regulations, it also uses the term "assurance" in relation with audit and audit-related processes. In the Guidance Document, AENV distinguishes between two basic types of conclusions that can be provided through assurance service providers: (i) audit; and (ii) review. Audit, also known as positive assurance, offers the highest level of assurance because the conclusion of the third party reviewer is structured as a direct factual statement expressing the opinion of the reviewer.

In particular, the reviewer provides a high (though not absolute) level of assurance through procedures such as inspection, observation, enquiry, confirmation, recalculation, re-performance and analytical procedures. A review, also known as a negative assurance, provides a more limited level of assurance because the conclusion of the third party reviewer is based on the identification of anomalies rather than the confirmation of the assertion. Review level of assurance can be obtained through enquiry, analytical procedures and discussion. Not surprisingly, the level of effort required to complete verification rises with the level of assurance.

AENV states in the Guidance Document that it requires a review level of assurance for the Baseline and Annual submissions. In addition, AENV has identified the following review standards as appropriate for ensuring a consistent level of quality in the review process:

  • ISO 14064 Part 3 – Greenhouse Gases: Specification with guidance for the validation and verification of greenhouse gas assertions.
  • Standards for Assurance Engagements, Canadian Institute of Chartered Accountants (CICA) Handbook – Assurance Section 5025.
  • International Standard on Assurance Engagements (ISAE) 3000 – Assurance Engagements Other Than Audits or Reviews of Historical Financial Information.

In establishing an initial materiality level for errors, omissions or misreporting, third party auditors should take note that AENV has stated that an error, omission or misreporting over 5% of the reported value is material. If the Director is not satisfied with the baseline emissions intensity submitted by any facility, he or she may prescribe an audit of the facility.

Falling Short Of Your Reduction Targets

For those facilities unable to meet their intensity reduction targets through improvements in operational efficiencies, the following compliance tools are available:

  • Payment of $15 per tonne of CO2 (also known as Fund Credits) into the Climate Change and Emissions Management Fund;
  • Purchase offsets (also known as Emission Offsets) generated from Alberta-based projects by facilities not subject to the Regulation (these projects must have taken place after January 1, 2002); or
  • Purchase credits from facilities that reduced their emissions intensity below target. These so-called Emission Performance Credits may be banked or traded to other Alberta facilities.

Looking Ahead

AENV continues to consult with stakeholders on the province’s climate change initiatives, particularly in respect of the protocols for offset programs and use of the technology fund. As the first one out of the gate in Canada, there are many watching Alberta to see what lessons can be learned from its experience with intensity-based targets. In the short to medium-term, observers will likely see significant efforts by companies to increase efficiency in their individual production processes, particularly because facilities have been defined so narrowly. As the anticipated federal climate change initiatives come online over the next few years, it is anticipated that the provincial and federal authorities will work together to harmonize standards and ensure that companies are not burdened by the requirements of two competing regulatory systems.

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 Mondaq.com.

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

Events from this Firm
16 Oct 2018, Seminar, Toronto, Canada

Join Blakes lawyers for our 10th annual overview of recent legal and regulatory developments and practical strategies to navigate the changing regulation of Canada’s payments industry.

26 Oct 2018, Other, Vancouver, Canada

Cybersecurity, including data privacy and security obligations, has become a critical chapter in every company’s risk management playbook.

30 Oct 2018, Other, Toronto, Canada

Please join us for discussions on recent updates and legal developments in pension and employee benefits as well as employment law issues.

 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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