The Alberta government is seeking feedback from stakeholders on its proposed Technology Innovation and Emissions Reduction (TIER) system, which is intended to replace the current Carbon Competitiveness Incentive Regulation (CCIR) on January 1, 2020. TIER is designed to encourage energy-intensive facilities to find innovative ways to reduce emissions and invest in clean technology to stay competitive. Alberta Environment & Parks (AEP) released the TIER Discussion Document on July 9, 2019 which outlines the proposed policy changes expected under the TIER system compared to the current CCIR. The deadline for stakeholder feedback is August 2, 2019.
Overview of Proposed TIER System
Under the proposed TIER system, facilities that emit more than 100,000 tonnes of carbon dioxide equivalent (CO2e) per year (other than electricity generators) will be required to comply with facility specific product benchmarks, equal to 90% of their average 2016 to 2018 emissions intensity. The reduction requirement would increase by 1% per year, starting in 2021 (i.e. facility-specific product benchmarks would decrease from 90% of baseline emissions intensity in 2020, to 89% in 2021, 88% in 2022, and so on). AEP is seeking input on whether the tightening rate should apply to the "good-as-best-gas" benchmark for electricity.
Electricity facilities with more than 100,000 tonnes of CO2e per year will be required to comply with a "good-as-best-gas" benchmark set at 0.37 tonnes of CO2e per megawatt hour (MWh). This benchmark is equal to the performance of the best combined-cycle natural gas powered electricity generator in Alberta.
Regulated facilities can achieve compliance by:
- reducing their emissions;
- using credits from facilities that have met and exceeded their emissions targets;
- using emission offsets from organizations that are not regulated by TIER, but have voluntarily reduced their emissions;
- paying into the TIER Fund, which will be used for new Alberta-based technologies that reduce emissions, such as research and investment in carbon capture, and improved oil sands extraction technology.
The first $100 million in annual revenue and 50% of the remaining revenue paid into the TIER Fund will be used for emissions reduction technologies, such as new and improved technologies for oil sands extraction, research and investment in carbon capture, utilization and storage, or other areas of opportunity for industrial emission reductions. The Alberta government is also considering solutions under the TIER system to protect 26 facilities (including smaller conventional oil and gas facilities) emitting less than 100,000 tonnes of CO2e per year from the federal fuel levy.
Opt-In/Opt-Out for Facilities Emitting <100,000 Tonnes
Under the TIER system, it is proposed that a facility may opt-in to the system if it competes directly against a facility that is covered by the regulation, or if the facility has greater than 10,000 tonnes CO2e of annual emissions and belongs to a high Emissions Intensive and Trade Exposed (EITE) sector. Eligible facilities that opted-in to the CCIR would be automatically opted-in to TIER to facilitate exemption from the federal fuel charge, but may opt-out if desired.
On the ability to opt-out, AEP is seeking input on provisions to allow opted-in facilities and regulated facilities with emissions below a certain threshold for a certain period of time to opt-out of the TIER regulation without being required to demonstrate equivalent coverage under an alternative regulatory system.
AEP, which is leading consultation activities on TIER, is seeking feedback on the following areas:
- scope of emissions coverage (including indirect emissions, industrial process emissions, biomass emissions, formation CO2 emissions, and fugitive emissions) and thresholds;
- criteria for opt-in/opt-out provisions;
- how to treat new facilities and best-in-class facilities;
- compliance flexibility – it is proposed that credits created under the Specified Gas Emitters Regulation and CCIR will be eligible for use under TIER, with the same expiry dates;
- fund credit price;
- treatment of conventional oil and gas producers below the emissions threshold;
- TIER Fund design for innovation funding;
- reporting and verification requirements;
- Compliance Cost Containment Program; and
- regulatory review frequency – it is proposed that an initial regulatory review be completed by January 1, 2023, and every fifth year after 2023.
While other policies are currently being reviewed by government, the scope of this consultation process is primarily focused on the TIER system. In particular, AEP has indicated that the carbon levy, oil sands emissions limit, methane regulations, renewable electricity program, federal fuel charge, emission offset protocols, among others, are outside the scope of the TIER engagement process.
The proposed TIER system has been put forward by the Alberta government as the centrepiece of province's approach to climate change, and further details are expected in fall 2019. AEP has indicated that it is working with its federal counterparts to ensure that the proposed TIER system meets federal benchmarking criteria to avoid the need for the federal output-based carbon pricing system for large emitters (under the Greenhouse Gas Pollution Pricing Act) to be implemented in Alberta. Separately, the federal government has announced that the federal carbon levy will apply in Alberta from January 1, 2020. The ministers of AEP, Agriculture and Forestry, and Energy are planning to meet with a variety of industry stakeholders throughout July 2019.
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