Overview of Alberta Climate Change Policy Solar West 2017 Alberta Climate Change Office May 10, 2017 1
Purpose/ Outline Context Alberta GHG emissions Climate Leadership Plan Carbon Levy Federal / Provincial Initiatives Specified Gas Emitters Regulation Alberta Offset System Output-Based Allocation System 2
Alberta Emissions Profile 267 Mt CO2e total provincial GHG emissions in 2013 14 percent or 33 Mt emissions growth since 2005 37 percent Alberta s percentage of Canada s emissions in 2013 World >43,000 Mt Canada 726 Mt Alberta 267 Mt
Emissions Context 350 2005 2013 2020 2030 Million Tonnes CO2e 300 250 200 150 100 50 0 BC AB SK MN ON QC NB NS NL Canada s Second Biennial Report On Climate Change (2016) note that this projection was modelled prior to Alberta s Climate Leadership Plan
Timeline of Key Actions 2002 - Released Albertans & Climate Change: Taking Action (first provincial strategy in Canada) 2003 - Climate Change and Emissions Management Act passed (first legislation to establish economy-wide price on carbon in North America) 2004 - Specified Gas Reporting Regulation 2007 - Specified Gas Emitters Regulation (first economywide price in Canada) 2008 - Revised provincial Climate Change Strategy 2015 - Amended Specified Gas Emitters Regulation (reduction requirements and carbon price increased) 2015 Climate Leadership Plan
Climate Leadership Plan Released in November 2015 in response to Climate Change Advisory Panel report The Climate Change Advisory Panel heard from a wide range of Albertans including the public, farmers, Indigenous communities, academia, think-tanks and industry representatives on a new climate change strategy for Albertans.
Climate Leadership Plan Key Initiatives Phasing out emissions from coal-generated electricity and developing more renewable energy Coal power emissions phase out by 2030 30% of generation from renewables by 2030 Implementing a new carbon price on greenhouse gas pollution Carbon Levy on all transportation and heating fuels Together with the new performance standards for large industrial emitters, the carbon pricing model covers 78-90% of Alberta s emissions New approach will generate funding that will be fully recycled back into the economy Capping oil sands emission limit 100 Mt CO2e limit, with provision for cogen emissions and new upgrading Reducing methane emissions from oil and gas by 45% by 2025
Climate Leadership Plan Priority Initiatives Coal Emissions Phase Out Renewable Energy Carbon Pricing Consumer Rebates Small Business Tax Cuts Energy Efficiency Microgeneration Carbon Fund Management Innovation and Technology Framework Oil Sands Emissions Limit Output-Based Allocations Bioenergy Methane Municipal Climate Change Action Plan 8
Alberta s Climate Leadership Plan Measures of Success Reduced GHG emission Compliance options are flexible and met Transition to cleaner sources of electricity Oil sands emissions are managed within limit Diversified low-carbon economy Competitiveness is maintained Create new jobs Family & communities well-being and resilience Transition to new employment opportunities Energy efficiency and green infrastructure incentives shift attitudes and consumer behaviours Avoid downstream health care costs and lost productivity
Why Price Carbon? Climate Change is already happening and the cost will rise over time Societal costs associated with GHG emissions are estimated to be $41 per tonne CO 2 e on a global basis in 2016 by Environment and Climate Change Canada, rising to $55/t by 2030. Could be as high as $167/t in 2016 (95th percentile) Floods, droughts, fires, extreme storms, invasive species, crop loss, etc. Greenhouse gas emission are a negative externality A negative externality occurs when an individual or firm making a decision does not have to pay the full cost of the decision. Carbon pricing provides a signal to all entities to reduce emissions Behaviour change (change purchasing habits, drive less, turn down heat, etc.) Technology change (energy efficiency, more efficient vehicles, etc.)
Carbon Pricing Around the World Source: World Bank (2016)
Carbon Pricing Alberta is aligned with the current highest price in Canada, $30/tonne, and our emissions coverage and stringency is also as good as or better than other Canadian provinces. Carbon Levy on heating and transport fuels All revenue collected will be rebated to Albertans and reinvested in the economy to help fund provincial efforts to reduce greenhouse gas emissions Output Based Allocation Build on the experience of the Specified Gas Emitters Regulation (2007) Drive emissions reductions while protecting trade exposed industries Includes large emissions and trade exposed industry: oil sands, electricity, refineries, petrochemicals, cement, mining, etc.
Carbon levy impact on major fuels Type of Fuel 2017 2018 Diesel 5.35 /L 8.03 /L Gasoline 4.49 /L 6.73 /L Natural Gas 1.011 $/GJ 1.517 $/GJ Propane 3.08 /L 4.62 /L http://www.alberta.ca/climate-carbonpricing.aspx Starting January 1, 2017, the carbon levy will be applied to fuels at a rate of $20/tonne. One year later, the levy will increase to $30/tonne. Six of 10 Alberta households will receive a rebate that covers the average cost of the carbon levy they pay. Electricity covered by output based allocation, not the levy Alberta Energy analysis projects no significant rate increases over base case
Carbon Levy Exemptions SGER/Output Based Allocation Upstream oil and gas (until 2023) Marked gasoline and diesel Use by farmers for farming operations Biofuels Inter-jurisdictional flights Indigenous use Eligible First Nations individuals and bands, when fuel is purchased on-reserve for personal or band use Other exemptions Fuel sold for export Fuels used in industrial processes without releasing GHG emissions. Federal Government use 10
Federal Initiatives underway Advancing elements of the Pan Canadian Framework Methane reductions in oil and gas Commitment to reduce methane gas emissions from oil and gas operations by 40-45% by 2025 from 2012 levels. Clean fuel standard Reduction in GHG lifecycle of fuels to achieve 30 MT of annual reductions by 2030. Investments in innovation and technology task force that will make recommendations on a Climate Change Innovation and Technology Framework. Carbon pricing Carbon price across Canada - $10/tonne in 2018 rising to $50/tonne in 2022 15
Federal Initiatives underway cont. Federal government is also advancing important work through Canadian Council of Minsters of the Environment (CCME) Article 6 Paris Agreement role of Internationally Transferred Mitigation Outcomes (ITMOs) Assess opportunities and risk and provide advice to inform federal negotiation position. Pan Canadian Offset Framework Focus on guidelines and best practices Greenhouse gas inventories Work to align and improve F/P/T greenhouse gas inventories and facility-level reporting Collaboration on emissions projections and approaches to modeling technology change and investment 16
Federal Initiatives underway cont. In November 2016, the federal government announced its intention to implement a national Clean Fuel Standard. The target for the CFS is a 30 Mt reduction of lifecycle greenhouse gas emissions across the transportation, building, and industry sectors by 2030. The federal government launched a series of consultations through webinars and stakeholder meetings to gather feedback and early views on the development of the CFS. In December 2016, the federal government published a notice of intent to develop GHG regulations for electricity generation. Proposed standards of 420 t/gwh for new and modified large combustion engine units and boilers; 500 t/gwh for new and modified small combustion engine units; and interim emissions requirement of 550 t/gwh for converted coal-to-gas boilers.
Specified Gas Emitters Regulation 18
Specified Gas Emitters Regulation Climate Change and Emissions Management Act (2003) Specified Gas Emitters Regulation (2007) regulating large industry (> 100,000 t CO 2 e per year, over 100 sites) existing facilities required to immediately reduce per unit GHG output Historically 12% reduction required transitioned to 15% for 2016 and 20% for 2017 new facilities ramped up from operating years 4 to 9 to full stringency requirements Compliance flexibility reduce emissions at facility use emission performance credits purchase serialized Albert-based carbon offset credits pay into the Climate Change and Emissions Management Fund (dedicated fund defined in legislation) Historically at $15/tonne increased to $20/tonne for 2016 and to $30/tonne for 2017
Program Results Summary Compliance Year 2007 (half year) Emissions Reductions at Facility Facility Cogeneration Improvements Recognition (Mt CO2e) (Mt CO2e) Offset Credits Submitted (Mt CO2e) Total Reductions (Mt CO2e) Fund Payment ($Million) 1.6 1.3 0.9 3.8 41.3 2008 1.4 2.6 2.7 6.6 83.4 2009 1.3 2.7 3.8 7.7 66.2 2010 0.4 2.6 3.9 6.8 78.9 2011 2.1 2.5 5.4 10 62.9 2012 1.3 3.4 3 7.7 93.5 2013 2 3.3 2 7.3 94.5 2014 5.2 3.1 2.3 10.6 83.8 2015 5.3 3.2 0 8.5 135.6 Total 20.5 24.6 23.9 69 740.1 20
2015 Obligation by Sector Sector Facility Count EPCs Requested* Tonnes Owed Chemical 10 292,547 229,124 Coal Mines 3 8,572 57,470 Fertilizer 5 15,903 289,845 Forest Products 4 520,188 - Gas Plant 29 431,662 652,547 In Situ 19 2,107,318 1,242,175 Mineral 4 62,228 3,601 Oil Sands 5 720,532 1,625,944 Pipeline 3 35,171 978,899 Power Plant Coal 8 1,445 4,642,970 Power Plant Cogen 8 695,555 2,890 Power Plant Gas 8-101,231 Refining 4-410,317 Other 3 81,532 91,638 * EPCs requested, actual granted can be found on the EPC registry 21
Offsets Type by Year Used Note: Biofuel, Bitumen Binder Substitution in Asphalt Production, Engine Fuel Management and Vent Gas Capture and Forest Harvest Practice projects are not shown above 22
Offsets Year Used by Type Note: For 2015 compliance year, 2,939 Engine Fuel Management and Vent Gas Capture offsets and 9,031 Wind offsets retired. Biofuel, Bitumen Binder Substitution in Asphalt Production and Engine Fuel Management and Vent Gas Capture projects are not shown above 23
Regulation Updates Updates to reduction target schedule Introduction of binding standards (replacing guidance) Records retention requirements tied to usage of information Explicit treatment of cogeneration calculations Additional ability to audit or require additional information on registration of offset projects More clarity around issuance of EPCs 24
Offset System Overview 25
Emission Offsets Compliance flexibility mechanism A market based tool that provides a means of expanding the reach of the regulatory framework by incenting emissions reductions outside of the regulated facilities. Key rules: Reductions must occur in Alberta Must be Additional result from an action, change in practice or technology that is beyond business as usual and not otherwise required by law. Must result from actions taken on or after Jan 1, 2002 Must be real, demonstrable, and quantifiable or measurable Must use an approved protocol and be verified by qualified third party and must be auditable 26
Benefits of Emission Offsets Real and immediate GHG reductions in Alberta. GHG reductions that count toward reporting of Alberta and Canada s GHG reductions Cost-effective compliance for facilities unable to achieve on-site reductions. Regulated facilities in Alberta are investing in Alberta-based emission offset projects. Economic diversification in Alberta Emission offsets drive private investment directly to Alberta-based projects Drive emission reductions outside of our regulatory framework Financially support reductions by Alberta businesses not regulated by SGER. 27
Key Actors in the Offset System OAG Protocol Developers Government Auditors Offset Project Developers ACCO (Regulator) Regulated Facilities Verifiers CSA Registry 28
Emission Offset Process Government Approved Protocol Project Developer implements offset project Emission offsets are third party verified and registered on offset registry Emission offsets purchased by a regulated entity OAG Offsets submitted for compliance under SGER Key Elements of the Assurance System Government Audit 29
Industrial Methane/N2O Emissions Pneumatic devices Engine fuel mgmt and vent gas capture Solution gas conservation N2O abatement from nitric acid production Agricultural Lands Conservation cropping Agricultural N2O reductions Biological Methane Anaerobic decomposition of agri. materials Anaerobic wastewater treatment Dairy cattle Fed cattle Composting Landfill bioreactor Landfill gas capture Decreased Energy/Fuel Use Renewable Energy/Fuels Biofuels Distributed renewable energy generation Biomass energy Run-of-river hydro Non-incineration of thermal waste conversion Solar Wind GHG reductions from forest harvest practices Energy efficiency for C&I buildings Energy efficiency projects Conversion of drilling rigs from diesel-electric to high line elec. Fuel switching in mobile equipment Gravel and lightly surfaced road rehab. Substitution of bitumen binder in asphalt Waste heat recovery Engine fuel mgmt and vent gas capture CO 2 Sequestration CO2 capture and storage in deep saline aquifers EOR 30
Total Offsets (tonnes CO2e) 9000000 8000000 7000000 6000000 5000000 4000000 3000000 2000000 Active and Retired/Pending Retired Offsets (All Vintage Years) Alberta Offset Statistics Total Active: 16,699,911 tco2e Total Retired: 24,397,825 tco2e [Updated Mar 1, 2017] Active Retired/Pending Retired 1000000 0 31
1400000 Total Generated Offsets by Protocol and by Vintage Year 1200000 Total Offsets (tonne CO2e) 1000000 800000 600000 400000 200000 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Protocol Total Active: 16,699,911 tco2e Total Retired: 24,397,825 tco2e [Updated Mar 1, 2017] 32
Offsets Used for Compliance (Mt) 2007 half year 2008 2009 2010 2011 2012 2013 2014 2015 Total Emission Offsets Submitted Offset use as a proportion of total compliance 0.88 2.68 3.75 3.85 5.39 2.99 2.03 2.32 0.01 23.9 0.23 0.31 0.42 0.38 0.56 0.32 0.21 0.23 0.00 0.30 33
System Learnings Records management and strong verification requirements are key: System-wide move from Limited to Reasonable assurance and goforward crediting in 2012 Biological-based quantification is complex: Complexity in protocol development, baseline setting Complex record-keeping and monitoring in commonly aggregated methodologies Regulatory-level accountability for overall program under SGER Emission offsets are not always the perfect fit 34
Greenhouse Gas Reporting 35
Specified Gas Reporting Regulation Alberta s mandatory GHG reporting program Threshold currently set at 50 kt Data collected through one window reporting system with federal government Used to inform inventory and policy development/analysis Federal Gazette 1 Reporting threshold intent to drop to 10,000 tonnes of CO 2 e Prescribing methodology for certain sectors To be required for 2017 emission year submission in 2018 36
Output-Based Allocation System 37
Output-based Allocation Definition What is an OBA? 1. Product emissions intensity (solid blue). 2. OBA is set at top-quartile (or similar) performance. Emissions below the OBA are not priced. 3. Emissions below OBA generate credits. 4. Emissions above OBA have a compliance obligation payment or submission of offsets or emission performance credits. 38
Output Based Allocation System 2018: Output based allocation approach will replace the Specified Gas Emitters Regulation Strategic Intent: effectively drives to best-in-class performance. improves transparency of performance and benchmarking across facilities and jurisdictions. Recognizes competitiveness pressures on Alberta s industry. 39
Engagement Scope and Approach Discussion Document outlines principles and policy considerations: https://www.alberta.ca/output-based-allocationengagement.aspx Multi-phase engagement process focused on four key sector groupings: Electricity and Heat Oil and Gas Chemicals, Fertilizers, Minerals and Metals Coal Mines, Pulp and Paper, Landfills, Food Processing Stakeholders from industry, academia and ENGOs invited to provide feedback 40
OBA - Next Steps What We Heard document summarizing input from stakeholders Spring 2017 Update on government s regulatory and policy framework June/July 2017 Regulation in effect January 2018 41
Questions 42