Alberta to Introduce “Carbon Pricing” Regime with New Carbon Competitiveness Regulation


This post was written prior to our January 2017 merger, under our previous firm name, MacPherson Leslie & Tyerman LLP.

On November 22, 2015, Alberta premier Rachel Notley announced that the Alberta Government will introduce a new carbon pricing regime that will form its “Climate Leadership Plan.”

The plan’s highlight is a proposed carbon tax that will apply to all industries and come into effect on January 1, 2017, at a price of $20 per tonne. The price will increase to $30 per tonne in 2018, with expected annual increases at a rate of inflation plus 2% every year thereafter.

The announcement followed public consultations by Alberta’s independent Climate Advisory Panel, which penned its report following several months of consultations with stakeholders from the public, indigenous communities, universities, think-tanks, and industry on a broad range of energy-related issues.

Premier Notley announced that the Government would implement the tax by replacing Alberta’s Specified Gas Emitters Regulation, AR 139/2007, which requires intensity-based CO2 reductions and covers 50% of Alberta’s CO2 emissions, with a new Carbon Competitiveness Regulation that would expand to cover over 90% of Alberta’s CO2 emissions. The proposed regime would create two broad categories of taxpayer.

The first category of taxpayers are those large industrial facilities producing more than 100,000 tonnes of CO2 per year. These large facilities will pay the carbon tax as they emit CO2 and will receive a set subsidy back on a per unit of energy output basis, depending on the sector and its exposure to external trade forces. Because the tax applies to CO2 emissions and the subsidy to energy output, the facilities that produce energy most efficiently will become relatively more competitive.

The second category of taxpayer will be so-called “end-use emitters,” who will be taxed at the point of sale. Fuel distributors will acquire permits that tax expected CO2 emissions based on the expected efficiency of combustion. Any facilities producing less than 100,000 tonnes of CO2 per year will fall into this category by default, but will be able to opt into the first category where beneficial.

The Report predicts that the tax will generate annual revenues of $3 billion by 2018 and over $5 billion by 2030. The revenues are expected to be reinvested back into energy efficiency measures, an adjustment fund to assist low-income Albertans and affected sectors, and related energy policy initiatives.

In addition to the carbon tax, the panel’s report recommended, among other things, that Alberta phase out coal-fired power generation by 2030 and caps its total annual oil sands emissions, currently at 70 megatons, at 100 megatons per year. The government says that it will adopt both measures.

By any measure, Alberta’s proposed plan is ambitious. Tax and environmental law practitioners will watch closely as the government begins drafting its new regulatory regime in 2016.