The Risks & Opportunities from Alberta’s Greenhouse Gas Legislation
Hans Luu explains the rule and regulations behind Alberta's new laws
The recent passing of the March 31 compliance deadline for Alberta’s landmark Specified Gas Emitters Regulation marks a timely opportunity to assess the impact of this new greenhouse gas legislation. Hans Luu reflects on the lessons learned by the reporting companies.
On March 8, 2007, Alberta became the first province in Canada to legislate greenhouse gas (GHG) reductions from large industrial emitters by introducing the Climate Change and Emissions Management Amendment Act (also known as Bill 3), and the accompanying Specified Gas Emitters Regulation (SGER). When Bill 3 came into force on July 1, 2007, it effectively became Canada’s first negative incentive legislation for GHG emissions enacted by any level of government.
Bill 3 mandates that established Alberta companies (i.e. those that have been in operation for eight or more years) emitting more than 100,000 tonnes of GHG per year, measured in carbon dioxide equivalent gas, must reduce their emission intensity by 12 percent (subject to a baseline comprised of average emissions from 2003 to 2005) starting July 1, 2007. New facilities are granted a proportional reduction in emissions intensity targets, starting at two percent per year beginning in the fourth year of operation.
Emissions intensity is defined as the quantity of a specified gas released by a facility per unit of production from that facility, and can be used to measure emissions against the value of all the goods and services produced by a country or province. At the time of its passing, Bill 3 affected approximately 100 facilities that collectively produce about 70 percent of total GHG emissions in Alberta.
The SGER implements Bill 3 by detailing how affected companies can reduce their emissions intensity through three compliance mechanisms:
• Undertake operating improvements to reduce emissions;
• Purchase eligible third party-verified, Alberta-based offset credits to apply towards emissions reductions targets; or
• Purchase technology investment credits that will be allocated to the Alberta Technology Fund, a new government fund that will invest in technology to reduce GHG emissions in the province. The cost of credits was initially set at $15 per tonne of carbon dioxide equivalent gas emitted in excess of the 12 percent reduction target.
An Evolving Regulatory Landscape
Alberta’s groundbreaking legislation signals a growing recognition of the importance of climate change issues – and, by extension, sustainability issues – in the public policy agenda, and has set in motion a move toward holding businesses more accountable for the impacts of their activities. Bill 3 and the SGER represent one tactic in Alberta’s larger strategy of managing growth pressures, and are likely only the “tip of the iceberg” as far as broader climate change policy in Canada is concerned. Though it is still too early to be certain of long-term implications, the impact of this increased focus on climate change on business will likely be a change in the rules of the game.
Following on the heels of Alberta’s climate change plan, Quebec, British Columbia, New Brunswick, Saskatchewan and Ontario implemented or modified their own climate change legislation or policies. At the federal level, the Government of Canada revamped its original clean air act, which was first tabled in the House of Commons in October 2006 and stalled by opposition criticism. As climate change issues increasingly move toward centre stage in Canadian public policy, it is foreseeable that governments will give greater priority to addressing them. This will likely be done in non-traditional ways including the implementation of a broader range of policy combinations involving regulatory, financial, and voluntary instruments. Businesses must, in turn, respond to this evolving regulatory landscape, and the question of how to respond can potentially lead to unexpected and significant opportunities.
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