Alberta’s Carbon Credit Regime and Federal Integration
In 2022, the price of one tonne of carbon dioxide equivalent (CO2e) is increasing to $50 per tonne in Alberta – a 25% increase from 2021’s rate of $40.
With the price of greenhouse gas emissions showing no signs of slowing, Albertan businesses can benefit from understanding the ins and outs of the carbon market. Carbon emission credits and emission offsets provide businesses with a unique playbook of opportunities now that offsets created under the Technology Innovation and Emissions Reduction (TIER) Regulation can be used for compliance purposes.
In this article we provide a brief overview of Alberta’s emission reduction regulatory scheme and explain how emission offsets created under TIER can now be used to meet the Out-Based Pricing System’s federal requirements.
Brief Overview of Alberta’s Emission Reduction Regulatory Scheme
In Alberta, industrial greenhouse gas emissions are priced and regulated by TIER. According to TIER, their regulations apply to any facility that, “emitted 100,000 tonnes of carbon dioxide equivalent CO2e or more per year of greenhouse gases in 2016, or a subsequent year.”
Facilities that don’t meet the 100,000 tonne threshold can still opt into the TIER program. For example, facilities that reduce emissions beyond a benchmark level can generate emissions performance credits (EPC’s). If they stay in compliance, facilities can either collect EPCs or sell them.
Facilities that are not in compliance can submit banked or purchased EPC’s, emission offsets from other facilities, or purchase credits by paying the TIER fund $40 per tonne of CO2e.
In Alberta, the EPC Registry oversees the registration and tracking of all energy performance credits. EPC’s are characterized as revocable licenses, each representing 1 tonne of CO2e emissions reduced under a facility’s reduction target.
TIER-regulated facilities who voluntarily reduce their greenhouse gas emissions and whose projects fall within one or more quantification protocols can submit their project and start generating emission offsets.
Some examples of TIER’s quantification protocols are:
- Energy Efficiency Projects
- Greenhouse Gas Emission Reductions from Pneumatic Devices
- Solar Electricity Generation
- Waste Heat Recovery
- Wind-Powered Electricity Generation
Emission Offsets Under Tier Available for Use in the Federal System
In 2020, the federal government of Canada announced that, under the Output-Based Pricing System, TIER-regulated facilities can use greenhouse gas offsets generated no later than 2017 for compliance purposes – as long as they meet one of TIER’s five quantification protocols:
- Methane reductions from pneumatic devices in the oil and gas industry
- Low residual feed intake markets in beef cattle
- Fed cattle
- Aerobic landfill bioreactors
- Aerobic composting
Emissions offsets produced by TIER-compliant projects are now considered “recognized units” by the federally regulated Output-Based Pricing System, opening a brand new market for emission offset project developers in Alberta.