On December 1, 2021, the Alberta Minister of Environment and Parks issued Ministerial Order 87/2021 confirming the cost to obtain Technology, Innovation and Emissions Reduction Fund (Fund) credits under the Technology, Innovation and Emissions Reduction Regulation (TIER) will increase from C$40 per credit in 2021 to C$50 per credit in 2022. This price increase aligns with the carbon pricing requirements established by the federal Greenhouse Gas Pollution Pricing Act (GGPPA).
The GGPPA acts as a federal backstop that applies to provinces lacking equivalent carbon pricing requirements. Part 1 of the GGPPA imposes a fuel charge on fossil fuels and combustible waste that emit greenhouse gases (Fuel Charge). Part 2 of the GGPPA establishes an output-based pricing system (OBPS) for large industrial emitters with greenhouse gas emissions in excess of annual limits. Both the Fuel Charge and the OBPS apply in a province unless a provincial regime has been deemed equivalent under the GGPPA.
ALBERTA TIER AND ITS INTERPLAY WITH THE GGPPA
Large industrial emitters in Alberta are subject to an OBPS pursuant to TIER, which was deemed to be equivalent to the federal OBPS in December 2019. Therefore, although the Part 1 Fuel Charge under the GGPPA applies in Alberta, large industrial emitters are subject to TIER and remain exempt from the federal OBPS.
Pursuant to the GGPPA, the carbon price for 2022 increased to C$50 per tonne of CO2 equivalent greenhouse gas emissions. For a detailed discussion regarding the mechanics of the GGPPA, see our December 2018 Blakes Bulletin: Federal Carbon Pricing System Coming Into Force January 2019: How Will it Impact Your Business?
Up until the issuance of Ministerial Order 87/2021, there was uncertainty over whether TIER would continue to be deemed equivalent under the GGPPA in 2022. Under the previous Ministerial Order 36/2020, the price of carbon under TIER was capped at C$40 per Fund credit “for the year 2021 or a subsequent year”, with no recognition of future increases. Had Alberta elected not to increase the carbon price applicable to TIER-regulated entities (i.e., the cost of Fund credits), TIER’s equivalency under the GGPPA may have been jeopardized. The issuance of Ministerial Order 87/2021 resolves the potential disconnect between the TIER Fund price and the GGPPA carbon price.
FEDERAL “FLOOR” FOR CARBON PRICE
As discussed in our Blakes Bulletin: Now That the Greenhouse Gas Pollution Pricing Act Has Been Determined to be Constitutionally Valid – What Does it All Mean?, the Supreme Court of Canada’s determination in March of 2021 of the GGPPA’s constitutionality was expected to create a federally-mandated carbon pricing “floor” which will result in consistent and increasing GHG emissions compliance costs, including for large industrial emitters. The recent enactment of Ministerial Order 87/2021 is further confirmation that a single carbon price will be applied to regulated emitters across the country.
Alberta’s decision to increase the cost of Fund credits enables TIER to remain consistent with the carbon pricing provisions of the GGPPA. However, increased compliance costs for emitters and increased revenues for offset producers will influence the cost of doing business for these entities. An increased carbon price in the regulated market may also have an impact on prices in the burgeoning voluntary markets for environmental attributes including emissions offsets, allowances and renewable energy certificates.
It remains to be seen if the price of carbon prescribed by the GGPPA will increase to C$170 per tonne of CO2 equivalent emissions by 2030 as described in the federal government’s proposed climate plan entitled A Healthy Environment and a Healthy Economy. We will continue to monitor and report on developments in this area.
For more information, please contact:
Dufferin Harper 403-260-9710
Nicole Bakker 403-260-9645
or any other member of our Environmental or Energy Regulatory groups.
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