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Alberta Premier Rachel Notley speaks to reporters in Calgary on May 27, 2015.Jeff McIntosh/The Canadian Press

Alberta's NDP government is imposing an economy-wide carbon tax starting in 2017 and a cap on emissions from the oil sands in a sweeping plan aimed at showing it is serious about fighting climate change.

Premier Rachel Notley's strategy – a major shift in environmental policy for Canada's largest oil-producing province – will take centre stage as Canada's premiers and Prime Minister Justin Trudeau gather in Ottawa on Monday for a first ministers' meeting to craft a strategy for the coming Paris climate talks.

Canada will be heading to the UN-sponsored summit with a limited national strategy and carbon rules that vary widely between provinces. The Prime Minister is facing pressure from environmentalists to set national standards, but may also risk push back from the premiers if he does so.

During the recent federal election campaign, Mr. Trudeau promised to allow Canada's provinces to continue to write their own climate rules. Quebec and Ontario have developed a system of cap and trade, British Columbia has a carbon tax and Alberta will now have a mixture of both systems.

Alberta's plan, released Sunday, also features a phaseout of coal-fired power in the next 15 years, a 10-year goal to nearly halve methane emissions, as well as incentives for renewable energy.

"Alberta is leading again," Ms. Notley told a room of supporters at Edmonton's science centre. "The government of Alberta is going to stop being the problem and we are going to start being the solution."

The oil industry is in the second year of a crude-price collapse that has led to billions of dollars in spending cuts and at least 37,000 job losses. Previous Progressive Conservative governments in Alberta sought to shield the dominant industry from costly emission limits.

Even so, the plans won plaudits from powerful oil executives along with environmental groups.

There are no hard targets, but under the strategy carbon emissions are projected to begin to fall under today's levels by 2030. The NDP had already announced plans to double the carbon levy on major industrial emitters.

The new carbon tax is expected to raise $3-billion annually by 2018, but the government will not be cutting any provincial taxes. Some of the new revenue will be spent on technology to fight climate change and the NDP has committed to helping the lower-earning 60 per cent of households cope with some of the increased transportation and heating costs through an "adjustment fund."

The six-month-old government says the previous weak climate policies hampered efforts to persuade the United States and other trading partners to accept more shipments of crude from the carbon-intensive oil sands.

U.S. President Barack Obama said his country's efforts to battle climate change would be tarnished by approving TransCanada Corp.'s Keystone XL pipeline that would ship Alberta oil to Texas refineries. He rejected it after seven years of review.

"We got a major wake-up call a few weeks ago in the form of a kick in the teeth from the government of the United States," Ms. Notley said. "Unfairly in my view, the President of the United States claimed that our production is some of the dirtiest oil in the world. That is the reputation that mistaken government policy in the past has earned for us."

Energy leaders had previously warned any onerous new costs would be disastrous for an industry under severe financial pressure.

Still, Suncor Energy Inc. chief executive Steve Williams, Shell Canada head Lorraine Mitchelmore, Cenovus Energy Inc. CEO Brian Ferguson and even Canadian Natural Resources Ltd. chairman Murray Edwards, who had been among the sharpest critics of the NDP's economic policies, stood with Ms. Notley and environmental groups to endorse the moves.

"This plan will position Alberta, one of the world's largest oil and gas producing jurisdictions, as a climate leader and will allow for ongoing innovation and technology in the oil and gas sector," said Mr. Edwards, the Calgary-based oil man, financier and sports-team owner.

New measures include:

  • A 100-megatonne cap on carbon emissions from the oil sands, Canada’s fastest-growing source of emissions, once new rules are adopted. It currently emits 70 megatonnes annually.
  • An economy-wide tax of $20 per tonne on carbon-dioxide emissions starting in 2017, rising to $30 in 2018. Equal to seven cents per litre of gasoline, the average household will see heating and transportation costs increase by $470 annually by 2018.
  • Incentives to have nearly one-third of power generated from renewables such as wind and solar by 2030.

TransAlta Corp., the largest coal-fired power generator, said it was heartened by the gradual shift that it said would "ensure system reliability and price stability" for customers. The province is appointing a negotiator to work with the industry as it tries to avoid stranding capital, or the loss of asset value by hastily rendering plants useless.

The NDP devised the strategy with data from a panel led by University of Alberta economist Andrew Leach that held numerous meetings with the public and industry groups in recent months.

Climate activists including former U.S. vice-president Al Gore applauded the NDP, saying the government was taking much-needed leadership as Canada seeks to improve its environmental reputation at the Paris summit later this month.

"The oil-sands emissions limit will give the world certainty that our emissions will not grow unchecked. It's a game changer and will change the debate about the oil sands industry doing its part to address climate change," said Ed Whittingham, executive director of the Pembina Institute, an environmental think tank.

Kudos were not universal, however. "This new carbon tax will make almost every single Alberta family poorer, while accelerated plans to shut down coal plants will lead to higher power prices and further jobs losses," said Brian Jean, Leader of the province's Wildrose opposition party.

Politicians, business leaders and environmental activists react to Alberta's strategy to fight climate change

Calgary Alberta Premier Rachel Notley released a sweeping plan on Sunday for reducing carbon emissions. Here is some reaction:

Catherine McKenna, federal Minister of Environment and Climate Change: "This is a strong, positive step in the right direction. We want to send a clear signal to Canadians and our partners around the world that Canada is back and ready to play our part ... Alberta is taking a leadership position on phasing out coal, and as Minister of Environment and Climate Change, I will be looking at ways to help accelerate the reduction of coal power right across the country.

Al Gore, former U.S. vice-president and global climate activist: "Today's announcement by Premier Notley that Alberta will put an economy-wide price on carbon, phase out coal and increase its commitment to renewable energy and energy efficiency represents an inspiring addition to the legacy of leadership and forward thinking action by Canadian provinces to speed our transition to a low carbon economy."

Tim McMillan, President of the Canadian Association of Petroleum Producers: "There are opportunities in there – as coal is phased out, natural gas has been identified as one of the major backfills. The changes to the carbon price and the cap that's put on oil sands, the details are going to matter a lot and we're keen to be at the table."

Brian Ferguson, Chief Executive of oil sands producer Cenovus Energy Inc.: "It enables Alberta to be a leader, not only in climate policy, but also in technology, innovation, collaborative solutions and energy development. I believe it will lead to Albertans and Canadians receiving full value for their oil and natural gas resources, while addressing climate change."

Dawn Farrell, CEO of TransAlta Corp., Canada's largest coal-fired power generator: "What's critically important is that the Premier has committed to an orderly transition that ensures system reliability and price stability for our customers, given that it is now certain that coal-fired generation will be phased out by 2030, and that the province's policies will not unnecessarily strand capital. This is a positive, timely and important step forward. We are looking forward to working with the government-appointed negotiator to achieve these objectives."

Brian Jean, leader of Alberta's opposition Wildrose Party: "This new carbon tax will make almost every single Alberta family poorer, while accelerated plans to shut down coal plants will lead to higher power prices and further jobs losses."

Kathleen Wynne, Premier of Ontario: "Alberta's new climate strategy, combined with a new federal government that is a true climate change partner for the provinces and territories, positions Canada to enter the Paris conference with a united voice. This unity is a departure from the past."

Mike Hudema, climate and energy campaigner for Greenpeace: "These policies are important first steps, but much bigger emission reductions will be needed for Alberta to do its part to keep global warming below two degrees Celsius."

- Jeffrey Jones, Calgary

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