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Buses transporting workers head south on highway 63 while the oil sands mining operations emissions blend with the overcast skies outside of Fort McMurray, Alta.

AMBER BRACKEN/The Globe and Mail

The Alberta government will make $1.4-billion in grants and loan guarantees available to oil sands producers and other businesses to help them reduce greenhouse gas emissions – and as a means of cushioning the blow as a new system of carbon pricing for the province's heaviest industrial emitters begins next year.

On Tuesday, the government laid out $1.4-billion in "innovation projects" meant to help Alberta companies transition to a lower-emissions world over the next seven years. On Wednesday, it will announce the full details of a system to reduce emissions among large industrial producers such as oil sands and chemical producers, coal-fired power generators, and any other facility that emits 100,000 tonnes or more of carbon dioxide equivalent a year – in a system designed to allow them to still compete on a global scale.

The stakes are high for Alberta's NDP government. Alberta is Canada's largest greenhouse gas emitter, but also the top producer of the country's oil and gas.

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As the United States moves to lower corporate taxes and cut environmental regulations for its fast-growing oil and gas industry, Canadian producers say they already face higher costs, more rules and limited pipeline access to international markets. In the next election, Alberta Premier Rachel Notley will face United Conservative Party Leader Jason Kenney – who says he would junk Alberta's carbon tax and other policies that he argues are hurting the province's ability to attract investment compared with the United States and other competitors.

But the NDP argues their policies help the oil-producing province adapt in a world where lower emissions are increasingly part of the business landscape. Alberta Environment Minister Shannon Phillips said the system is designed to protect the competitiveness of the province's energy-intensive industries, even as the province and Ottawa forge ahead with carbon pricing.

"It's going to reward companies that look to reduce either the carbon in the barrel or the carbon in whatever they're producing," the minister said in an interview. "This system means you get credit if you make those investments and push innovation a little further."

Alberta implemented a carbon tax of $20 a tonne this year that will move to $30 a tonne as of Jan. 1. But the government wanted to do something to protect against its largest industries from simply shifting production to other jurisdictions without a carbon levy.

The idea now is that Alberta's heavy emitters will receive a cache of "free" GHG emission credits, to be determined by a sector emissions benchmark. Benchmarks will be set relative to high-performing industrial projects that produce the same or similar products. Previously, heavy emitters were judged based on how improved they were from their historical performance – now, they will be judged against their competitors under an output-based allocation system that will be called the Carbon Competitiveness Incentive.

The regulations will be phased in over three years, Alberta officials told The Globe and Mail. Next year, emitters will pay half of what they would owe under the full program, with the bill rising to 75 per cent in 2019-20 and 100 per cent in 2020-21.

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