Alberta will be doubling its carbon levy over the next two years – the first change in the tax's eight-year history – as the province works on broader measures to burnish its image as a responsible oil producer.
The tougher regulations and a royalty review announcement expected Friday come at a tough time for Alberta's energy industry as a plunge in oil prices has led to thousands of layoffs and shelved expansion plans across the oil patch.
Premier Rachel Notley says the higher levy and a new carbon policy will help the province when world leaders gather in Paris in November for a climate conference expected to hammer out a new deal to lower global greenhouse-gas emissions.
As the federal government has resisted calls for a national carbon strategy, a patchwork of provincial policies has emerged. Alberta targeted industrial polluters with a levy that was North America's first price on carbon, British Columbia followed with a broad-based carbon tax, and Quebec and Ontario are moving forward with a cap-and-trade system.
On Thursday, Alberta Environment Minister Shannon Phillips announced plans to increase her province's carbon levy on Jan. 1 from its current $15 per tonne to $20, before a further hike to $30 in 2017. The hikes will coincide with a near doubling of efficiency targets large polluters must meet.
The levy was set to expire at the end of June. Ms. Phillips said the two-year renewal is an interim measure.
"If we get it right, our environmental policy will make us world leaders on this issue instead of giving us a black eye around the world," Ms. Phillips said. "We were not taken seriously on the national or international stage; with this, that will change."
The levy required producers to pay the charge only if emissions intensity wasn't cut by 12 per cent from a baseline unique to each individual producer. Under the new rules, producers will be required to reduce carbon emissions intensity by 15 per cent in 2016 and 20 per cent in 2017.
"Our regulations are now obsolete and do very little to either address the climate change issue or to earn us greater market access," she said. "Let's be clear, no other jurisdiction and no energy market is going to accept that this constitutes an effective climate change policy. We need to do better."
The Canadian Association of Petroleum Producers said it is prepared to work with the government on a new climate strategy but warned its membership of large- and medium-energy producers faces $800-million a year in new taxes as a result of the NDP government's 20-per-cent increase in corporate taxes and Thursday's hike in the carbon levy.
Alberta's regulations currently price carbon at an effective rate of about $2 a tonne. The stricter rules will raise that cost to about $6 by 2017. By that time, the province expects the new rules will reduce greenhouse-gas emissions by 13 megatonnes annually. Under existing rules, an 8-megatonne reduction had been expected.
"Not only is it the right thing to do, it's the right time to do it," said Brian Vaasjo, the CEO of Capital Power. The Edmonton-based utility operates 17 power-generating facilities.
Ms. Notley said Thursday she expects to arrive at the Paris conference with new climate measures proposed by Andrew Leach. An energy and environmental economist at the University of Alberta, Prof. Leach will chair an advisory panel that will comprehensively review the province's climate change policy. The panel will go beyond the oil sands and emissions from large businesses and look at introducing broader new rules that affect all Albertans.
Ms. Phillips did not close the door to joining the cap-and-trade plan being adopted by Quebec and Ontario.
Alberta's Premier is due to meet her provincial and territorial counterparts in St. John's next month, with a proposed national energy strategy topping the agenda. Ontario's Kathleen Wynne and Quebec's Philippe Couillard are pushing hard to have an agreement that would commit provinces to working together on reducing greenhouse-gas emissions, but no deal can be finalized until the Alberta government completes its climate plan.
Other leaders are looking for Alberta to make a commitment for absolute reductions in greenhouse-gas emissions rather than simply slowing the pace of the increase – an extremely challenging target if oil-sands production doubles over the next decade. On Thursday, Ms. Phillips said the government's goal is indeed to reduce the province's overall carbon emissions.
The minister also said Alberta needs a credible climate plan to win support for pipeline projects and reach new markets for oil-sands producers. It's an argument used by other advocates of carbon pricing – notably federal Liberal Leader Justin Trudeau – that climate regulations are needed to improve the market access for the industry. But many environmentalists argue the expansion of oil sands is inconsistent with the goal of deep cuts to carbon emissions over the next few decades.
"There is a real state of denial that in fact you can somehow have a climate policy that doesn't affect development and export of oil," Louise Comeau, executive director of Climate Action Network Canada, said in interview. "It's the fundamental problem – we're going to have to get very deep [GHG] reductions, and it is an inconsistent policy to say you can have effective climate policy, and maintain and expand oil sands development and exports."
Ms. Comeau said Alberta – and Canada – will not be seen in Paris as taking a leadership position so long as governments fail to lay out a clear path to meet aggressive targets, including a commitment to move away from the oil sands.
"Until we have that conversation, I don't think they can expect people will respond positively in Paris," she said.
Greenpeace climate campaigner Mike Hudema said the goal of climate policy should not be to open doors for oil sands exports. "We agree with the 100 scientists who [in a recent open letter] said we need a moratorium on tar sands expansion while we develop and implement a national, science-based GHG reduction strategy," Mr. Hudema said.
Striking a similar chord, some oil-sands supporters say the industry is unlikely to win acceptance among environmentalists, and that government and industry should focus on keeping costs as low as possible and getting regulatory approval for new pipelines.
"Market access is about building pipelines," interim Progressive Conservative Leader Ric McIver said in response to the government's insistence that the stricter environmental rules would help energy exports.