Alberta's ambitious plan to lower its industrial greenhouse gas (GHG) emissions without alienating the province's powerful oil and gas sector has been rolled out with a mixed response from many of the heavy emitters it will impact.
The government provided details of a key plank of its Climate Leadership Plan this week, introducing a set of grant and loan guarantee programs, totalling more than $1.3-billion over seven years to help oil sands companies and others adapt to a lower-carbon future.
It also introduced its new Carbon Competitiveness Incentive program – a plan that will increase the carbon-tax burden on the province's heaviest industrial emitters, which produce roughly half of the province's total GHG emissions. While the government will inject hundreds of millions of dollars into the oil sands industry and other businesses that want to reduce GHGs, budget projections show that the revenue collected through facility compliance payments will jump to as high as $597-million next year and $510-million in 2019-20 from $196-million this fiscal year.
"By seeing a substantial increase in the costs to industry, that as a standalone – regardless of the model – I think is something that may position us to be less competitive at a time when we need to be substantially more competitive," Tim McMillan, president of the Canadian Association of Petroleum Producers, said in an interview.
While the government sought to portray in its announcement that the energy industry was on side, no oil executives appeared at press conferences this week – although there were representatives from the Canadian Manufacturers & Exporters association and the Concrete Association of Canada who spoke in support of the policy.
At Canada's largest oil company, Suncor Energy Inc. spokeswoman Sneh Seetal said that, while it understands the government sought to balance a variety of interests with the policy, "we're in the process of evaluating the announcement."
Cenovus Energy Inc. – with some of the lowest-emitting oil sands facilities – also said it needs more time to look at the details. "This plan is an important step forward in addressing climate change as it will incent those facilities with the lowest emissions intensity," spokeswoman Sonja Franklin said.
While the opposition United Conservative Party has been a fierce critic of Alberta's carbon pricing, the NDP government argues investors are demanding a plan to address the business risk of climate change. Alberta Environment Minister Shannon Phillips warned on Wednesday that, without a made-in-Alberta plan for reducing emissions from its heavy emitters, the province is likely to be forced to adapt to a plan laid out by Ottawa.
Alberta implemented a carbon tax of $20 a tonne this year that will increase to $30 a tonne Jan. 1. But to help heavy industrial emitters remain competitive globally, they are subject to a slightly different system than individuals. Firms with projects that emit 100,000 tonnes or more of carbon dioxide equivalent annually will receive a cache of "free" emission credits, to be determined by a sector performance benchmark. Benchmarks will be set relative to the best-performing projects that produce similar products.
The NDP government has made some other concessions to oil sector concerns. Of the money flowing back into climate-change programs for industry and business, $440-million will go directly to oil sands in situ producers. In addition, the government said the heavy emitters program will only be fully phased in by 2020 – a move that could reduce compliance payments firms will have to make in that period.
The Pembina Institute, an environmental think-tank, said the NDP announcement is smart climate policy. However, senior analyst Andrew Read said the NDP's decision to give industry until 2020 until the program takes full effect "is an unnecessary concession that weakens the immediate benefit of the policy."