The Canadian government has approved the industrial carbon-pricing plan set up by the province of Alberta, considering that it meets federal standards. According to the State government, the new mechanism will allow Alberta to reduce its greenhouse gas (GHG) emissions by 18% in 2030 compared to 2015 levels.
Under the Alberta’s Technology Innovation and Emissions Reduction regulations (TIER), GHG emissions from large industrial facilities such as oil sand or gas producers, chemical plants and fertilisers plants emitting at least 100 kt/year of GHG will be taxed at a rate of CAD30/t (US$22.7/t) as of 2020. The new plan replaces an existing system implemented by the previous Alberta government and that also included a CAD30/t tax; the existing system was based on industry-wide level targets, whereas the new plan introduces individual targets for each facility based on their average emissions over the 2015-2016 period. Companies failing to cut their emissions according to the target will have to pay the carbon tax on excess emissions. The new system is expected to help large emitters meet their emission targets and avoid the tax. The change in targets will apply to all large industrial emitters concerning about 127 facilities, except power generation.
Half of the revenues from the tax (estimated at CAD1.9bn (US$1.4bn) by its proponents) will be earkmarked to a Technology Innovation and Emissions Reduction (TIER) fund, which will finance research on new technologies. The government will use the other part of tax receipts to reduce its deficit, and finance the Canadian Energy Centre, a public agency focused on improving Alberta’s oil sands industry reputation.
This system will run in parallel to the federal fuel charge (carbon tax) applying to smaller emitting companies and to individual consumers. This federal "backstop" mechanism, which forces state governments to implement a carbon tax, will rise by CAD10/tCO2eq (around US$7.6/tCO2eq) each year from CAD20/tCO2eq (around US$15.3/tCO2eq) in 2019 to CAD50/tCO2eq (around US$38/tCO2eq) by 2022. The government of Alberta has lodged a constitutional lawsuit against the federal carbon tax.
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