Alberta’s Carbon Levy: A Primer

It may come as a surprise to some that Alberta pioneered carbon pricing — not just in Canada, but for all of North America.

That’s right: the province with the fastest growing greenhouse gas emissions in Canada was the first place on the continent to put “polluter pays” legislation into place almost exactly eight years ago.

“Even back in 2007, Alberta was getting pressure over its environmental management, particularly of the oilsands. This may have been in response to that,” Matt Horne, associate B.C. director at the Pembina Institute, told DeSmog Canada.

Since then, three other provinces have joined the carbon pricing club: British Columbia with a carbon tax and Quebec and Ontario with cap and trade.

Each system is meant to, in theory, shrink provincial carbon footprints while allowing economies to remain strong and competitive. (If you want to totally geek out on the differences between Canada's carbon pricing systems, check this paper out).

With support for a national carbon pricing system growing, Canada need look no further than these provinces to learn some lessons. So, let's start with the first: Alberta.

Canada’s First Carbon Price: The Alberta Carbon Levy [view:in_this_series=block_1]

Although a pioneering system, Alberta’s carbon levy or Specified Gas Emitters Regulation (SGER) has not been effective in decreasing emissions in the province.

The carbon levy goes after the big emitters in the province — those producing more than 100,000 tonnes of GHG emissions. Mainly oilsands operations and coal-fired power plants — which make up roughly 50 per cent of the province’s total carbon footprint — fall into this category.

Rather than requiring emitters to make overall reductions in GHG emissions, the Alberta system requires a 12 per cent reduction in GHG-intensity of their product.

That means that as long as a project or facility produces 12 per cent less GHG emissions per dollar or barrel of bitumen than it did in the baseline year, the overall carbon footprint of that project is free to grow.

“Alberta’s system is an intensity-based system, which means you can potentially increase your total emissions as long as your intensity goes down,” Philip Gass, a senior researcher at the International Institute for Sustainable Development, said.

Companies unable to make the 12 per cent reduction in energy intensity pay a $15 levy per tonne of GHG emissions.

Source: Pembina Institute

The Alberta system also allows for carbon offsets — the option to purchase the right to emit from other large emitters that have met their reduction targets. 

However, the flexibility provided to polluters in Alberta is both the system’s strength and weakness.

“The short answer is Alberta’s carbon levy has not been effective,” Horne said.

“But that is not an indictment of the system itself. The problem stems from the relatively weak parameters they’ve used to populate it.”

Alberta’s carbon levy may need to toughen up as international pressure to limit emissions grows.  

As the world prepares for the upcoming UN climate summit in late 2015, some countries have turned their attention to the oilsands, asking how Canada plans to curtail the resource’s growing emissions. A recent report argues development of the oilsands stands at odds with Canada’s climate targets.  

For more on Alberta's carbon levy read How Carbon Pricing Currently Works in Alberta from the Pembina Institute. For a more detailed analysis of the levy read Andrew Leach's analysis in the Canadian Tax Journal (pdf).

Image Credit: Kris Krug