October 29, 2019

By: Matt Beck, Director, The Delphi Group


Today the Government of Alberta announced the structure of the new Technology Innovation and Emission Reduction (TIER) program as it tabled new legislation. TIER is slated to replace the Carbon Competitiveness Incentive Regulation (CCIR) on January 1, 2020.

2019 has been a roller coaster of a year for large greenhouse gas (GHG) emitters in Alberta. The ride has included submitting inaugural regulatory reports under CCIR after it replaced the previous Specified Gas Emitters Regulation (SGER); as well as seeing the provincial carbon levy removed, followed by an announcement that a federal carbon tax would replace it in a few short months. With the introduction of the TIER program, once again folks will be scrambling to ensure compliance while continuing to pursue meaningful emissions performance improvements.

Earlier today, I had a chance to review the program prior to its release with fellow GHG policy wonks and the program directors at the Alberta Climate Change Office. TIER has been designed to drive continued reductions in emissions intensity, while creating significant relief for industry from high compliance costs – particularly for those facilities that were built based on economic models incorporating past regulatory approaches to carbon management.

Here are my top five TIER takeaways from today’s briefing and the Government’s announcement:

  1. Alberta heard the message loud and clear.

    Challenging the federal price point could mean losing jurisdiction over carbon pricing in the province, and that is not a risk they are willing to take.

    Despite earlier rumours that a $20/tonne compliance price could be back on the table, Alberta has committed to a $30 price point for now that will preserve its autonomy to regulate large emitters instead of triggering a federal backstop. Many industry stakeholders will be happy to hear that one of their nightmares has been avoided.
  2. Aggregate facilities are finally a thing.

    In a move that will likely expand total covered emissions from roughly 50% to 67% in the province, small conventional oil and gas facilities can now be aggregated and opt in to TIER. This program will start with stationary combustion only, in order to ensure a simple roll out and to give the existing methane regulations a chance to do their thing. However, this will be reviewed to explore other emissions sources in the future. The Province expects that nearly all conventional facilities will choose to participate in this option.
  3. The hybrid bench-marking approach tries to walk the line.

    A dual High-Performance Benchmark (HPB) and Facility-Specific Benchmark (FSB) that has been modeled after EU best practices will merge the sector performance standard approach of CCIR with the facility approach of SGER. It intends to reward best-in-class performance and provide relief to lower performing facilities (with a benchmark that starts even lower than past SGER compliance requirements). While some bugs may need to be worked out with respect to how the benchmark encourages new facilities to attain best-in-class performance, initial estimates are showing that TIER should cut annual compliance-related payments (including the use of Emission Performance Credits and offsets) by a third in 2020, while still delivering roughly 50 Mt in emissions reductions by 2030 (I’m still waiting to find out if that is compared against growth estimates or in absolute terms from 2015).

    Based on the numbers released in the recent provincial budget, it looks like the new program will incur roughly $500 million less in government revenues from large emitters. That will be a tough hit on investment in new emissions-management technologies.
  4. The electricity sector still has good-as-best-gas benchmark.

    This is a strong signal to the sector that continued efforts to move away high-intensity generation will be rewarded. The output-based standard for electricity is an efficient way to enable reductions and it’s great to see past efforts to develop good policy being recognized in this update.
  5. Stay tuned for more info on how the compliance payments will be used.

    The government is still playing a bit coy on what the plans are for the TIER fund, but the press release makes it clear that Emissions Reduction Alberta (ERA) will still be the steward. That is surely welcome news for the many project developers that have been working with ERA over the years on various new technologies. We will be sure to share more information on this as soon as it’s available.

At the end of the day, Alberta’s policy makers continue to do what they do best: evolve regulations with feedback from their stakeholders, and deliver outcomes that, while not perfect, are workable. That being said, there is much work to do to deliver absolute emissions reductions on the scale needed to meaningfully address climate change. TIER is another example of an incremental change when we need bolder action. I’m glad that Alberta is continuing to take strong action as a resource economy, and incremental improvements are important. However, until we figure out a way to align our economy with larger climate action, we are at risk of having our future determined for us.

Matt Beck is a Director at The Delphi Group. For more information about Alberta’s Technology Innovation and Emission Reduction (TIER) program or Delphi’s Climate Change and Corporate Sustainability service areas, feel free to reach out to Matt directly at mbeck@delphi.ca