New research suggests Alberta’s oilsands are releasing potentially hazardous compounds into the atmosphere at rates dozens of times higher than official estimates. A dump truck works near the Syncrude oilsands extraction facility near the city of Fort McMurray, Alta., on June 1, 2014. THE CANADIAN PRESS/Jason FransonJASON FRANSON/The Canadian Press
Alberta is changing its industrial carbon tax system to allow major emitters to account for investments in emissions reduction technology at their sites in lieu of paying into a provincial fund or buying carbon credits, as is now the case.
The province also said it would allow smaller emitters that are part of the program to opt out of it this year to reduce regulatory burdens, and reinvest the savings into emission reduction or other operational improvements.
Alberta Premier Danielle Smith said on Tuesday that the changes to the Technology Innovation and Emissions Reduction, or TIER, program are aimed at bolstering the competitiveness of Alberta’s major industries, notably the oil sands, whose largest operators are considering a $16.5-billion carbon capture and storage project.
They will allow businesses to invest directly into technology through TIER, choosing the best technologies for their needs, Ms. Smith said.
“This approach allows company to meet up to 90 per cent of their compliance obligations by investing in projects at their own facilities rather than waiting for government to redistribute those funds,” Ms. Smith said at a news conference on Tuesday.
Alberta has had an industrial carbon price in place since 2007. Essentially, the large industrial sites governed by TIER can comply with the rules by reducing emissions, buy offsets or make payments to the fund. Currently, facilities can invest in projects to reduce emissions in future years to lower their obligations under the system over time. Under the new approach, the investment itself can be used to address up to 90 per cent of TIER obligations over an eight-year period.
An August analysis by S&P Global found that prices in Alberta’s system have decreased significantly from last year, with credit and offset prices on August 4 down more than 55 per cent compared with the fourth quarter of 2024. That’s largely due to a glut of credits, with some traders estimating there three years of banked inventory sit idle in the market.
The market would likely balance out by the end of the decade, “provided aggressive regulatory changes are not made to the program’s structure,” the report said.
The changes to TIER come as the federal and Alberta governments work toward what Ms. Smith has deemed a “grand bargain,” which has paired a new oil pipeline with progress on the oil sands producers’ Pathways Alliance carbon capture project to reduce emissions in the oil sands.
Ms. Smith said she mentioned the change in direction to Prime Minister Mark Carney during a meeting last week.
“We knew that we needed to find a different way of approaching this issue, so this won’t be a surprise to the federal government,” she said.
The changes stand to weaken the TIER program by opening the door to risks of double counting – that is, companies getting credit first for making the initial technology investment, then again for the emissions reduction once they begin, said Chris Severson-Baker, executive director of the Pembina Institute think tank.
And it will slash demand for TIER credits, he said, further undermining the stability of Alberta’s credit market on which projects Pathways Alliance rely.
The current obstacles to that development are not primarily regulatory, but financial, including Alberta’s lackluster credit market.
Uncertainty over the future of the federal carbon price is another concern for Pathways members. Eliminating it is one of the items being pushed by more than 90 oil and gas executives and industry associations, who on Monday sent a letter to Mr. Carney, urging him to simplify regulations that govern the sector.
They also urged Mr. Carney’s Liberal government to repeal the West Coast tanker ban, shorten timelines for project approvals, commit to growing fossil fuel production and eliminate the oil and gas emissions cap. And they want Ottawa to provide Indigenous loan guarantees at scale so industry can create ownership opportunities for communities.
Suncor chief executive Rich Kruger, one of the signatories, said in an interview that although Ottawa has made some “positive actions” – such as the formation of the Major Projects Office and referring major energy projects to the body – more policy changes are needed to stimulate investment.
“We need the clarity and predictability across the regulatory environment to make this happen,” Mr. Kruger said.
The government’s goal should be to create a free market “where a multitude of projects can come forward, big and small,” rather than picking and choosing a short list, he said.
“What we fundamentally are saying is we need to unravel a decade of, quite frankly, onerous, complex, largely anti-oil and gas legislation,” he said.
“It’s about protecting and promoting Canada’s competitiveness. And the rest of the world is not standing still.”
