Recent Federal and Alberta Developments in GHG Reduction Initiatives

This bulletin highlights two recent developments relating to the federal and Alberta governments' respective efforts to reduce greenhouse gas (GHG) emissions and transition toward a low carbon economy:

• On June 15, the Government of Canada announced the $2 billion Low Carbon Economy Fund. As an important part of the Pan-Canadian Framework on Clean Growth and Climate Change, the fund is intended to foster investments in clean growth and emissions reduction projects.
• On June 16, the Government of Alberta announced that it had taken receipt of a consensus panel report by the Oil Sands Advisory Group (OSAG), which outlines certain recommendations for implementing the 100 megatonne per year oil sands emissions limit under the Alberta Climate Leadership Plan.

What You Need To Know

• The federal Low Carbon Economy Fund will assist the efforts of eligible provinces and territories to reduce GHG emissions in support of Canada's 2030 emissions reduction target of 30% below 2005 levels. The fund will include two parts:
  • The Leadership Fund, which was launched June 15, 2017, will provide $1.4 billion in funding to signatories of the Pan-Canadian Framework (which currently includes all provinces except Saskatchewan and Manitoba), including a base amount of $30 million for each signatory plus additional funding based on population size.
  • The remaining $600 million will be made available through the Low Carbon Economy Challenge, which will launch in the fall of 2017 to support eligible projects by provinces, territories, municipalities, indigenous groups, businesses, and not-for-profit and for-profit organizations.
• With respect to Alberta's 100 megatonne limit on oil sands emissions, OSAG's recommendations include early actions to reduce emissions and more stringent actions as emissions approach or exceed the annual limit, including mandatory reductions by the top half of highest emitting facilities. Facilities that exceed the authorized amount could face a $200 per tonne penalty. The province will consult with stakeholders before proceeding with policy design and implementation.

Federal Low Carbon Economy Fund

As a key part of the Pan-Canadian Framework, the $2 billion Low Carbon Economy Fund will support projects that generate clean growth and reduce GHG emissions towards meeting or exceeding Canada's commitments under the Paris Agreement. Funding will be provided over the next five years through two streams: the Low Carbon Economy Leadership Fund and the Low Carbon Economy Challenge.

Launched on June 15, the Low Carbon Economy Leadership Fund provides $1.4 billion to provinces and territories that have signed on to the Pan-Canadian Framework, which to date include all provinces except Saskatchewan and Manitoba. Each signatory is eligible to receive a base amount of $30 million plus additional funding based on population size. Over the next several months, the federal government will engage eligible provinces and territories on their proposed projects and will develop bilateral funding agreements in respect of approved projects.

The remaining $600 million in funding will flow through the Low Carbon Economy Challenge, which will launch this fall to support "ambitious projects" that leverage Canadian ingenuity to reduce emissions. Such projects may be submitted by all provinces and territories as well as municipalities, indigenous governments and organizations, businesses, and both not-for-profit and for-profit organizations.

To be eligible for funding under the Low Carbon Economy Fund, the emissions reductions associated with a project must be material, incremental to existing actions, contributing towards Canada's 2030 emissions reduction target and as cost effective as possible. For all projects, proponents may partner with other eligible entities and flow funding to them, subject to approval by the federal government.

For more information on the Low Carbon Economy Fund, visit the Government of Canada's website.

Alberta Oil Sands Advisory Group Report

In July 2016, the Government of Alberta established the OSAG to advise on the oil sands aspects of the province's Climate Leadership Plan, including an annual emissions limit of 100 megatonnes for the oil sands industry (which currently emits about 70 megatonnes of GHG per year). In its latest report, OSAG's recommendations include early actions to further reduce emissions and more stringent reviews and compliance actions as emissions approach or exceed the annual limit.

Examples of early actions recommended by OSAG include (i) requirements for new facilities and expansions to use the "best available technology economically achievable," (ii) submission of non-binding GHG management plans, (iii) preparation of a technology roadmap and costs of abatement technologies by innovation entities, and (iv) changes to resource recovery requirements to no longer require emission-intensive portions of a resource to be recovered.

OSAG also recommends the establishment of information systems and accompanying standards to trigger reviews (e.g., at the 80 megatonne and 95 megatonne marks) as oil sands emissions approach the yearly limit. No further compliance actions beyond carbon pricing are recommended at this stage to directly limit emissions. If the 10 year forecast indicates that oil sands emissions are anticipated to exceed the yearly limit within 5 years, more stringent actions would be triggered, including the establishment of a buffer reserve of emission allowances. Moreover, if the 100 megatonne limit is expected to be exceeded within the year, then the 50th to 100th percentile of highest emitting facilities would face mandatory emissions reduction requirement, such that: (i) the 50th to 75th percentile would share one-third of the reduction requirement, and (ii) the 75th to 100th percentile would share two-thirds. If a facility exceeds the maximum emission intensity limit (within an acceptable level of variability), the excess amount would be authorized from the buffer reserve. If such excess falls outside an acceptable level of variability, OSAG recommends a penalty equal to the greater of $200/tonne, or a certain multiple to be determined in the regulatory drafting process of the applicable carbon levy.

OSAG advised the Alberta government to exclude emissions from primary, experimental and enhanced recovery oil sands sites, and from electricity cogeneration (with reference to the emission intensity of a benchmarking power plant).

The province will now consult with key stakeholders before proceeding with policy design and implementation. For more information on OSAG's recommendations, visit the Government of Alberta's website.

To discuss these issues, please contact the author(s).

This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.

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