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An inside look at Alberta’s new climate change rules

And why I’ve decided to become a climate change advisor to the Alberta government


 

alberta legislatureWith last month’s election of Rachel Notley’s NDP in Alberta, it was clear that many things would be changing, in particular with respect to resource and environmental policy.  As I wrote during the campaign, the NDP promised that it would, “take leadership on the issue of climate change and make sure Alberta is part of crafting solutions with stakeholders, other provinces and the federal government.” I wrote at the time that there was a lot left to define with respect to short-term and long-term policies affecting greenhouse gas emissions in the province. Defining these policies begins today, and I am pleased that I will have a small part in delivering on the premier’s promise that Albertans will be engaged in the development of the remainder of the policy package to be implemented over the coming years.

First, what policy changes are we seeing this morning? The government announced today that the Specified Gas Emitters Regulation, slated to expire next week, will be renewed and strengthened. While the current policy requires facilities to reduce emissions intensity by 12 per cent from baseline levels, the new policy will require a 20 per cent reduction. The existing policy allows firms to comply with the regulation by contributions to an innovation fund at a rate of $15 for each tonne of emissions over their facility-specific reduction requirement, and the new policy will raise this price to $30 per tonne. This means that the benefit to reductions in emissions within existing, industrial operations in the province will come to match the reward to similar improvements under the British Columbia carbon tax. It remains the case that the average cost imposed on industry (ass.uming constant performance over time) would be smaller than B.C.’s, at $6 per tonne, but the change in policy today implies that the average cost will be over three times higher than the average cost of emissions under the policy in effect right now. It’s a meaningful increase in stringency, and the minister of environment has signalled that, subject to the input the government receives in the months to come, it will be announcing further measures.

To that end, the government has also announced the creation of a climate change advisory panel with a mandate to report to the minister of environment  early in the fall to aid in the formulation of a new climate change strategy for the province, and they’ve appointed me to chair the panel (it’s only fitting that I get the scoop on the announcement and the first quotes from myself, right?). This is a wonderful opportunity, and one for which I am really excited, but the challenge is daunting, so let me tell you a little about what comes next.

When you talk about climate change policy in Canada, Alberta and the province’s energy industry—the oil sands in particular—are among the most prominent topics.  Alberta’s emissions represent a large and growing share of Canada’s emissions, and oil sands represent a large and growing share of emissions in Alberta. However, the greenhouse gas policy challenge in Alberta is about more than oil sands and more than large industrial emitters. The panel’s mandate is clear—deliver a comprehensive overview of greenhouse gas mitigation options across the economy. We’ve already seen discussions around energy efficiency programs for homes and business, as well as discussion on the future of Alberta’s electricity generation mix, and those topics will be considered in depth. We also plan to look at on—and off—road-vehicle emissions, fugitive emissions, emissions from agriculture, and emissions from waste management. While today’s focus will be on the changes to the Specified Gas Emitters Regulation, the panel will consider a much broader suite of potential actions to capitalize on opportunities for greenhouse gas emission reductions in all sectors across the province.

So, what will we do? Over the coming weeks, the panel membership will be finalized and dates will be scheduled for public consultations—creating opportunities for public engagement on Alberta’s climate change strategy is a core element of the panel’s mandate. We will also be reaching out to Alberta’s First Nations, to industry groups, to environmental organizations, as well as to subject-area experts within academia, government, and the private sector to make sure we are able to offer the minister a report that clearly provides options, complete with the best available evidence regarding both the benefits and costs of these options. It is my hope that our report will enable the government to make their decisions based on as thorough an examination of the evidence as we can provide, given the time frames involved.

As the premier has made clear, she expects to have a long-term climate change strategy in place for the province before she travels to the UN climate change conference in Paris in December. To meet this deadline, we’ll expect to provide a report in the fall for the government’s consideration. It’s a daunting challenge but this is a discussion that is long overdue in Alberta. We’re also not starting from scratch—there has been significant work completed both within and outside government, examining a variety of potential options for Alberta, and so this gives us a running start. We’ll need it.

Of course, taking on this role will also mean some changes for me. For one, I won’t be writing in this space for some time to come and some of my academic research will take a back seat for a few weeks (more apologies to my long-suffering co-authors will have to be written), but, as an academic, I don’t believe this  opportunity is one to which you can say no. Our motto at the University of Alberta is Uplifting the whole people—a motto I take to imply that, among other things, we bring the expertise to bear on important policy problems facing the province when we can. When I teach environmental economics, and I’m sure many of my colleagues are like me, I use examples that begin with: “Imagine the premier calls you and asks for your advice on Alberta’s next climate policy. What would you tell her?” I can tell you that, when I ask my students what they’d tell the premier to do, I get wide and varied answers. I expect much the same from Albertans. We teach our students to consider the policy implications of research, and to apply that knowledge to real, pressing problems. I’m excited to get to live this in-class example.

 


 

An inside look at Alberta’s new climate change rules

  1. “Economics, at its best, is a set of ideas and methods for the improvement of society. It is not, as so often seems the case today, a set of ideological rules for asserting why we cannot face the challenges of stagnation, job loss and widening inequality.” Chris Sims.

    One pleasant outcome of having a new government is they must rely heavily upon the expertise of others, and this is truly an opportunity to set the record straight. Good on you, Mr. Leach. We need well considered environmental regulation, not more window dressing.

    • I have every confidence Mr. Leach and the panel he will chair will provide considered advice and I don’t begrudge him accepting a deserving and attractive offer. Regrettably, I suspect his and his panel’s purpose is, in fact, “window dressing”, the same role for which Mr. Dodge was recruited last week. Ms. is barely a month into actual governance and there are already amble signs her government has no intentions to temper its ideological bent in any way shape or form. Hence, the beleaguered industry can already look forward to further “meaningful increase(s) in stringency” at a time it can arguably least afford them.

      • Conservatives – all about taking personal responsibility until they’re responsible. Then gee, it’s expensive. How ’bout we just keep making everyone else pay just a bit longer?

        • Glo-Bull Warming is the biggest fraud ever perpetrated in human history.

          CO2 is not a pollutant.

          Nothing wrong with reducing Nox, Sox and air born particulates, there is a big difference between pollution reduction and the AGW fraud of socialist wealth redistribution.

          The only upside of the new NDP governments headlong rush to becoming a have not province will be the elimination of Equalization.

  2. We must let the LIBERAL politicians make our weather nicer, safer and colder by letting them tax the air we breathe with bankster funded and corporate run carbon trading stock markets ruled by trustworthy politicians so we can please the angry weather gods and return to a perfect world.

    • I can see why you’re upset.
      So rest easy. Nobody is proposing to tax the air you breath. The idea is to tax emissions into the air you breath.
      Nor will reducing emissions make it colder. The best that can be hoped for is to reduce future temperature increases.

  3. My suggestion would be to tailor your writings and pronouncements to avoid ambiguity that serves to confuse the media and hence the public laypersons.

    Here’s a finely crafted paragraph that will confuse many (intentionally?. I’ve highlighted the relevant words.

    While the current policy requires facilities to reduce emissions intensity by 12 per cent from baseline levels, the new policy will require a 20 per cent reduction. The existing policy allows firms to comply with the regulation by contributions to an innovation fund at a rate of $15 for each tonne of emissions over their facility-specific reduction requirement, and the new policy will raise this price to $30 per tonne. This means that the benefit to reductions in emissions within existing, industrial operations in the province will come to match the reward to similar improvements under the British Columbia carbon tax. It remains the case that the average cost imposed on industry (ass.uming constant performance over time) would be smaller than B.C.’s, at $6 per tonne, but the change in policy today implies that the average cost will be over three times higher than the average cost of emissions under the policy in effect right now.

    1. “Match the rewards.” So, what AL is referring to here is marginal costs (and vice versa benefits). In other words, the BC carbon tax applies to all emissions. Conversely, the AB “levy” kicks in after the first 88% of emissions get a free ride (now reduced to 80%). And the next 20% (up to the historical baseline) and beyond do indeed pay $30/tonne like BC. Why he can claim that the marginal benefit of reducing one tonne of emissions in this specific example is the same.

    2. “would be smaller than BC’s at $6 per tonne”. I had to read that a few times. Then I realized he was referring to AB’s carbon levy averaging $6/tonne (20% x $30/tonne) not BC’s – which I believe applies to ALL emissions.

    Given that any emissions reduction strategy in oilsands production would typically involve processing the whole production differently (say installing a heat exchanger) I believe the $6 (AB avg cost) vs $30 (BC avg cost) is the approporiate economic driver – 5x more financial incentive to conserve in BC vs AB. The “marginal” analysis (the basis of an earlier Leach academic paper, I believe) in 1). is not particularly relevant, in my opinion.

    Anyhoo, good luck.

    • To clarify, my comments above apply to new greenfield sites (not existing ops) which is the most likely scenario. But even then my comments may understate the differences.

      • Notley has already announced she is shutting down coal production in Alberta. That means we won’t be burning coal nor shipping it to China like BC is in record amounts. Yes we have the oilsands or dirty tarsands that create a good deal of emissions. We don’t pretend otherwise but we are not pretentious when it comes to admitting our part in the destruction of the planet. Let’s be honest, burning coal creates a much higher carbon footprint than producing and burning our dirty oil. So while you might have created an environment in BC where residents have “5x more financial incentive to conserve”, the BC government is making it hard to breathe in Bejiing.

        • Burrard thermal (BC Hydro generating station) was once coal fired, converted to natural gas, I believe in the 90s primarily for health reasons. Same with a lot of plants in Ontario – there is a cost/benefit as far as health outcomes. GHG reductions were a bonus factor.

          Same is happening now in China – just a matter of when/degree.

          My point, however, was to point out the difference between incentives when planning a new oil sands plant/operation vs after the fact when it is operational. AL focuses on the latter when discussing the ghg levy, which really is not that relevant.

          An analogy – say you were building a new house – and hypothetically there were gov’t programs in AB and BC to encourage you to increase the amount of insulation in your walls and ceilings. Say the BC program was available to new homes in the planning phase – the AB program after the house is built (based upon historical heating costs). Which homeowner would be more likely to upgrade the insulation? The BC homeowner who can perhaps beef up the thickness of the wall studs and add more insulation in the walls before drywalling, or in the ceiling during construction – or the AB homeowner who has to go in and do very costly renovations?

          And if the AB homeowner had the foresight to add additional insulation during construction (in the absence of incentives) because it was economic – their historical use once occupied will be lower – and hence less available heat to conserve through more insulation.

          Not completely analogous to carbon tax in BC vs large emitter levy in AB, but similar enough.

          • Correction – Burrard thermal was previously dual fired – oil and gas , not coal.

  4. Thank goodness, Rachel Notley managed to find a bright mind at an Alberta university to put on her panel. Given her habit of recruiting experts from outside the province, I really started to wonder if she would ever take a look in her own back yard.

  5. Congrats Dr. Leach ,
    No one can be more deserving of this position than Andrew Leach. I have been following his contribution to Alberta’s climate change debate invariably, , in particular his incisive, authoritative command and in-depth analysis of SGER. He is the bona-fide candidate to lead Alberta’s most important public policy initiative.

    Best,
    Berhanu Kebede

    • If I understand the proposed process, this involves public hearings where the committee will be listening to the input of many Albertans before formulating recommendations/summary. This by necessity requires flexibility and an ability to admit there are other points of view, and that one person does not have all of the answers.

      Based upon twitter discussions and repartee here in Macleans comment sections, this will be a personal challenge. Hopefully, he is up to the task.

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