Amending the TIER Regulation: Maintaining Alberta’s Carbon Pricing System and Bolstering the CCUS Framework
The Technology Innovation and Emission Reduction Regulation (TIER Regulation), enacted under Alberta’s Emissions Management and Climate Resilience Act, governs Alberta's industrial greenhouse gas emissions pricing regime and emissions trading system.
The TIER Regulation applies to large emitters and those who have opted-in to the system, requiring regulated facilities to reduce emissions to meet facility benchmarks. The TIER Regulation also establishes the Alberta Emission Offset System or emission performance credits (EPCs) and emission offsets (Offsets) available to emitters to meet their reduction targets. Facilities regulated under the TIER Regulation are exempted from the federal fuel charge under the Greenhouse Gas Pollution Pricing Act so long as the TIER Regulation maintains federal stringency requirements.
The Government of Alberta (Alberta) completed its review of the TIER Regulation in December of 2022 and released the Technology Innovation and Emissions Reduction Amendment Regulation (the Amendment Regulation) and the Administrative Penalty Amendment Regulation, imposing certain amendments and changes which came into force on January 1, 2023. The amendments enacted by the Amendment Regulation maintain the TIER Regulation’s compliance with federal stringency standards, ensuring that Alberta’s carbon pricing system remains in place in the province instead of the federal fuel charge.
Overview of the TIER Regulation Amendments
The amendments to the TIER Regulation include:
- Regulatory Stringency: Opt-in threshold for emissions-intensive and trade-exposed industry is reduced from 10,000 tonnes CO2e per year to 2,000 tonnes CO2e per year.
- Benchmarks: A 2% annual tightening rate will apply to facility-specific benchmarks and high performance benchmarks. For oil sands mining, in situ and upgrading, the annual tightening rate will be 4% in 2029 and 2030. Additional high-performance benchmarks will be released in early 2023.
- Credit Expiration: EPC and Offset expiry is reduced from the current 9-year and 8-year periods, respectively, to 5 years for EPCs and Offsets issued in 2023 or later. Sequestration credits must be used for a year within the 6-year period beginning in the year in which the net geological sequestration of the associated emission offset occurred.
- Credit Use Limit: The credit use limit in which emitters can use EPCs, Offsets and sequestration credits to comply with emission targets will be 60% in 2023, 70% in 2024, 80% in 2025 and 90% in 2026 and on.
- Carbon Price: A Ministerial Order will set the TIER Fund Price for 2023 to 2030, aligning the provincial fuel price with federal requirements. The price will increase annually (by $15 increments) starting at $65 in 2023 and will increase to $170 in 2030.
Sequestration Credits for CCUS Projects
In May 2021, Alberta Energy announced, through an information letter, that it intended to move towards a competitive bid process for carbon sequestration tenure. The process focuses on the development of strategically located capture, utilization and storage (CCUS) hubs, allowing for additional volumes and multiple sources of CO2 to be stored and avoiding stand-alone injection operations. Since its inception, Alberta has approved a total of 25 proposals and announced it will invest $40 million in 11 CCUS projects through Emissions Reduction Alberta.
Adding further support to Alberta’s CCUS regime, the Amendment Regulation establishes “sequestration credits” and “capture recognition tonnes” in connection with CCUS projects in the province. Sequestration credits will enable recognition under the federal Clean Fuel Regulations and must be used for a year within the 6-year period beginning in the year in which the net geological sequestration of the associated emission offset occurred. Sequestration credits can only be issued for converted Offsets that meet the following requirements:
- the emissions for net sequestration must meet the requirements for sequestration under the TIER Regulation;
- the geological sequestration must have occurred in or after 2022; and
- the sequestered carbon dioxide equivalent (CO2e) for the emission offset must have been captured by a large emitter or at an opted-in facility.
Following the Amendment Regulation the TIER Regulation will be in effect through 2030. The next review of the TIER Regulation must be completed by December 31, 2026. As further updates and related changes come into effect, we will continue to monitor future developments.
To discuss any questions about the Amendment Regulation, its effects on your business and operations or the TIER Regulation, please contact your trusted McCarthy Tétrault advisor or one of the authors.