Photographer: Ben Nelms/Bloomberg

Alberta to Limit Oil-Sands Emissions in Climate Policy Revamp

  • Government will give incentives to accelerate innovation
  • Wind, solar power to replace coal electricity generation

Alberta will cap oil-sands emissions for producers such as Suncor Energy Inc. and Imperial Oil Ltd., phase out coal power plants and implement an economy-wide price for carbon in an effort to curb pollution from Canada’s largest greenhouse-gas emitter.

The oil-sands industry will face a limit of 100 megatons of carbon emissions a year, the government said in a statement on Sunday, above current annual emissions of about 70 megatons. The province will phase out coal power plants by 2030 and set a carbon price of C$20 ($15) a metric ton by 2017, rising to C$30 in 2018.

Premier Rachel Notley has said the province needs to be a leader in climate-change policy in order to support the oil-sands industry, which has been criticized for its environmental impact. The oil-exporting province, in 2007, was one of the first places in the developed world to implement a carbon levy for large emitters. That policy, which contributes proceeds to a technology fund, has failed to dent emissions growth.

“We are going to do our part to address one of the world’s greatest problems,” Notley said in an statement. “It will help us access new markets for our energy products and diversify our economy with renewable energy and energy efficiency technology.”

The government said the “unprecedented” oil-sands emissions cap is supported by executives in that industry and will help “change the debate” about the province’s most important export. The new rules will replace the current regime that levies C$15 a ton on large emitters. A number of oil sands producers released a statement on Sunday in support of the plan.

Oil Slump

The province’s oil-sands industry, already pummeled by a slump in global oil prices and surging costs, will have to adapt. Bitumen output is expected to continue rising through 2020 with construction already under way on a number of projects such as Suncor’s Fort Hills mine. Carbon emissions from the oil sands have quadrupled since 1990.

“This is literally a game changer,” said Suncor Chief Executive Officer Steve Williams, during a briefing Sunday with other executives, environmental groups and journalists. “This will create a wealth of opportunities and jobs for generations to come. We in Alberta want to take a leadership role on climate.”

Technology and innovation, along with energy efficiency improvements, will allow the oil sands, which accounts for a quarter of the province’s greenhouse gas output, to better compete with other crude-producing jurisdictions, the government said.

Industry agrees.

“The ingenuity of the engineers working in Canada’s oil and gas sector is world class, and the technologies they develop for use here at home can be exported to countries with less environmental expertise,” said Tim McMillan, President of the Canadian Association of Petroleum Producers, in an e-mail before the announcement.

UN Conference

The climate-policy review was led by University of Alberta professor Andrew Leach to prepare the province ahead of the United Nations climate talks in Paris that start on Nov. 30. Notley will attend the conference, along with Canadian Prime Minister Justin Trudeau and other provincial premiers.

The new regulations build on efforts begun by Notley’s predecessor, Jim Prentice, to rehabilitate the tarnished reputation of Canada’s oil-sands industry. The planned expansion of crude output has been hampered by a shortage of export pipelines like Keystone XL, which was rejected by the U.S. this month, and by opponents that have focused on the higher carbon emissions of extracting and processing bitumen, a thick fossil fuel mined or steamed out of underground reserves.

The new rules are estimated to cost families almost C$500 more annually from 2018 to pay for carbon emissions associated with transportation and heating fuel. The carbon price will cover as much as 90 percent of emissions in the province, the government said.

Coal generation currently accounts for almost a fifth of emissions in Alberta. Two-thirds of that capacity will be replaced with renewable energy and the remainder with natural gas. Under the plan, by 2030, wind, solar and other low-carbon sources of power will account for 30 percent of electricity generation.

The government will work with owners and operators of coal power plants to help transition the industry, and will provide support to low-income Albertans. In addition, the province will cut emissions of methane from oil and gas production by 45 percent by 2025 from 2014 levels.