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Alberta Set to Double Carbon Tax Rate in Canada’s Oil Heartland

The changes, announced by the province’s new government on Thursday, will be phased in by 2017. Environmental groups say it’s not enough, but some of oil’s biggest players are calling it the right thing to do.
Photo by Jason Franson/The Canadian Press

In its quest to become a leader in the fight against climate change, the newly elected left-wing government in Alberta has announced major changes to curb greenhouse gas emissions in Canada's oil-rich province.

The province's heaviest emitters — defined as businesses that produce more than 100,000 tons of CO2 per year — will be forced to reduce their CO2 emissions intensity by 15 percent next year, then 20 percent by 2017.


Those emitters, such as oil and gas companies, will also have to pay double the current carbon tax rate they pay on every ton of CO2 they produce beyond those levels, up from $15 to $30. This means the cost of carbon will effectively raise from $2 per ton to approximately $6 by 2017.

"Some will argue we are moving too far and too fast. I say to them that more of the same would be the worst thing we could do for our energy economy and for the future of our province," Alberta's Environment Minister, Shannon Phillips, told reporters on Thursday.

"We are serious about making progress."

The new rules update the province's current gas emissions regulations, which were introduced in 2007 and expired this month.

The announcement comes on the heels of the federal government's pledge to reduce the country's overall emissions by 30 percent below 2005 levels by 2030. And it marks a turning point for a province that has been vilified for producing the vast majority of Canada's overall greenhouse gas emissions.

Last month, voters in the longtime conservative stronghold stunned the country by electing a New Democratic Party that promised to rein in the growing energy sector — a sector that has been hit lately by the plummeting price of crude.

Related: Canada's Carbon Cutting Pledge is Criticized for Being the Weakest Among Leading Economies

But the biggest names in oil welcome the new changes and are grateful the price increases are being phased in gradually.


The president of Shell Canada told The Canadian Press the updated rules are "a clear signal Alberta is committed to doing its part to address climate change."

"At Shell Canada, we recognize that economic growth demands environmental leadership more than ever."

Environmental groups have long called on Alberta to crack down on the emissions produced by the oil sands, and are now divided on Alberta's latest move.

Clean Energy Canada applauded the government, telling Reuters the announcement is "a solid set of first steps" and "sends an important signal both inside and outside Alberta."

However, Environmental Defense said the new regulations will barely make a difference and do not go far enough.

"As oil production continues to expand, Alberta's absolute emissions have continued to grow. Putting a very low price on a very small share of emissions has been ineffective," the group said in a statement, which suggests Alberta look to neighboring British Columbia for a stronger carbon tax system. Its carbon tax of $30 per ton is five times larger than Alberta's.

In addition to the dramatic carbon price hike, Alberta also struck a new climate change advisory panel to help create a new provincial strategy ahead of the UN climate change summit in December.

"It's a daunting challenge but this is a discussion that is long overdue in Alberta," the panel's chair, Andrew Leach, Director of Energy Programs a the University of Alberta, wrote for Maclean's magazine Thursday.

"[T]he greenhouse gas policy challenge in Alberta is about more than oil sands and more than large industrial emitters."

Leach added the panel will also examine emissions from vehicles, agriculture, and waste management.

Details about another panel that will review Alberta's royalty regime are expected to be announced on Friday.

Follow Rachel Browne on Twitter: @rp_browne