Name of Instrument
Alberta TIER
Subnational - State/Province ETS
Implemented in 2007
Alberta
Baselines (Intensity-based)
Price ceiling
All
Point Source
Yes, with quantitative limit
Covered Sectors
- Covered
- In principle
Description
The Technology Innovation and Emissions Reduction (TIER) Regulation is a baseline-and-credit ETS. It covers large emitting facilities, with the ability for lower emitting facilities to opt in to the regulation.
Covered entities must reduce their emissions intensity (emissions per unit of production) by a set percentage each year. The reduction requirement is based on a facility’s average emissions intensity over a three-year historic period or compared to a sector-specific benchmark. Covered entities that outperform their targets generate emissions performance credits (EPCs), which can be sold or used in future compliance years. Those that exceed their limits are required to provide compensation by either (1) purchasing EPCs from other covered facilities, (2) paying into the TIER fund to purchase a fund credit for each tonne of excess emissions, or (3) purchasing emission offset credits generated within Alberta under an approved offset protocol or sequestration credits.
Recent Developments
Alberta’s Technology Innovation and Emissions Reduction (TIER) Regulation was amended in December 2022, with changes taking effect on January 1, 2023. Updates included setting the carbon price in line with the federal benchmark; tightening output-based benchmarks by 2% annually from 2023 to 2030 and also increasing the tightening rates of the oil sands sectors by 4% in 2029 and 2030; reducing the opt-in threshold to 2,000 tonne per year; increasing the limits on emission performance and offsets usage from 60% in 2023 by 10% annually until it reaches 90% in 2026; reducing the credit expiry to five years; establishing sequestration credits and capture recognition tonnes to support carbon capture, utilization, and storage investments; and changing the biomass emissions treatment to support bioenergy with carbon capture and storage.
Coverage
Alberta’s TIER Regulation applies to all greenhouse gas emissions from facilities that emit 100 ktCO2-e/year or more, including industry, power, food processing, waste and other sectors. Smaller conventional oil and gas facilities can aggregate and opt-in to the regulation. Lower emitting facilities (those emitting 2,000 tonnes CO2e or more per year) can opt-in to the regulation.
Alberta’s TIER system directly covers approximately 60% of Alberta’s emissions. The ETS extends the price signal to broader sectors. The output-based pricing system approach itself is designed to protect the competitiveness of emissions-intensive and trade-exposed (EITE) sectors by the use of benchmarks that apply carbon pricing to only a portion of their emissions. The emissions trading allowances to comply with the TIER Regulation also further enable cost-effective compliance and emission reductions.
If TIER Regulation compliance costs exceed 3% of sales or 10% of profit at a facility, the facility owner may be eligible to receive some regulatory relief under the province’s Compliance Cost Containment Program.
Pricing and allocation approaches
Regulated facilities can pay into the TIER fund to meet their compliance obligations at a fixed price set at $65 per tonne in 2023, rising by $15 per tonne annually to $170 per tonne in 2030. This acts as a price ceiling for the scheme.
To address facilities that are competitively impacted or at risk from being competitively impacted by the TIER Regulation, if compliance costs exceed 3% of sales or 10% of profit at a facility, the facility owner may be eligible to receive some regulatory relief under the province’s Compliance Cost Containment Program. The Alberta TIER system uses an output-based allocation approach. The emissions baseline of each facility (freely allocated emission level) is determined by a combination of emissions intensity benchmarks and production activity data. Facilities can use facility-specific benchmarks (FSBs) or sector high-performance benchmarks (HPBs), except for the electricity, heat and hydrogen sectors which are required to use HPBs.
In 2022, FSBs were based on 88% of a facility’s past performance using 2013 through 2015 as a reference period for most existing facilities, except for oil sands mines and upgraders which are based on approximately 18% New facilities are subject to a compliance obligation starting in the third, full year of operation. HPBs are generally based on the average performance of the top 10% of facilities in a sector or equal to the top performer in sectors of less than 10.
From 2023 forward, all FSBs and HPBs will tighten at a rate of 2% per year. In 2029 and 2030 FSBs and HPBs for the oil sands sector will tighten at a rate of 4% per year. There is no cap on emissions in the Alberta TIER.
Compliance Approaches
Point source. Regulated facilities report the emissions covered under the Alberta TIER Regulation at a facility level and for meeting their compliance obligations. Regulated facilities need to meet compliance obligations on an annual basis. Carbon offsets are included in the TIER regulatory system.
Regulated facilities can use offset credits to meet compliance obligations. Offset credits used for TIER Regulation compliance must be created in Alberta using protocols approved by the Alberta government.
As of January 1, 2023, Alberta offset credits are subject to a five-year expiry period for compliance use.
Limits apply to regulated facilities on the amount of offsets, and emission performance credits that can be used to meet compliance. The amount cannot exceed 60% in 2023, 70% in 2024, 80% in 2025 and 90% in 2026.
Relation to other compliance CPIs
Facilities covered by the TIER Regulation are exempt from paying the Canadian federal carbon tax.
Covered Emissions
Price range:
in 2023
Indicates instruments with multiple price levels. Only the main rate is shown for these instruments. Data last updated on 1 April 2023
