The carbon market is “kind of a simple extension” of Alberta’s years of practice creating and regulating its oil and gas industry
Alberta was a pioneer in establishing its own provincial carbon market, the success of which is due in part to the province’s history of regulating the oil and gas industry, experts say.
On September 20-21, carbon experts met in downtown Edmonton for the Carbon Capture Canada Conference, and John Storey-Bishoff, director of climate change compliance for Alberta, said the province had established a carbon market for more than a decade and operated .
Alberta’s carbon market is currently known as TIER, the Technology Innovation and Emissions Reduction Regulation, which helps the province reduce greenhouse gases (GHG) from large industrial emitters. In 2020, about 50 percent of greenhouse gases from large emitters, or 154 megatons, were captured in the system.
The program is performance-based, with facilities receiving free credits based on a product’s benchmark emissions intensity, which includes measurements such as tonnes of GHG emissions per tonne of bitumen.
An installation only pays a carbon price if there is a difference between the actual emissions and the indicative value that it is expected to emit. If an installation has fewer emissions than the benchmark, it will be given credits for the difference. Carbon capture projects can also earn credits.
“The monetary value of all these credits comes from their use as a compliance option. Therefore, sites that have not met the benchmarks set for them are required to use either carbon credits or carbon offsets,” Storey-Bishoff said.
Alberta has had a carbon market since 2007, and Ian Kuwahara, director of energy and industrial innovation at Verra, a voluntary carbon credit program, said Alberta has many elements to create regulatory predictability and clarity.
“I think Alberta has been able to build up all these years of the oil and gas industry and regulate the gas industry in a way that made it kind of an easy extension. [Carbon capture and storage] will be possible in jurisdictions around the world that don’t have their own oil and gas industries, that don’t have well regulations or post-closure management regulations,” Kuwahara said.
Voluntary versus compliance markets
Many other countries have their own carbon markets. The European Union operates a large market, but other countries have nothing like Alberta’s TIER program, and companies like Verra are stepping in and creating a voluntary market for companies to participate in.
Verra operates the Voluntary Carbon Standard (VCS) – currently the largest voluntary carbon market in the world, issuing around 80 percent of all credits worldwide – and has registered 1,800 projects with nearly a billion tons of emissions reduction.
Even though the carbon market is voluntary, companies must still follow a set of standards and rules to participate, Kuwahara said.
Any companies registered in their own local compliance market, such as those required to register in Alberta, cannot register in the voluntary global markets, Kuwahara said, to ensure proper accounting of the market.
There are some jurisdictions such as South Africa that use the voluntary market as their compliance option, meaning companies wishing to operate in the country must be part of the voluntary carbon market.
“There are many other parts of the world, especially in developing countries around the world, that don’t have compliant carbon markets, and that’s where the [voluntary carbon markets] have taken root,” said Kuwahara.