Source: http://gazette.gc.ca/rp-pr/p2/2019/2019-08-21/html/sor-dors294-eng.html
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Canada Gazette, Part 2, Volume 153, Number 17: Part 1 of the Greenhouse Gas Pollution Pricing Act Regulations (Alberta)
Part 1 of the Greenhouse Gas Pollution Pricing Act Regulations (Alberta): SOR/2019-294
SOR/2019-294 August 8, 2019
P.C. 2019-1139 August 7, 2019
Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to sections 166 and 168 of the Greenhouse Gas Pollution Pricing Act footnote a, taking into account, as the primary factor, the stringency of the provincial pricing mechanisms for greenhouse gas emissions, makes the annexed Part 1 of the Greenhouse Gas Pollution Pricing Act Regulations (Alberta) .
Part 1 of the Greenhouse Gas Pollution Pricing Act Regulations (Alberta)
1 For the purposes of the definition adjustment day in section 3 of the Greenhouse Gas Pollution Pricing Act , January 1, 2020 is a prescribed day.
2 For the purposes of the fuel charge system , as defined in subsection 168(1) of the Greenhouse Gas Pollution Pricing Act , and of applying subsection 38(1) of that Act in respect of the adjustment day that is January 1, 2020, paragraph (a) of the description of B in subsection 38(1) of that Act is adapted as follows:
(a) if the listed province is Alberta, zero, and
Amendments to the Greenhouse Gas Pollution Pricing Act
3 Table 1 of Part 1 of Schedule 1 to the Greenhouse Gas Pollution Pricing Act footnote 1 is amended by adding the following in numerical order:
4 The portion of items 1 to 22 of Table 1 of Schedule 2 to the Act in columns 4 and 5 is replaced by the following:
(c) Manitoba
(e) Alberta
(f) Yukon
(g) Nunavut
5 The portion of items 1 to 22 of Table 2 of Schedule 2 to the Act in columns 4 and 5 is replaced by the following:
6 The portion of items 1 to 22 of Table 3 of Schedule 2 to the Act in columns 4 and 5 is replaced by the following:
7 The portion of items 1 to 22 of Table 4 of Schedule 2 to the Act in columns 4 and 5 is replaced by the following:
8 These Regulations come into force on January 1, 2020.
The Greenhouse Gas Pollution Pricing Act (GGPPA) received royal assent on June 21, 2018. footnote 2 The GGPPA provides the legal framework and enabling authorities for the federal carbon pollution pricing backstop system (the federal backstop system) for the purpose of ensuring that the pricing of greenhouse gas (GHG) emissions is applied broadly in Canada. The federal backstop system has two components: a charge on fossil fuels and an output-based pricing system (OBPS) for large industry. Further, the GGPPA provides the Governor in Council with authority to determine in which provinces, territories and areas the GGPPA applies, by amending Schedule 1 to the GGPPA through regulations and, with respect to the fuel charge, by amending Schedule 2 to the GGPPA through regulations. Amendments to Schedule 1 take into account recommendations resulting from the assessment of the stringency of provincial and territorial pollution pricing systems and alignment with the benchmark elements of the Pan-Canadian Approach to Pricing Carbon Pollution (the Benchmark), including the additional published guidance on the Benchmark. footnote 3, footnote 4 The federal backstop system applies, in whole or in part, in those provinces, territories and areas listed in Schedule 1 (backstop jurisdictions). As of April 1, 2019, Part 1 of Schedule 1 lists Ontario, New Brunswick, Manitoba and Saskatchewan as backstop jurisdictions for the purpose of the fuel charge and, as of July 1, 2019, lists Yukon and Nunavut. It is necessary to list Alberta in Part 1 of Schedule 1 to have the fuel charge component of the federal backstop system apply to that province, thereby ensuring that carbon pricing applies broadly across Canada.
At the United Nations Framework Convention on Climate Change Conference in December 2015, the international community, including Canada, concluded the Paris Agreement, which is intended to reduce GHG emissions to limit the rise in global average temperature to less than 2 °C and to pursue efforts to limit it to 1.5 °C above pre-industrial levels. It is widely recognized that economy-wide pollution pricing is the most efficient way to reduce GHG emissions. Pricing pollution drives innovative solutions to provide low-carbon choices for consumers and businesses. As part of its commitments made under the Paris Agreement, Canada pledged to reduce national GHG emissions by 30% below 2005 levels by 2030.
In October 2016, the Government of Canada published the Pan-Canadian Approach to Pricing Carbon Pollution, which outlines the principles on which the pricing of pollution in Canada will be based. footnote 5 This publication also states that a federal backstop system will apply in all Canadian jurisdictions that do not have a pollution pricing system in place that aligns with the Benchmark by 2018. The Benchmark is intended to ensure that pollution pricing applies to a broad set of emission sources across Canada, with increasing stringency over time. The Benchmark was published in Part II of the Canada Gazette on April 3, 2019, as an annex at the end of the Regulatory Impact Analysis Statement for the Regulations Amending Part 1 of Schedule 1 and Schedule 2 to the Greenhouse Gas Pollution Pricing Act footnote 6 and on October 31, 2018, as an annex at the end of the Regulatory Impact Analysis Statement for the Order Amending Part 2 of Schedule 1 to the Greenhouse Gas Pollution Pricing Act . footnote 7
Part 1 of the GGPPA, administered by the Canada Revenue Agency, establishes a charge on fossil fuels — known as the fuel charge — that is generally paid by fuel producers or distributors and generally applies to fossil fuels produced, delivered or used in a backstop jurisdiction, brought into a backstop jurisdiction from another place in Canada, or imported into Canada at a location in a backstop jurisdiction. Part 1 of the GGPPA provides the legal framework and enabling authorities for the fuel charge with the aim of ensuring that the pricing of GHG emissions is applied broadly in Canada. The fuel charge applies at the rates set out in Schedule 2 to the GGPPA and those rates vary by fuel type. The rates increase annually up to 2022.
Part 2 of the GGPPA, administered by the Department of the Environment, provides authority to establish an OBPS. The aim of the OBPS is to minimize competitiveness risks for emissions-intensive and trade-exposed facilities in backstop jurisdictions, while retaining a price signal on pollution and thus an incentive to reduce GHG emissions. Facilities participating in the OBPS are generally able to purchase charge-free fuel and instead face a compliance obligation on the portion of their GHG emissions that exceed prescribed limits. Participants have the option to comply with the OBPS regulations by either remitting eligible compliance units or paying the excess emissions charge, or through a combination of these options.
Schedule 1 to the GGPPA is divided into two parts. Part 1 of the GGPPA (the fuel charge) applies in the backstop jurisdictions listed in Part 1 of Schedule 1 to the GGPPA. Similarly, facilities that meet specified criteria and are located in any of the backstop jurisdictions listed in Part 2 of Schedule 1 to the GGPPA are subject to Part 2 of the GGPPA (the OBPS). These lists take into account recommendations resulting from the assessment of the stringency of provincial and territorial pollution pricing systems and alignment with the Benchmark.
The objective of the Part 1 of the Greenhouse Gas Pollution Pricing Act Regulations (Alberta) [the Regulations] is to ensure carbon pricing applies broadly in Canada by adding Alberta to Part 1 of Schedule 1 and to Schedule 2 in order to have Part 1 of the GGPPA (i.e. the fuel charge) apply in that backstop jurisdiction.
In accordance with subsections 166(2) and (4) of the GGPPA, the Regulations identify Alberta as a jurisdiction in which the fuel charge under Part 1 of the GGPPA will apply by adding that province to Part 1 of Schedule 1 to the GGPPA. The Regulations come into force on January 1, 2020.
Schedule 2 to the GGPPA is also amended by the Regulations to specify the rates of the fuel charge that will apply in Alberta. The fuel charge rates reflect a carbon pollution price of $20 per tonne of carbon dioxide equivalent (CO2e) in 2020, rising by $10 per tonne annually to $50 per tonne in 2022. For Alberta, the rates will become effective as of January 1, 2020, with future increases effective as of April of each year specified in the tables in Schedule 2.
The Regulations also include a rule prescribing January 1, 2020, as an “adjustment day” for Alberta. If a person holds fuel in Alberta at the beginning of that day, that person may have obligations under Part 1 of the GGPPA, including an obligation to pay a charge in respect of the fuel held at that time.
In March 2016, Canada’s first ministers committed to putting Canada on a credible path to meet or exceed its commitments made under the Paris Agreement. The first ministers agreed that such a commitment would require transitioning to a low-carbon economy by adopting a broad range of domestic measures, including pollution pricing, adapted to the specific circumstances of each province and territory.
The federal government is committed to ensuring that the provinces and territories have the flexibility to design their own policies and programs, while ensuring that pollution pricing applies to a broad set of GHG emission sources across Canada with increasing stringency over time. Provinces and territories can implement the type of pollution pricing system that makes sense for their specific circumstances (i.e. either an explicit price-based system or a cap-and-trade system).
(i) a charge on fossil fuels that is generally payable by fuel producers or distributors, with rates that are set for each fuel such that they are equivalent to $20 per tonne of CO2e in 2019, rising by $10 per year to $50 per tonne of CO2e in 2022; and
(ii) an OBPS for large facilities in emissions-intensive and trade-exposed sectors, with an opportunity for smaller facilities in these sectors to voluntarily participate in the system. footnote 8
In December 2017, the Government of Canada requested that provinces and territories provide information by September 1, 2018, describing how they intend to meet the Benchmark.
In January 2018, the federal government released draft legislative proposals relating to the proposed federal backstop system for public comment. On March 27, 2018, the Government of Canada tabled the GGPPA in the House of Commons, as part of the Budget Implementation Act, 2018, No. 1 (Bill C-74). On June 21, 2018, Bill C-74, including the GGPPA, received royal assent. footnote 9
Also in January 2018, the Government of Canada released a draft regulatory framework for the OBPS outlining the design of the system. footnote 10 Further, in May 2018, the Department of the Environment published a document related to the regulatory framework providing additional details on compliance units and their use in the OBPS. footnote 11 In setting output-based standards, the Department of the Environment is taking into account the emissions intensity and trade exposure of each sector, as well as other factors that may lead a sector to be at competitiveness risk due to the pricing of pollution.
On October 23, 2018, after the review of each provincial and territorial system, the federal government announced its intention to implement the federal backstop system, in whole or in part, in 2019, in any province or territory that has requested it or that does not have a pollution pricing system in place that aligns with the Benchmark. The assessment process considered how the elements of the given provincial or territorial pollution pricing system contribute as a whole to meeting the Benchmark.
At the time of the initial assessment, Alberta’s carbon pollution pricing system was found to meet the Benchmark and was comprised of two components — a carbon levy on fuel and an output-based pricing system. However, the Legislative Assembly of Alberta repealed the Alberta carbon levy effective as of May 30, 2019.
In respect of the Regulations, no impacts have been identified in respect of the Government’s obligations in relation to Indigenous rights protected by section 35 of the Constitution Acts, 1867 to 1982 , modern treaties or international human rights obligations.
Under the GGPPA, the Governor in Council is provided with the authority to determine in which provinces, territories and areas the GGPPA applies, by amending Schedule 1 to the GGPPA through regulations and, with respect to the fuel charge, by amending Schedule 2 to the GGPPA through regulations. Therefore, the Regulations, adding Alberta to Part 1 of Schedule 1 and Schedule 2 to the GGPPA, are the appropriate instrument choice.
Not taking action on climate has costs. More frequent and extreme weather events due to climate change are already costing Canadians billions of dollars a year in insurance costs. Across the country, Canadians have experienced first-hand devastating wildfires, extreme flooding, severe droughts and stronger storms. Experts agree that putting a price on carbon pollution is the most effective and efficient way to cut climate change causing greenhouse gas emissions.
The Regulations will be administered and enforced as part of the fuel charge regime under Part 1 of the GGPPA. Adding Alberta to Part 1 of Schedule 1 and Schedule 2 to the GGPPA does not increase or decrease the legislative or regulatory requirements of the GGPPA, as any requirements relating to the fuel charge under Part 1 of the GGPPA are derived from the GGPPA itself. Accordingly, the Regulations do not increase or decrease the level of costs imposed on Canadians, businesses, governments or other stakeholders.
As the fuel charge requirements under Part 1 of the GGPPA generally apply to fuel producers and fuel distributors upstream in the distribution chain (which are generally medium or large-size businesses), small businesses are not expected to incur significant compliance costs due to the listing of Alberta in Part 1 of Schedule 1 and Schedule 2 to the GGPPA. However, to the extent that small businesses may incur compliance costs, those costs are derived from the GGPPA itself. As a result, the small business lens does not apply to the Regulations.
The Regulations trigger the application of Part 1 of the GGPPA in Alberta, and any requirements relating to the fuel charge under Part 1 of the GGPPA are derived from the GGPPA itself. Accordingly, the Regulations do not increase or decrease the level of administrative burden imposed on business; therefore, the “One-for-One” Rule does not apply.
The Regulations trigger the application of Part 1 of the GGPPA in Alberta, which is an essential component of the Pan-Canadian Approach to Pricing Carbon Pollution. Carbon pollution pricing intends to reduce GHG emissions by encouraging behavioural changes and stimulating investments in low-carbon innovation. The federal backstop enables implementation of the Pan-Canadian Approach to Pricing Carbon Pollution and the extension of pollution pricing throughout Canada. A price on carbon pollution that meets the federal standard, when applied in all jurisdictions across Canada, will support the reduction of GHG emissions and help achieve the objectives of protecting the environment, stimulating investments in low-carbon innovation and creating a sustainable clean-growth economy. It will directly and indirectly contribute to all of the goals of the 2016–2019 Federal Sustainable Development Strategy, but particularly to the goals of effective action on climate change, clean growth and clean energy. footnote 12
The Regulations trigger the application of Part 1 of the GGPPA, which is an essential component of the Pan-Canadian Approach to Pricing Carbon Pollution.
The gender-based analysis plus (GBA+) concluded that the application of the carbon pollution price can have disproportionate impacts on low-income and vulnerable populations. The Pan-Canadian Approach to Pricing Carbon Pollution neutralizes or mitigates these impacts by recycling the direct proceeds to individuals. Carbon pollution pricing, with well designed proceed return as a core element, will minimize the impacts of climate change on Canadians and the Canadian economy contributing to the overall resilience of the country and benefiting all, including potentially vulnerable groups, while maintaining the overall incentives of the price signal on behaviour changes to reduce GHG emissions and contribute to the Government’s climate change objectives.
The Regulations will be administered and enforced by the Canada Revenue Agency and, at the border, by the Canada Border Services Agency as part of the fuel charge regime under Part 1 of the GGPPA.
The long title of the GGPPA is An Act to mitigate climate change through the pan-Canadian application of pricing mechanisms to a broad set of greenhouse gas emission sources and to make consequential amendments to other Acts .
“Guidance on the pan-Canadian carbon pollution pricing benchmark”. Government of Canada.
“Supplemental benchmark guidance”. Government of Canada.
“Pan-Canadian Approach to Pricing Carbon Pollution”. Government of Canada.
SOR/2019-79
SOR/2018-212
“Technical paper: Federal carbon pricing backstop”. Government of Canada.
“Carbon pricing: Regulatory framework for the output-based pricing system”. Government of Canada.
“Carbon pricing: Compliance options under the federal output-based pricing system”. Government of Canada.
“Federal Sustainable Development Strategy”. Department of the Environment.