Premier Danielle Smith speaks with reporters in this July 2024 file photo. Smith announced Monday that the province will temporarily freeze the TIER levy at its current level.--CP FILE PHOTO
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The industrial price on carbon emissions – one of the key considerations in ongoing city power division planning – could now be the subject of talks between the province and Ottawa
Premier Danielle Smith announced Monday that Alberta will freeze the levy, known as TIER, at current levels as she hopes to open new talks with the federal government.
That comes as the newest Liberal government prepares to potentially change tact to bolster economic productivity in the county, but also as the City of Medicine’s Hat’s carbon compliance costs under the program are scheduled to quadruple over five years.
Smith and Environment Minister Rebecca Schulz told a press conference on Monday that the longstanding schedule of increasing to the per tonne rate for emissions has become onerous and needs to be “recalibrated.”
That, said Smith, is obvious after new Prime Minister Mark Carney set the consumer levy at zero in March as he proposed a review in light of affordability issues.
“It shows the price has gone too high to bear and it’s reasonable to expect that it’s parallel in the business community,” said Smith. “That’s foundationally why we have the dispute we’re having with the federal government.”
“Let’s co-ordinate around a 2050 target so you can have a reasonable timeframe to implement technology, develop new solutions, see the retirement of equipment (over a longer timeframe.)”
This winter, Saskatchewan Premier Scott Moe’s government moved to eliminate the industrial carbon price, which is charged by provinces, like Alberta, through “equivalency” agreements.
Smith has listed provincial control of industrial carbon pricing, as well as clean electricity regulations on a 2035 timeframe, as Alberta positions itself with the new Liberal government.
There will be no increase in 2026 for the cost per tonne for heavy emitters. It will remain at $95 instead of rising to $110. It is scheduled to reach $170 by 2030. City of Medicine Hat officials have warned since 2020 that escalating carbon fees could challenge the viability of the municipally owned power production company by later this decade.
Currently, they have listed carbon compliance costs as one of five key areas they are weighing as they plan upgraded facilities, or other spending that could cost hundreds of millions of dollars.
On Monday, city officials said the division has built its operating budget based on expected rates for the next two years, but the schedule of changes means the benefit of a lower-than-expected rate wouldn’t show up in payments until in mid-2027
“While power prices impact how we run the facilities, our (carbon compliance) obligations would be reduced,” said Travis Tuchscherer, energy business analyst with the city.
“A $15 change (in rate) translates to a $1.6-million to $2.5-million change for us,” said Tuchscherer. “If it keeps going up, that compounds .. (and) makes a big difference.”
Schulz said the pause on increases was “indefinite,” though Smith says the move is to allow adjustment, not necessarily cancellation.
“We’re not proposing it goes to zero,” she said Monday. “We’re proposing it stays where it is while we have some kind of recalibration about how this is going to impact the business community. What we have heard from the business community is that it’s too high.”
The decades old Alberta Technology Innovation and Emissions Reduction (TIER) regulation charges large emitters based on their current emissions compared to facility specific profile and past emissions.
That translates to charging the fee on emissions above certain levels that that become more stringent over time. With both the price rising and allowable limits falling, costs are compounded for companies that take no action.
A third-party analysis of the city’s carbon compliance outlook, presented last fall by consultant KPMG, stated that without action to lower or offset the carbon profile at the city’s natural gas-fired power complex, costs could quadruple from about $11 million in 2024 to $40 million per year in 2030.
The energy division posted a $12-million dividend to the city in 2024, a steep decline from 2023, blamed on very low power prices on the provincial grid compared to record highs the year before.
Solar outlook
City officials are still determining the effect of Monday’s announcement on the potential plan to build first phases of the Saamis Solar Park, which is proposed to, in part, lower emissions and produce TIER credits.
That project is now subject to final design engineering and updated economic analysis. If encouraging, a decision could come to council this year, administrators have said.
Specific to an initial 75-megawatt phase of Saamis, the city’s energy division estimates it would earn revenue for offsetting 63,000 tonnes of carbon coming online, at an expected rate of $125 per tonne in 2027. That would equal $7.2 million per year, at that rate, according to city analysis.
The freeze in rates will also halt scheduled increases to value the carbon credits earned by companies, including the city which transfers credits earned for operating a yard-waste composting facility.
