Capital Power (TSX:CPX) CEO Brian Vaasjo cheered the changes at a news conference alongside Environment Minister Shannon Phillips on Thursday, saying more green energy investment is likely to result.
"Not only is it the right thing to do, it's the right time to do it," said Vaasjo, whose Edmonton-based company generates power from coal, natural gas and renewables.
The basic structure of the Specified Gas Emitters Regulation is staying intact for now, but the reduction targets and carbon price are being hiked starting next year.
The 103 facilities that emit more than 100,000 tonnes of CO2 a year must now aim to reduce their carbon intensity by 20 per cent in 2017, versus 12 per cent currently. Emitters have the option of improving their facilities, buying Alberta-based offsets or paying into a technology fund.
For emissions that go above that threshold, the price of carbon is doubling to $30 a tonne in 2017. When a facility's total carbon emissions are taken into account, the new carbon price works out to about $6 a tonne, more than triple the current level.
University of Alberta economist Andrew Leach will lead a panel on the province's broader energy policy, with the goal of having a report in time for the climate talks in Paris in December. That will be held in tandem with an oil and gas royalty review to be announced shortly, said Phillips.
The president of Shell Canada, a major oilsands miner, said the government's announcement "is a clear signal that 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 before," said Lorraine Mitchelmore.
The Canadian Association of Petroleum Producers, the main industry lobby group, said it's pleased the changes will be phased in gradually and that money raised will continue to fund technology.
But it said with a corporate tax hike to 12 per cent from 10 per cent and the higher carbon levy, the industry could face nearly $800 million in additional costs over the next two years.
"We will continue to work with the Alberta government to protect jobs and investment to keep the industry healthy for all Albertans," said CAPP president Tim McMillan.
With oil prices continuing to hover in the US$60 a barrel range, it's not a good time to be raising costs for oilsands players, said Jackie Forrest, vice-president at ARC Financial.
"Although this may only equate to less than a dollar of extra cost for a company when it is fully ramped up, that is actually quite material today because there's not very much free cash flow coming from these operations."
Analysts at Desjardins Capital Markets said they expect the tweaks to be "very manageable," but they'll serve as "another overhang on the sector," along with low oil prices and the royalty review.
The Desjardins report predicts Thursday's announcement is just the first phase of a major overhaul. A regime similar to British Columbia's $30-a-tonne broad-based carbon tax would not be "unmanageable," the analysts wrote.
"The big question, however, is what happens to royalties with the rollout of a carbon tax. Perhaps the NDP government will determine that reducing greenhouse gas emissions is a priority and royalties will actually be decreased to ensure ongoing investment in the lifeblood of the Alberta economy."
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