greenhouse gas

Alberta expands TIER regulation to reduce scope of federal carbon taxes



Canada Publication August 21, 2020

Alberta’s Technology Innovation and Emissions Reduction Regulation (TIER) has been amended to allow more industrial facilities to voluntarily opt in to Alberta’s carbon emission reduction regime and not be subject to federal carbon taxes.

TIER applies to all facilities in Alberta that emit 100,000 tonnes or more of greenhouse gases (GHGs) per year. Such facilities are not subject to federal carbon taxes on fuel consumption. Previously, facilities with emissions under 100,000 tonnes per year could voluntarily opt in to be regulated by TIER if they either competed with a facility subject to TIER or competed in an “emissions-intensive-trade-exposed sector” (EITES) and had direct emissions of 10,000 tonnes or more per year.

On July 30, 2020, the definition of EITES was amended to include more types of facilities that can voluntarily opt in to TIER, thereby allowing more facilities to avoid federal carbon taxes on fuel consumption.

Other amendments to TIER expanded the ability of oil and gas companies to aggregate conventional oil and gas facilities to voluntarily opt in to TIER.s


TIER is Alberta’s key regulation for reducing industrial emissions of GHGs. It sets emission reduction requirements for large industrial facilities using a facility-specific benchmark approach for most facilities.1

A facility subject to TIER must reduce its emission intensity by 10% relative to the facility’s historical average emissions intensity, and is subject to reporting and verification requirements. The 10% reduction requirement will be subject to a further 1% reduction or tightening requirement each year.

The federal carbon tax

On January 1, 2020, the federal government began applying a carbon tax in Alberta on fossil fuel consumption under the Greenhouse Gas Pollution Pricing Act (GGPPA). The federal tax is paid by fuel producers and distributors and they generally collect it from their customers. Currently the tax is $30 per tonne of GHGs. It is scheduled to rise to $50 per tonne in 2022.

The GGPPA allows the federal government to declare a provincial carbon pricing scheme to be equivalent to the federal carbon tax. In December 2019 Alberta’s TIER was deemed to be equivalent, meaning Alberta facilities subject to TIER do not have to pay the federal carbon tax on fuels they consume provided they obtain a GGPPA exemption certificate from the Canada Revenue Agency.

Expansion of the EITES opt-in

Prior to July 30, facilities with emissions between 10,000 and 100,000 tonnes per year competing in a sector with a certain level of “emission intensiveness” and “trade exposure” could voluntarily opt in to TIER. Emission intensiveness is the full carbon pricing costs of the sector divided by the gross value added by the sector. Trade exposure measures the percentage of the types of a facility’s end products produced outside Alberta and that are not subject to TIER.

The opt-in was expanded by:

  • lowering the emissions intensiveness needed to qualify for the opt-in; and
  • broadening what is considered to be a trade-exposed sector.

Alberta Environment and Parks (AEP) administers TIER. AEP estimates about 100 small industrial facilities and 20 medium-sized facilities are now additionally eligible to opt in, including facilities in the coal, power, agriculture, forestry, chemical, metal and fertilizer sectors.

Continuation of the direct competition opt-in

Facilities that compete directly with facilities to which TIER applies can continue to voluntarily opt in to TIER. This has not changed.

AEP has published a list of sectors in Alberta that directly compete with TIER-regulated facilities. The list includes facilities in the agribusiness, chemical, coal, fertilizer, food processing, industrial sand, metal processing, oil and gas, pipeline, power and refining sectors.

Conventional oil and gas aggregation opt-in

In addition to the EITES and direct competition opt-in pathways, TIER allows eligible conventional oil and gas facilities with less than 100,000 tonnes of emissions per year to voluntarily opt in by aggregating two or more conventional oil and gas facilities and treating them as a single facility for TIER purposes. The aggregation streamlines reporting and administration.

Aggregated facilities that opt in must collectively reduce their intensity of emissions from stationary fuel sources by 10% each year relative to the aggregate facility’s historical benchmark. Unlike other facilities regulated by TIER, aggregated conventional oil and gas facilities are not subject to the 1% tightening each year.

The recent amendments to TIER now allow additional conventional oil and gas facilities to be added to an aggregated facility during a compliance year. The amendments also expanded the definition of who is a person responsible for complying with TIER.

The opt-in process

A facility has to apply to AEP to opt in, and AEP has to accept the facility as an opt-in facility. Verification by a third party is not required to opt in.

The deadline to opt in for the 2021 compliance year is September 1, 2020, and for 2020 the deadline is November 1, 2020.

Is the opt-in beneficial?

It is up to each facility owner to understand its current and future federal carbon tax costs and develop its own cost estimates for opting in to and complying with TIER, including the costs and efforts required to prepare and file a facility-specific benchmark application, TIER compliance reports and third-party verification of its emissions. It may not make sense for all facilities to opt in, but it is an option that should be considered. For instance, conventional oil and gas facilities that directly consume little fuel during operations pay little in federal carbon taxes, such as those largely using electricity from the grid instead of fuel gas, may not see cost savings by opting in to TIER.

Other facilities may see significant savings, especially where the emission reduction opportunities at the facility are large and economically attractive. For conventional oil and gas, where a facility can reduce its emissions economically and it is aggregated with other facilities where emission reduction opportunities are scarce and expensive, resulting in the average of the emission reductions costs from all of the facilities being much less than paying the federal carbon tax at each of the individual facilities, the opt in to TIER may be very attractive.

The Alberta government has calculated the cost savings in 2020 for TIER-regulated oil and gas facilities to be 90% compared to what would have been paid under the federal carbon tax, or about $450 million in aggregate for the sector.


1   For electric power facilities a high-performance benchmark is used of “good-as-best-gas” instead of a facility-specific benchmark.

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