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On January 1, 2023 Alberta implemented amendments to the Technology Innovation and Emission Reduction (TIER) regulation that were informed from stakeholder engagement which occurred from June to August 2022. The TIER regulation amendments build on Alberta’s 20-year record of leadership on provincial climate policy and will ensure that Alberta’s communities, businesses, industries and Indigenous peoples are set up for success and ready to take advantage of emerging opportunities.

On January 23, 2023, the Government of Alberta hosted a general information session to provide more details on the regulatory changes. Below is a summary of the key highlights from the webinar. Should you have any questions about how your organization will be impacted by the changes, please reach out to us and our team will be happy to assist you.

Goal: To bring TIER in line with minimum federal standards to aid in the continuation of the provincial emissions trading and carbon pricing system in Alberta

Effective date: Applies to 2023 compliance year onward

3 key points

1. TIER Fund Price: Price will increase to match carbon pricing schedule; in 2023 the fund price will be $65/tonne, and increase$15/tonne every year until 2030, when it will reach \$170/tonne
2. Emissions Coverage: Flaring emissions from an aggregate facility is regulated. Changes to opt-in threshold
3. Benchmarks and Tightening: Benchmarks tighten at 2% annually

Opt-in threshold

Currently: Opt-in threshold for Emissions-Intensive and Trade Exposed (EITE) industry for facilities emitting over 10,000 tonnes CO2e/year

Update: Opt-in threshold reduced to 2,000 tonnes CO2e per year for an EITE sector

Emissions coverage

Emissions coverage will expand in the conventional oil and gas sector to include emissions from flaring

• Quantification methodologies for flaring to be published for review later in the year

Benchmarks

Currently: Facility-Specific Benchmarks (FSB) are reduced using a rate of 1% per year with exception of industrial process emissions and emissions associated with electricity used. There is no tightening rate to sector-specific, High-Performance Benchmarks (HPBs)

Update: Reduce FSBs and HPBs at a rate of 2% per year. Situ tightening subject to extra 2% tightening in 2029 and 2030. Oil sands mining and upgrading beginning at a different point and also have extra 2% in 2029 and 2030

Credit generation for CCUS: 2 new credit classes

Sequestration credit (SC): created by converting an emission offset for carbon sequestration. Treated similar to Emission Performance Credits (EPCs) in that they may be banked, traded and used to meet compliance obligations

Capture recognition tonne (CRT): Created by converting a sequestration credit. Enables large emitters and opt-in facilities to reduce sequestered emissions from their total regulated emissions at carbon capture sites. CRTs are unique in that they may only be used in the year they are created, cannot be banked or traded, and are deducted directly from total regulated emissions (therefore not subject to the credit use limit)

Cost containment program

Cost containment program under TIER remains and eligibility requirements stay the same but have been updated:

• Facilities that receive a cost containment designation do so for a fixed 5-year period
• Facilities in the cost containment program are allowed to earn emissions performance credits if they emit below their allowable emissions
• Cost containment program is only available for facilities with the first year of commercial operations before 2023

Provides two types of support for eligible facilities:

1. Credit use limit is waived for facilities in the cost containment program, allowing them to use offset EPCs or sequestration credits to meet 100% of their compliance obligations
1. Historically, those credits had to be below TIER fund price. Allows for potential savings to the designated facilities
2. Where compliance flexibility does not provide sufficient relief, facilities may be eligible for cost containment benchmark allocation. Allocations are based on forecasting compliance cost over the 5 year term using the average fund price over that period.
1. Historically, extra allocations were calculated annually and now they will be calculated upfront on entry to be designated.
2. Facilities that receive the extra allocations will do so for the 5 year period. The values, however, will be tapered so that full allocations are provided for the first 2 years but then are gradually reduced so that eventually facilities will get back to the HPB or FSB after the 5 years.
 Year BCCA Fraction 0 1.00 1 1.00 2 0.75 3 0.50 4 0.25

Negative emissions allocations

Previously, allowable emissions could not be less than 0. Facilities were determined to have negative allowable emissions based on their allocation rates. The update enables facilities to receive negative allowable emissions. This may be necessary for facilities that import heat or hydrogen to generate electricity or for LFE/opt-in facilities that import CO2 for on-site sequestration.

Hydrogen import threshold

The regulation now includes the hydrogen import threshold of 10,000 tonnes per year which trigger mandator regulation of the facility as a large emitter.

• Change was made to ensure emissions allocations associated with the production of hydrogen are properly accounted for, regardless of whether hydrogen is imported or produced on site at a facility.

Updated Global Warming Potentials

• Facilities that also report under SGRR or GHGRP, the updated GWPs apply for 2022 One Window Reporting
• Re-calculation of benchmarks will be undertaken based on these new values
• Benchmarks revised under the benchmarks will include use of updated GWPs
 Species Previous GWP Revised GWP CO2 1 1 CH4 25 28 N2O 295 265

Compliance and reporting due dates

 Item Previous due date New due date Annual Forecasting Report March 31 March 15 Request for new Aggregate designation December 1 of the preceding year November 15 of the effective year Amendment(s) to existing Aggregate December 1 of the effective year November 15 of the effective year Conversion of Sequestration Credits to capture Recognition Tonnes N/A Between January 1 and May 31 of the year following the capture

Credit use limit

• Increase 10% per year, starting in 2024
• Designed to increase credit demand in TIER and allow increased compliance
• Expiry rates reduced
• EPCs from 8 years to 5 years
• Offsets from 9 years to 6 years
 Year Credit use limit 2023 60% 2024 70% 2024 80% 2025 90% 2026 90% 2027 90% 2028 90% 2029 90% 2030 90%

Electricity grid displacement factor

• Grid factor will mirror benchmark after 2030

Currently: grid factor reflects the greenhouse gas emission intensity of the marginal MWh in Alberta’s electricity generation and is used in the calculation for generating offsets under TIER.

 2022 2023 2024 2025 2026 2027 2028 2029 2030 Electricity benchmark (tCO2e/MWH) 0.37 0.3626 0.3552 0.3478 0.3404 0.333 0.3256 0.3182 0.3108 EGDF (tCO2e/MWh) 0.53 0.52 0.4901 0.4602 0.4303 0.4005 0.3706 0.3407 Matches HPB onward

Offset project reporting period

 Vintage year Pre-2022 2022 2023+ Reporting period No max length No max length 2 years maximum Report due December 1, 2023 December 1, 2024 6 months after end of reporting period

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