Linkages Workshop November 14/15 2007

1. Linkages Workshop November 14/15 2007

2. Outline • Alberta context • Regulatory framework • Compliance options • Carbon connections

3. Provincial Economy • Fossil-fuel Value-Add Focused • Resource extraction, upgrading and transport • Oil sands growing as a major source of secure energy • Driver of economic and emissions growth (oil sands, upgrading) • Thermal-based electricity • Coal at 60% generation • Growing wind generation (400% since 2000) • Disbursed population • Limited but growing concentration in a few urban areas • Transportation accounts for 15% of total greenhouse gas emissions • 100 large point source facilities account for about 50% of total emissions • Ideal geology for carbon sequestration

4. Alberta’s Emissions(Million Tonnes of CO2 Equivalent) Business As Usual Projections (average estimate) 305 MT 2004 Emissions: 235 MT 1990 Emissions: 168 MT Share of Emissions Associated with Energy Exports

5. Alberta Approach • Long term issue • Need to start with practical, achievable objectives • Policy certainty for industry • Large investments being made now – expensive to retrofit, investment is for 40 years+ • Implementation of new technology will be a big part of the long-term solution. • Linked to our unique role as North America’s energy supplier • Market instruments are needed to bridge the gap between current emissions and long-term solutions. • Consumers must be part of the solution • Requires strategic and focused investment in transformational changes (technology, behavioral, etc.)

6. Alberta Mitigation Options Send Price Signal Trading Mechanisms to Bridge Technology Application

7. Specified Gas Emitters Regulation • Under the Climate Change and Emissions Management Act passed in 2003 • Applies to all facilities in Alberta that release over 100,000 tonnes of CO2e • Facilities have been reporting since 2003 • Reduction targets off of baseline • Emissions/production=baseline intensity • 12% reduction off of baseline (adjusted targets for new facilities) • For facilities that are not increasing production (majority) – intensity target = absolute • Emphasis is on the price signal

8. Options to Achieve Targets • Emission Performance Credits • These are credits for better than target performance • Fund Credits • Invest in the Climate Change and Emissions Management Fund at $15/tonne – funds used to develop or invest in Alberta based technologies, programs, and other priority areas • Emission Offsets • Action (project) must be taken in Alberta on or after January 1, 2002 • Not otherwise required by law • Must be verified by 3rd party

9. The Carbon Market • Total potential carbon demand is about 10-12 million tonnes annually • Focus of the system is on compliance – carbon as a commodity secondary • Third party verification not government issuance of credits • Government to audit at back-end • Performance credits based on verified compliance reports • Offset Credits created based on verification of emission reductions using government approved protocols • 15 approved thus far • Deals being done through bilateral contracts / over the counter • Registry being finalized for posting of key project information • Growing interest in carbon exchanges

10. Carbon Connections • Overarching framework less critical to linkages than the ‘carbon foundation’ • Framework outlines how a tonne fits to meet regulatory objectives • Technical level is where the tonne is created • For both ex-ante and ex-poste • Need common weights and measures at the foundational level • Industry reporting • Offset protocols • Verification / Assurance • Linkages should be tied to the policy context • Will best inform how systems can bridge • A coherent international market will evolve, not simply occur • There is a paradigm shift in moving from exploring to implementing