Drilling into Policy Effectiveness: An Evaluation of Carbon Pricing Policies in Oil and Gas Jurisdictions

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dc.contributor.advisorWinter, Jennifer
dc.contributor.authorMathurin, Neuczki
dc.date.accessioned2018-12-12T19:09:06Z
dc.date.available2018-12-12T19:09:06Z
dc.date.issued2018-09-10
dc.description.abstractGovernments around the world are intensifying their efforts to address climate change. Since carbon dioxide and other greenhouse gases build-up in the atmosphere and contribute to climate change, climate change requires collective action. Jurisdictions with large oil and gas sectors face a two-fold challenge. They must promote emissions reductions in a high-emitting sector and ensure the sector maintains its economic prosperity to support the local economy. Failure to strike this balance can result in carbon leakage, which will shift emissions and economic activity to jurisdictions with less stringent policies. If more carbon pricing instruments are shown to effectively decouple emission reductions and economic growth, more responsible resource development can be achieved. Alberta faces this particular challenge. The oil and gas sector is Alberta’s largest emitting sector and the cornerstone of the province’s economy. On January 1, 2018, the provincial government replaced the Specified Gas Emitters Regulation with the Carbon Competitiveness Incentive Regulation (CCIR). As part of its Climate Leadership Plan, the provincial government designed the CCIR to meaningfully reduce emissions while allowing the province’s high-emitting sectors to remain globally competitive. Among the world’s climate leaders, Norway and California are also important global oil and gas producers. This paper compares Alberta’s CCIR with Norway and California’s oil and gas-specific policies to measure the CCIR’s performance at reducing the sector’s emissions and maintaining the sector’s competitiveness. Carbon pricing is widely accepted as the most economically efficient means to reduce GHG emissions. It increases the price emitters pay to release or produce emissions by an amount meant to reflect the environmental cost of climate change. Carbon leakage becomes a concern when the increased cost of production with the carbon price puts emitters at a disadvantage relative to foreign competitors. Emissions-intensive, tradeexposed (EITE) sectors are particularly vulnerable to carbon leakage. The oil and gas sector is often included among EITE sectors and requires specific policy considerations. The relative importance of Norway, California and Alberta’s oil and gas economies provide a common benchmark for comparing their carbon pricing policies. Carbon taxation and emissions trading systems are the primary carbon pricing instruments. While Norway and California’s approaches use one or both of these instruments, Alberta’s CCIR uses a variation of direct emission pricing and permit trading. Despite different policy designs, all three approaches are effective policies based on their administrative costs and economic efficiency. The ultimate objective of carbon pricing policies is to mitigate GHG emissions; however, emissions reductions are challenging to compare across jurisdictions. Since their respective policies were implemented, Norway and Alberta’s oil and gas emissions have increased, while California’s sector-specific emissions have stabilized. Economic growth, complementary policies and emissions-intensive extraction methods exert a greater influence on emissions trends than carbon pricing. The effects of carbon pricing policies may be better observed though changes in emissions intensities, but these are also influenced by other factors. In addition to different emissions influences, each jurisdiction has unique needs and considerations that influence policy features. Despite strong similarities between Norway and Alberta’s oil and gas sectors, Norway excludes the oil and gas sector from competitiveness assistance. This position limits comparison between the two jurisdiction’s carbon pricing policies. Alberta’s CCIR is more similar to California’s emission trading system, particularly through its EITE classification and competitiveness assistance measures. Overall, the CCIR provides more compliance flexibility. This added flexibility further enhances Alberta’s competitiveness assistance. The CCIR is designed to promote cost-effective abatement and builds off a predecessor that allowed the oil and gas sector to continue to grow. Its short-term provisions that affect even coverage of facilities and minimize stringency escalation should not hinder the policy’s longer-term performance. As the world shifts towards a low-carbon economy, jurisdictions that want to continue to benefit from the demands for fossil fuels must demonstrate responsible resource development. Alberta’s CCIR is well positioned to achieve emission reductions and maintain competitiveness. It offers other oil and gas jurisdictions one more carbon pricing solution to address climate change.
dc.identifier.citationMathurin, N. (2018). Drilling into Policy Effectiveness: An Evaluation of Carbon Pricing Policies in Oil and Gas Jurisdictions (Unpublished master's project). University of Calgary, Calgary, AB.
dc.identifier.doihttp://dx.doi.org/10.11575/PRISM/34934
dc.identifier.urihttp://hdl.handle.net/1880/109312
dc.language.isoen
dc.publisher.departmentSchool of Public Policy
dc.publisher.facultyFaculty of Graduate Studies
dc.publisher.institutionUniversity of Calgary
dc.titleDrilling into Policy Effectiveness: An Evaluation of Carbon Pricing Policies in Oil and Gas Jurisdictions
dc.typemaster thesis
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