Alberta is inching towards a market for carbon trading, a means for big greenhouse gas emitters to meet the provincial government's requirement to become more efficient.

Effective March 31, 2008, the 100 or so plants in the province that produce more than 100,000 tonnes of greenhouse-gas emissions have to take action to cut their carbon intensity by 12 per cent, retroactive to July 1, 2007.

Alberta is targeting the biggest industrial emitters of greenhouse gases with its legislation, which came into effect July 1.

That means the plants will have to produce 12 per cent less emissions for each unit of output. But total emissions could increase if production rises.

The deadline was set by the province under new greenhouse gas legislation that came into effect July 1. The government said the bill makes the province "the first jurisdiction in North America to impose greenhouse gas reductions on large industrial facilities."

The big operations, led by electricity generating plants that burn coal and oilsands producers, can choose to:

• Cut emissions by becoming more efficient.
• Pay $15 a tonne for emissions above the new efficiency target, with the money going to an Alberta fund that will invest in projects or technology to cut emissions in the province.
• Buy an offset in Alberta to apply against their emissions total.

That's where the market will come in. The government is consulting over the summer about how a market might work so a system will be in place for the March 31 compliance deadline, an official with Alberta Environment said.

The market is not expected to be large; the government said the total cost of compliance with the new act is estimated to be only $177 million — less than one-tenth of one per cent of Alberta's $242-billion economy in 2006.

Farmers could be carbon sellers

The province's Agriculture and Food Department said farmers who sequester carbon by reducing cultivation could become sellers of carbon credits.

A plant that becomes efficient and cuts intensity by more than 12 per cent could sell its extra cuts, as could operations producing less than 100,000 tonnes that voluntarily reduce emissions.

Foresty, agriculture and transportation projects that hope to qualify "must have legitimate greenhouse gas reductions," the province said.

But developing a carbon market wil not be easy, said a man who has been there. Neil Eckert, head of the European Climate Exchange, the carbon trading market in London, said trading volumes are growing, and the market will help reduce Europe's emissions.

But "you're going to have some teething problems," he said. "You've just got to have a lot of resolve and go for a good system."

There is also a carbon market in Chicago, the Chicago Climate Exchange, and the Winnipeg Commodity Exchange would like to start a carbon market.