What’s New with the Carbon Tax

On January 1, 2018, the Alberta carbon levy increased from $20/T to $30/T. Beyond 2018, there is an intention to increase it further, but no firm schedule for doing so. However, pending Federal legislation will require a rate of $50/T by 2022, and it is the expressed intention of the NDP government to meet the Federal standard. The net effect on the consumer of the $10 increase will be an increase of $.0225/litre of gas and $.50/GJ for natural gas. Electricity costs to the consumer will be affected little if at all, because of a complex system of government guarantees and subsidies to producers. Combined with the effects of pass-through from commercial payers, the effect on the average household is estimated to be in the range of $150-200 per year, and for about 60% of Alberta households, this will be offset partially or entirely by a rebate. So the good news is that the latest increase will not have much effect on the average Albertan. This is also the bad news, since the intent of the carbon tax was never to raise revenue, but to induce a reduction in fossil fuel consumption by Albertans, and the current increase is not a substantial incentive to do that.

Furthermore, the fixed rate of $30/T applies to less than half of Alberta’s total CO 2 emissions. The oil sands alone account for 26% of the total. For the oil sands and other large industrial emitters that are exposed to international competition, emissions will be regulated by the newly promulgated Carbon Competitiveness Incentive Regulation (CCIF), which is basically a variation of cap and trade.The intent is to incrementally lower emissions over time, but, initially at least, this sector will be paying far less than $30/T.

Overall, we are left with a kludge, a messy patchwork of regulation and subsidy designed to address what the NDP sees as the political realities in Alberta, including its own protective approach to the oil sands.

Despite these defects, the NDP is at least trying to move in the right direction. The UCP, on the other hand, has promised to make repeal if the carbon tax its first order of business, while ignoring the problem that brought it into being. Faced with the resulting imposition of a Federal carbon tax, Jason Kenney makes brave noises about fighting it in court, knowing full well that his efforts would be futile. He could then drag out the old Conservative mantra about standing up for Alberta against Ottawa and milk that for support.

Alberta deserves better, and the Green Party of Alberta would deliver it.

Carl Svoboda – Public Finance