Two events this week have placed the country on a collision course over greenhouse-gas emissions policy.

On Monday, Green Party Leader Elizabeth May released her version of the Green New Deal calling for an end of all fossil fuel use in Canada by 2050. On May 30 at 12:01 a.m., the Alberta government ended the carbon tax on transportation and home heating fuels.

Distroscale

It has been curious to watch that as the Green Party policies have become increasingly extreme, public support for carbon taxes has tanked. Notwithstanding minor breakthroughs for the Greens on the East and West Coasts, the bigger story has been the voter backlash over carbon dioxide pricing that resulted in new Conservative governments in Alberta, Ontario and New Brunswick, joining those already elected in Saskatchewan and Manitoba.

Now the federal Liberals have to decide how to react. Do they try to outgreen the Greens or do they walk back and moderate their policies to get more public buy-in?

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Knowing the precise moment that Alberta’s consumer carbon tax would come to an end, I expected the federal government would have been poised to implement its own at 12:02 a.m. on May 30. That they didn’t suggests that the case to impose a carbon tax on Alberta is weak.

That is because Kenney has chosen to keep the Stelmach-era carbon tax on large industrial emitters that was established in 2007 and revised by Rachel Notley in 2017. This Carbon Competitiveness Incentive Regulation is a significant policy.

As University of Calgary economist Trevor Tombe notes: “Alberta will continue to levy a carbon tax on more emissions than any other province” through a $30-per-tonne charge on about 140 million tonnes of emissions, slated to go down to $20 per tonne in the fall.

Even though economists are quibbling about whether the changes Kenney intends to make to the program are better or worse than the existing program, the central fact remains: If Alberta is charging a carbon tax on a greater share of emissions than any other province, how can Ottawa impose an additional tax?

A recent paper by the Montreal Economic Institute (MEI) showed just how unfair the federal tax would be to Alberta. Quebec has a cap-and-trade system that sets a price on carbon dioxide emissions through a market with California. This cap-and-trade system only applies to large emitters as well, which is about 40 per cent of Quebec’s total emissions compared to Alberta’s carbon price that applies to about 60 per cent of total emissions.

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In 2018, the average price of credits in Quebec’s cap-and-trade market was $19.30 per tonne.

That’s close to the $20-floor price today, but what happens when the federal price reaches $50? The prices in Quebec are not set by government, they are set by the market. Most of the credits were created from California shutting down its coal plants. With plenty of supply to meet demand there is no reason to believe the price will spike. The MEI says it wouldn’t be fair to force Alberta to pay a higher price than Quebec. They’re right.

The Canadian Taxpayers Federation and Canadians for Affordable Energy have also done good work exposing additional unfairness in how the federal government has levied carbon taxes on consumers.

Newfoundland and Labrador and Prince Edward Island don’t have a carbon tax on natural gas for home heating.

Newfoundland and Labrador, Nova Scotia and Prince Edward Island were allowed to cut their existing provincial fuel taxes before applying the carbon tax. The upshot of that it is that fuel carbon taxes are the equivalent of 0.4 cents a litre in Newfoundland and Labrador, 0.9 cents in Nova Scotia and 1.0 cent in PEI. Yet in other provinces, the federal carbon tax on fuel will ultimately rise to 11.1 cents a litre.

It looks as if the federal government is prepared to cut special deals for regions that vote Liberal and apply punitive regimes on regions that don’t.

This lack of coherence in policy is surely one of the reasons public support for consumer carbon dioxide taxes is vanishing.

If the federal government imposes a federal carbon tax on Alberta, I predict they are going to have a much more difficult time making their case in court.