The Alberta carbon levy was a contentious issue even before the election was called. It then became a hot topic and buzz word on the campaign trail.
But how well is it understood? What does it mean for Albertans? And, are misconceptions being politicized to infuriate or rally voters?
Is the carbon tax ‘a cash grab’?
“We need to recognize that the NDP’s carbon tax is just a cash grab,” UCP leader Jason Kenney said during the April 4 leaders debate. “All economic pain and no environmental gain.”
Alberta’s consumer carbon tax came into effect Jan. 1, 2017. The levy is charged on all fuels that emit greenhouse gases when combusted at a rate of $20 per tonne in 2017 and $30 per tonne in 2018. The federal carbon tax took effect April 1, 2019, applying to provinces that refused to impose their own emissions pricing.
Economist Trevor Tombe says one of the biggest misconceptions of the carbon tax is that it doesn’t really do anything.
“You often hear a statement that, ‘It’s all economic pain and no environmental gain,’ for example. But there’s a lot of evidence, from B.C. in particular — who’s had a carbon tax for the past 10 years or so — that people do respond to price increases.
“When things get more expensive, you try to shift into other things, not everyone of course, but overall,” said Tombe, who works out of the University of Calgary’s School of Public Policy.
“Based on the B.C. experience, emissions in Alberta may fall between five and 15 per cent lower than they would be without the carbon tax.”
Watch below (Nov. 23, 2017): Alberta’s carbon tax is set to go up in the New Year. There are some big claims making the rounds on social media about exactly how hard it will hit Albertans in the wallet. Tom Vernon sets the record straight.
Canada’s Ecofiscal Commission, a non-partisan group of academics and business leaders focused on economic and environmental solutions, just published a report on carbon tax misconceptions.
The worst, the head of the commission says, is that a carbon tax doesn’t work.
“If you look at B.C., if you look at California, if you look at the U.K., if you look at Quebec, these policies do work. What they don’t do is work overnight,” Chris Ragan says.
At least five different published studies have found British Columbia’s carbon tax, introduced in 2008, has cut overall emissions, reduced per capita gasoline use by seven per cent, improved average vehicle efficiency by four per cent, cut residential natural gas use by seven per cent and diesel use by more than three per cent.
Meanwhile, the province enjoyed about three per cent annual economic growth between 2012 and 2017.
Energy economists such as Mark Jaccard at B.C.’s Simon Fraser University argue that regulations get faster, bigger results and are politically easier to enact (as opposed to a tax). The big cuts to Canada’s carbon emissions, he said, have come from closing coal-fired power plants and clean fuel rules.
“Some people will tell you you have to have carbon pricing,” he said on a recent podcast. “That’s not true. You could do it all through regulations.”
Is it a ‘massive’ expense for Albertans?
Tombe thinks this is the other broadly misunderstood aspect of Alberta’s consumer carbon tax.
“That it will add thousands of dollars per year in household costs of living. We see claims along those lines very often.”
In Alberta, the $30/tonne levy is applied on fuel purchases like gasoline (for filling vehicles) and natural gas consumption (for heating buildings).
“For the average household, it increases annual costs by about $450 per year or so,” Tombe said. “That’s counterbalanced by a refundable tax credit — $300 for an individual, it’s higher for a family, it grows with the number of children, it can be as high as $550 per year.
“So the net effect of both of those policy changes for the majority of Alberta households is fairly modest.”
Albertans earning less than $47,500 a year and families earning less than $95,000 a year get a full rebate. The NDP estimates 60 per cent of Alberta households qualify for a full or partial rebate.
Rebates are automatically applied to Alberta residents who file tax returns and meet the income criteria.
How much does the carbon tax cost businesses and commercial facilities?
“It really depends on the age of your building, the size of your building and so on,” Tombe said. “But roughly speaking, on average, the amount of natural gas that’s used for heating commercial building spaces is about 1 gigajoule of natural gas per square metre, for example. The carbon tax is $1.51 per gigajoule.
“Based on how large your space is, you’re looking at about $1.50 per square metre in heating cost from the carbon tax.”
Watch below (April 18, 2017): the province provided details on energy efficiency rebates available to Albertans. They’re part of a climate strategy that includes a carbon levy. Tom Vernon looks at where revenues are going.
Can Alberta just not have a carbon tax?
Kenney has said one of the first things a UCP government would do, if elected April 16, would be eliminate Alberta’s consumer carbon tax.
“That would be extremely easy to eliminate,” Tombe said.
“It could be done as quickly as legislation could pass through the house. The most time-consuming process of eliminating the carbon tax in Alberta would be to actually have the legislation written and passed. But once that’s done, it could be done overnight.”
But Albertans themselves would still be faced with a carbon tax — a federal one. On April 1, 2019 the federal government applied a levy to every province that hadn’t already implemented their own form of carbon tax.
No province would have two carbon taxes, but if Alberta got rid of its own levy, the federal one would kick in.
“If a province were to withdraw its own price on carbon — as we’ve seen Manitoba do, for example, or more recently, Ontario — if Alberta were to eliminate its charge on fuel, then we would see very shortly after that the federal government come in and impose its carbon tax,” Tombe explained.
“So the question of what happens to carbon taxes in Alberta and Canada won’t be solved by Alberta’s election one way or the other; it’s going to be determined by the federal election later on in the year.”
Alberta’s carbon tax translates to six cents a litre of gasoline. The federal tax is four cents a litre.
Watch below: On Day 14 of the Alberta election campaign, the United Conservative Party took aim at the federal carbon tax.
Martin Olszynski, a University of Calgary law professor, said all Ottawa would have to do is pass an order in council to bring Alberta under the same federal tax that recently came into effect in Saskatchewan, Manitoba, Ontario and New Brunswick. None of those provinces had its own tax.
“It’s a matter of getting cabinet together and writing the order,” Olszynski said.
Looking to the courts to block Ottawa’s tax is an iffy bet, he suggested.
In court hearings on Saskatchewan’s anti-tax constitutional challenge, Olszynski said, judges asked if allowing Ottawa to regulate greenhouse gases as a matter of “national concern” would impede provincial efforts to do the same.
“If you recognize this matter as a matter of national concern, you would strip away the provincial ability to regulate these things,” he summarized.
But Olszynski notes that courts have recognized that many issues – especially environmental ones – are best managed jointly between national and provincial governments.
Other federal arguments in favour of a national carbon tax are backed by decades of case law, Olszynski added.
Why has the carbon tax become politically volatile?
On the provincial level, the UCP are campaigning on a promise to scrap it. Kenney has said he would sue Prime Minister Justin Trudeau’s Liberal government if he tries to impose the federal carbon tax in Alberta.
NDP leader Rachel Notley says the carbon tax is a way to protect the future. She says the NDP’s rebate plan is working and the air is getting cleaner — that the party’s approach has already reduced greenhouse gases by seven megatons. The tax, she says, is paying for projects like public transit and flood protection.
The carbon tax has undoubtedly become a divisive political issue and one parties are capitalizing on in the hopes of motivating voters.
“The carbon tax is unpopular and it’s unpopular because it is visible,” Tombe said.
“GST is also not popular. Think back to the federal election after Brian Mulroney introduced the GST. The then-Liberal government campaigned strongly against the GST, a very unpopular tax because we see it on a regular basis… you’re exposed to it, you’re reminded of it all the time,” Tombe added.
Political scientist Duane Bratt believes there are a few reasons it’s coming up time and again on the election campaign trail.
“I would say the first is the way the NDP sold it,” Bratt said.
“There could have been lots of reasons to have a carbon tax, but they directly linked it to social license for pipelines and the pipelines haven’t been built yet. That’s the problem that the NDP is having.
“It’s very possible, I believe, that the pipeline eventually will be built in due part to the introduction of the carbon tax. But that doesn’t matter for this election because they’re getting the pain without the benefit,” Bratt said.
Another factor, he says, is timing: when the tax was implement in the context of the economic climate.
“I believe the NDP, after they were elected, didn’t think the recession would last as long as it did. Most experts were looking at two years, not four years,” Bratt said. “That’s another problem that they’ve had; just the economic downturn combined with a brand-new tax.”
Watch below (Oct. 5, 2018): Ontario Premier Doug Ford is in Alberta Friday to speak out against the federal carbon tax plan. Jason Kenney will be with him at a rally in Calgary. Tom Vernon reports.
— With files from Bob Webber, The Canadian Press