In an effort to back her Alberta Sovereignty within a United Canada Act, Premier Danielle Smith claimed the federal government is using collected tax money to buy votes in the Eastern provinces and Albertans are suffering because of it — a claim experts say is just not true.
“We have a system set up where they overtax us and then they dribble a little bit of money back to us if we’ll do our programs their way,” Smith said Saturday on 630 CHED’s Your Province. Your Premier. “And then they take the rest and they use it to buy votes in Eastern Canada.”
But the reality is, all that money is going back to Alberta and not being spent by the federal government.
There are two parts to the federal carbon tax pricing system: the first includes a regulatory fossil fuel charge (which includes taxes on gasoline and natural gas) and the second is the Output-Based Pricing System (OBPS), which is a performance-based system for industries.
The federal fuel charge currently applies to Alberta.
While there is a charge upfront for purchasing gas and diesel, 90 per cent of the taxes collected under the fuel charge are returned to Albertans every three months through direct deposit, explained Trevor Tombe, a professor of economics at the University of Calgary.
The 90/10 split on the federal fuel charge applies to every province and territory, Tombe said, except B.C., which has a fully independent model.
The remaining 10 per cent is currently being held by the federal government while they work to decide what sector that money goes into. But the government is currently leaning towards it going to Indigenous groups, farmers and targeted industry, Tombe said.
“What is done with this revenue is a federal choice,” said Tombe, adding that Smith may very well be “building up the idea of taking back the control of the revenues.”
The second part of the federal carbon tax is that for industries, the policy for which each province can select and create itself.
Alberta vs. Quebec
Smith has compared Alberta to Quebec — a province that has notoriously tried to separate from and distinguish itself from Canada for decades — multiple times since she first started talking about the Alberta sovereignty act during the UCP leadership campaign.
But her remarks hold little weight against the truth.
During Your Province, Your Premier, Smith said the federal government is, once again, acting unconstitutional by passing more favourable policies in other provinces, and that is the reason why Alberta needs her sovereignty act.
“I almost fell off my chair when I had my courtesy call with Quebec Premier Francois Legault and he told me, ‘Oh well you know, we don’t have the same retail carbon taxes as you do because we have a cap-and-trade system and we’re treated differently.’ I don’t think that that’s constitutional,” Smith said on air.
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Smith continued on to say the nature of the problem is that Alberta is treated differently by the federal government than other provinces do — specifically Quebec.
“Because if we’re talking about passing unconstitutional laws, this is exactly the kind of thing I’m talking about.
“The federal government passes policies that treat us differently than other parts of the country, and then we have to go to court to say, Oh, well, you can’t do that under the Constitution.
“This is the kind of thing that is offside, is these kinds of policies.”
The federal government does set the precedent by creating a benchmark, which outlines “the criteria that carbon pricing systems implemented by provinces and territories need to meet,” according to the federal government.
However, provinces and territories do get to choose how they regulate carbon emissions charges.
“The goal of the benchmark is to ensure that carbon pollution pricing applies to a broad set of emission sources with increasing stringency over time in order to reduce GHG emissions at lowest cost to business and consumers and support innovation and clean growth,” the federal government writes on its website.
Alberta, due to its sprawling oil and gas industry, has the largest amount of emissions of any other province or territory, with Ontario and Quebec following behind.
Ontario has the same framework setup as Alberta with a federal fuel charge and provincial OBPS, while Quebec has a cap-and-trade system.
Alberta’s provincial system meets the federal benchmark for its emissions. According to the federal government, provinces — like Alberta — that have its own carbon pricing system (provincial OBPS) “use the proceeds as they see fit.”
Some of the proceeds collected under the provincial plan are returned to industry through subsidies, some goes into funds that are used for energy innovation, and some goes towards the Energy War Room — “a quasi-government P.R. entity that aims to support Alberta’s oil and gas development,” and was a campaign promise during the last provincial election, Tombe said.
The federal government has been clear since it introduced Canada’s climate plan introduced in 2020 that the price on pollution would increase every year until 2030.
It is also revenue neutral, meaning the government will return the money it collects from these taxes to the public.
As for the cap-and-trade program that Smith said Quebec unfairly has, Dale Beugin, vice president at the Canadian Climate Institute, explained that since all the provinces opted in to their current programs, they could have a cap-and-trade system instead of a carbon levy or fee, as it is “within the rules of the original agreement defined by the Pan Canadian framework.”
“A cap-and-trade system is going to define the number of emissions allowed in the system… So Quebec knows for sure what its emissions levels will be. It doesn’t know for sure what its price will be,” Beugin explained.
“Alberta and the other provinces are the opposite. They know what the price will be. They are meeting that price directly by setting that price directly.”
“They don’t know exactly what emissions levels would be as a result — that’s going to depend on market choices and how those firms choose to reduce emissions or pay the carbon price.”
Smith calls emissions cap ‘against the Constitution’
According to Smith, the federal government’s plan to put an emissions cap “that would force our oil, natural gas producers to reduce their emissions 42 per cent both by 2030” is against the constitution.
She added that former energy and current Environment Minister Sonya Savage told Smith that “if you have an emissions cap and you don’t have the technology to achieve it and you don’t have the time frame to be able to achieve it, it is a de facto production cap and that is against the Constitution.”
She continued on saying, “we have the right to develop our resources to determine the rate that we’re developing, our resources to develop conservation policy around it. And that’s a violation of our rights.”
The purpose of the carbon taxes is so provinces can start funding initiatives that allow for cleaner solutions, for less emissions, and overall, a healthier environment, said Beugin.
The money collected is intended to invest into cleaner solutions and energy production.
“Whether it’s you as an individual filling up your car or a firm debating whether or not to replace their old equipment with new efficient equipment or implement carbon capture and storage — they do those things because it’s more cost-effective to make those changes, to take action to reduce emissions, than it is to not and to pay the carbon price,” he said.
“That’s how carbon pricing creates incentives for emissions reduction right away.”
Beugin said it also sets future expectations that it’s going to be worthwhile investing in things that make decarbonizing more effective and cheaper in the long-term.
“These output-based pricing systems that are in place across the country have been explicitly designed to maintain that incentive to reduce emissions by improving performance.”
Your Province. Your Premier airs on 630 CHED and 770 CHQR, which are owned by Corus Entertainment — the parent company of Global News.