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Jeffrey Simpson (Bill Grimshaw)
Jeffrey Simpson (Bill Grimshaw)

Jeffrey Simpson

Many Albertans agree: A carbon tax was the best solution Add to ...

Quebec is expected to receive somewhat more than $8.5-billion in equalization payments next year, up from about $8.3-billion this year. The payments will represent about 11 per cent of the government's total revenues.

A big chunk of those payments come from the richest province, Alberta. So one would have thought that gratitude, if nothing else, might be extended from Quebec (and other equalization-receiving provinces, including Ontario) to Alberta.

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No, a little Alberta-bashing apparently sells in la belle province, especially over the environment. Alberta has an environmental challenge, all right, because its greenhouse emissions are the highest in Canada, and Canada's overall record is among the very worst in the world.

But does anyone believe that if Quebec had oil and natural gas instead of abundant hydro that its politicians would be as morally virtuous as they now purport to be?

From 1990 to 2006, Quebec's emissions barely moved. Yet listening to Premier Jean Charest and Bloc Québécois leader Gilles Duceppe, you'd think those emissions had nosedived. Quebec has done better than elsewhere in Canada, not because of any serious governmental measures, but because of a happy geographic fluke.

The Alberta energy sector has a long way to go before it understands its obligations to reduce emissions, but the sector does continue to provide revenues that Ottawa can tax and then redistribute to other parts of Canada - including Quebec.

Having acknowledged this contribution, it's also important to underscore that Alberta's inability or unwillingness to do better in reducing emissions has national implications.

It will be impossible for Canada to meet the Harper government's target of reducing emissions by 20 per cent by 2020 if Alberta remains on its current emissions track.

That track, temporarily derailed by the temporary slowdown in oil sands development, would allow Alberta's emissions to grow by 14 per cent by 2020. With the largest polluting province's emissions set to rise by 14 per cent, it would be impossible for the country's to decline by 20 per cent.

Oil executives know this. Foreign governments know this. Energy policy analysts in universities know this. Federal civil servants know this. Even the Alberta government knows this. It is a square that cannot be circled, regardless of the public-relations campaign of the Harper government.

Alberta is betting hugely on carbon sequestration, or capture-and-storage, to reduce (eventually) its emissions. It has created a $2-billion fund to help finance such projects.

Four have thus far been announced. If they all work, they will eventually remove a small fraction of the roughly 235 million tonnes of carbon dioxide the province emits per year - at an Alberta government cost of $2-billion.

Long-term, Alberta's hopes to remove about 140 million tonnes through carbon sequestration by 2050. Yes, as lessons are learned, the costs of technology might (will?) diminish. Yes, therefore, the per-tonne removal costs will decline. And yes, some of the carbon is pumped into disused oil deposits that might extract additional pockets of oil, thereby generating additional revenues for the province.

But the economics of sequestration - even if all these things come about - are expensive on a per-tonne basis. Albertans should therefore know: The cost of this policy option is not a one-time payment of $2-billion, but a long-term investment of multiple tens of billions of dollars. Who pays?

Which brings us to Alberta's small carbon tax. It has one - $15 a tonne for companies that exceed certain emission limits, with the money going into a technology fund. The trouble is that $15 a tonne is too low today to generate a lot of money, and will certainly be far too low tomorrow to generate the income the government will need to finance this expensive policy option.

While Alberta pursues carbon sequestration, Ottawa (also investing in sequestration) is supposed to be designing a cap-and-trade scheme for buying and selling emission credits. Alberta dislikes this idea because it fears the trades will pull revenue out of the province, a fear not to be dismissed.

It should be possible, however, to design a system that lets the carbon-producing provinces keep some or most of the revenues. Canada has shown itself capable of designing such transfer schemes, as in equalization from which Quebec (and other provinces) benefit so greatly.

The supreme irony of private talks about this issue, among those in the industry and in policy circles who know global warming is real and Alberta's current approach is inadequate, is the majority belief that the best solution for pricing carbon would be a tax, rather than a cumbersome cap-and-trade system.

A tax would catch producers and consumers, a long-standing demand of producers in the oil and gas industry. It would give price certainty to companies. It would be much easier to keep the revenues in Alberta and other fossil-fuel provinces. It would be so much simpler to administer.

Their erstwhile political friends of the oil patch in the provincial and federal Conservatives parties, however, killed a carbon tax in the last election. It's amazing how many serious people in Alberta privately regret its passing, given the other options for pricing carbon on offer and the huge expense of sequestration.

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