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The Suncor mine facility along the Athabasca River: Alberta could realize enormous sums of money from its proposed carbon tax, but there is some disagreement about how it should be spent. (JEFF McINTOSH/CP)
The Suncor mine facility along the Athabasca River: Alberta could realize enormous sums of money from its proposed carbon tax, but there is some disagreement about how it should be spent. (JEFF McINTOSH/CP)

ENERGY

Alberta's carbon-tax windfall dilemma Add to ...

Alberta’s proposal to dramatically increase its carbon tax on large industrial emitters stands to generate hundreds of millions of dollars per year in new revenues that could be used to help slash emissions.

But as the province contemplates the much stricter greenhouse gas policy, observers say it must also sort out how to transform the deluge of money into actual change in provincial greenhouse gas output.

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Under Alberta’s current system, a much smaller carbon tax spins off $60-million to $80-million annually, largely used to pay for innovations in clean-energy technology and innovation.

If adopted, the new plan would compel oil sands emissions reductions of 40 per cent per barrel, and charge $40 per tonne of carbon on those that don’t comply. Although estimates vary widely, the plan could yield anywhere between $450-million and $1.5-billion per year by 2020. It’s a vast sum, given that the national clean-tech investment in 2012 stood at $144-million, according to the Canadian Venture Capital & Private Equity Association.

“We want to position Alberta not as the fossil-fuel province but as the energy province and the go-to place for innovation. If we could do that, it will have a big impact on our economy,” said Eric Newell, who chairs Alberta’s Climate Change and Emissions Management Corp. (CCEMC).

But the possibility of a much higher carbon tax has also trained attention on the province’s current system, which has broad industry support but faces questions about its effectiveness. Provincial carbon-tax money is largely distributed by CCEMC, which has invested $181-million in 49 green-tech projects. Those investments are expected to prune seven million tonnes in carbon emissions over 10 years, Mr. Newell said.

That works out to $258 per tonne per year, a sum higher than the cost of reducing emissions using expensive existing technologies such as wind power, carbon capture and storage, and even nuclear energy in some places.

Mr. Newell argues that the actual per-tonne figure may be much lower. CCEMC money has helped prod other clean-tech investments, and it is spending money on some innovations that stand to create far larger change if they gain commercial traction. One early-stage oil sands technology, for example, promises an 85-per-cent reduction in emissions.

Critics argue the best route lies in diverting some carbon tax money away from innovation funding altogether. In the United States, waning emissions have been driven largely by electricity generators switching from coal to cleaner natural gas. In Alberta, 52 per cent of electricity in 2012 came from coal.

Other ideas have also been circulated. Early-stage financing only accounts for a small percentage of a clean-tech company’s financial needs.

Debt is much more important: In 2013, according to a forecast by Ottawa-based Analytica Advisors, Canadian clean-tech companies will need $8.6-billion in borrowed funds.

But accessing those funds is difficult, since “normally debt capital is only available for technologies that have zero technology risk,” said Céline Bak, president of Analytica. To bridge that gap, Alberta could consider a “sovereign insurance fund” where provincial dollars backstop the technical risk.

“We need innovation,” said Wal van Lierop, chief executive of Vancouver-based Chrysalix Energy Venture Capital. “If we don’t do that, we in Western Canada will spill the opportunity that we have and we will fall back to being just a resource-based economy. And what a waste.”

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