Alberta will maintain a $30-per-tonne carbon tax on large industrial facilities to align the new government’s plan with the federal climate law and stave off possible intervention from Ottawa.
The industrial carbon tax is the centrepiece of Premier Jason Kenney’s climate strategy and, on Jan 1, 2020, replaces a similar system introduced by his New Democratic predecessor. The tax could increase in future years to keep pace with the federal government’s climate plan for industry.
Alberta’s United Conservative Party government, however, is keeping up its fight against a federal carbon tax on consumers that will be imposed in January on the province, arguing that the tax is unconstitutional.
Much of the oil sands will be covered by Alberta’s industrial tax, which is being introduced a week after a federal election that highlighted the regional divisions in the country, particularly over climate change. The Liberals, who ran on global warming as a defining issue in the campaign, were reduced to a minority and did not win a seat in either Alberta or Saskatchewan.
The industry tax is being set at a higher level per tonne than Mr. Kenney promised during the spring election, $30 instead of $20, in a move to ensure that the provincial government’s plan is in compliance with the federal climate law. Due to the size of Alberta’s industrial base, especially the province’s large oil and gas industry, the expected reductions in greenhouse gas emissions from the plan will contribute significantly to meeting national targets.
Speaking with reporters on Tuesday before he tabled the legislation, Environment Minister Jason Nixon said industries across Alberta were close to unanimous that they wanted the province to set the tax at a level where the federal government would not take over and regulate their emissions.
“We did hear loud and clear that they wanted us to go to $30 now. They wanted equivalency, they wanted to be regulated in the province of Alberta and not by the federal government. That’s what we’ve accomplished for January, 2020,” he said.
The introduction of the Technology Innovation and Emissions Reduction (TIER) system will not have any effect on Ottawa’s intention to apply a wider carbon tax on Alberta consumers starting on Jan. 1. The move follows the Kenney government’s decision to rip up the province’s consumer carbon tax this summer.
Mr. Nixon said that despite the province’s decision to comply with the federal tax on industry, Alberta will continue with a lawsuit arguing that the carbon tax on consumers is unconstitutional.
Saskatchewan has struck a deal with the federal government that is similar to what Alberta is seeking, running a provincial tax on industry while letting Ottawa collect a tax on consumers.
Mr. Nixon doesn’t have confirmation from Prime Minister Justin Trudeau’s recently re-elected government, but said he expects Alberta’s new law will conform with Ottawa’s climate plan for industry: “From the official perspective of the federal government, we have every indication that we’ve met equivalency.”
The federal government said it would review the proposal alongside those of other provinces and territories.
Proceeds from Alberta’s tax will go toward green technology research, funding the government’s $30-million “war room” to confront opponents of the oil sands online, as well as reducing the provincial deficit.
The minister added that he will consult on future increases to the provincial tax. The federal carbon price for industry is set to increase by $10 annually until it reaches $50-per-tonne in 2022. If Alberta’s tax were to fall below the federal threshold, Ottawa would likely impose a higher tax under a provision in the federal law known as the backstop.
The tax will apply to facilities that emit more than 100,000 tonnes of greenhouse gases annually – about 127 facilities, according to Mr. Nixon. Those industrial facilities, which comprise major projects in the oil sands as well as much of Alberta’s gas and coal-fired electrical generation, will need to reduce emissions by 10 per cent in 2020 and an additional 1 per cent annually thereafter.
Officials said TIER should lead to a reduction of about 50 megatonnes in emissions by 2030. That’s equivalent to 18 per cent of Alberta’s GHG emissions in 2015.
Jan Gorski, an analyst with the clean-energy think tank Pembina Institute, said the new tax structure is not as effective as the two-year-old NDP designed system it is replacing. “Ultimately it’s a step back from the NDP plan. It skews incentives and punishes progressive companies that have taken steps to reduce emissions and rewards those that haven’t,” he said.
One big difference is that companies under TIER will only need to reduce emissions, or pay the tax, on 10 per cent of their emissions in 2020. The now discarded NDP plan covered 20 per cent of emissions in 2020, he said.
Mr. Nixon made the announcement in Edmonton flanked by 13 industry players, including oil producers, the Cement Association of Canada and Emissions Reduction Alberta (ERA).
A good chunk of the TIER cash dedicated to research and technology will funnel into the energy sector via ERA, an arm’s-length agency that has been using large-emitter charges to fund GHG-reduction projects since 2009.
Chief executive officer Steve MacDonald said he doesn’t see the new program changing his organization’s mandate from the previous program introduced by former premier Rachel Notley.
“TIER is fundamentally the same design – you set targets, create incentives, there are punishments if [emitters] don’t achieve them, and then you reinvest some of that money in technology. The change will be where the emphasis is,” he said.
Rather than pushing green technologies, which was the former NDP government’s policy objective, Mr. MacDonald expects ERA to pivot toward more research projects around carbon capture and storage, as well as reducing agricultural emissions.
Ms. Notley called TIER “a profound disappointment for all Albertans who want to see the government take real action on combating climate change.”
Ms. Notley said the program has the potential to hurt the energy industry’s reputation thanks to its dearth of emission-reduction targets.
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