Albertans to pay more for energy in NDP’s ambitious climate strategy

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Albertans will pay more to fill up their vehicles and heat their homes as the province ramps up an ambitious climate strategy intended to reduce greenhouse gas emissions and help Canada's largest oil producer create jobs in areas such as renewable energy.

As the province struggles with a steep drop in crude prices, soaring government deficits and increasing unemployment, some of the almost $10-billion in revenue projected to come from carbon pricing over the next five years will be put toward rebates to help low- and middle-income earners adjust to the new levies on transportation and heating fuels – in effect as of Jan. 1, 2017.

"Every cent of that is going to be recycled through a series of programs back into the economy. The levy is something we believe will help Albertans make better choices, in terms of the burning of fossil fuels. It will reduce emissions," Alberta Finance Minister Joe Ceci told reporters.

Thursday's budget provided salient details on a climate change strategy that Alberta Premier Rachel Notley's government believes will help win support for the construction of high-capacity pipelines to ship the province's landlocked crude. Alberta's plan to reduce greenhouse gas emissions and improve its environmental reputation, announced last November, also features a phase out of coal-fired power by 2030, a hard cap on oil sands greenhouse gas emissions, and a target of reducing methane emissions by 45 per cent by 2025.

Spending and consumer rebates

The government expects to raise $9.6-billion through consumer and heavy emitter carbon levies over the next five years. It already has ambitious plans for the money, including a $3.4-billion allocation to large-scale renewable energy projects and research, $2.2-billion for "green infrastructure," such as public transit, and $2.3-billion in consumer rebates to families and individuals to help lessen the financial pain of the new fuel levies.

The consumer rebate program is targeted to low- and middle-income Albertans, and will give annual non-taxable rebates of up to $200 for single adults, $300 for couples and $30 per child in 2017. The rebates, which will increase in 2018, are based purely on taxable income, and not specifically meant to incent any further GHG-reducing behaviour. However, Mr. Ceci said he believes families will use the rebate to be "more efficient. They can improve their home … or buy different vehicles, or whatever they want to, to improve their situation and reduce their use of carbon."

Other allocations from climate plan revenue to 2021 include transition funding for coal industry-reliant and indigenous communities, and the creation of a provincial agency to focus on energy efficiency and micro generation initiatives.

To help small businesses adjust to the new carbon price, the small business income tax rate will be reduced to 2 per cent, from the current 3 per cent, as of Jan. 1, 2017.

Levies

The carbon price is $20 a tonne effective Jan. 1, and will jump to $30 on Jan. 1, 2018. On a practical level, this means each type of fuel will be assigned a levy based on amount of greenhouse gases released when combusted. For instance, a levy of 4.49 cents will be added onto each litre of gasoline in 2017, and 6.73 cents will be added to each litre in 2018. Natural gas levies, priced at $1.011 per gigajoule in 2017, will be shown as a separate line item on consumers' heating bills. Some uses will be exempted from the levy system, including work done by farmers and First Nation communities.

The levy will be enacted through legislation to be introduced this spring. From an administrative point of view, the new Alberta carbon levies are organized in a similar fashion to British Columbia's carbon tax.

Although a climate change advisory panel proposed late last year that the carbon price should be increased further in 2019 and beyond, with a suggestion of inflation plus two per cent per year, Alberta's budget documents said the government will not increase the levies in the longer term until the economy is "on a stronger footing and the actions of other jurisdictions, including those of the federal government, are better known."

Large industrial emitters, those facilities that emit 100,000 tonnes or more of GHGs annually, are already required to reduce the emissions intensity each year. Budget documents say that, in 2018, the province will shift to product and sector-based performance standards, with further details to come after industry consultations. But the system will be designed so that large emitters will not be charged twice – through the consumer levy – on the same emissions.

Summing Up

With levies targeted at consumers and the carbon price on emissions from large emitters, the Alberta government said its plan covers 78-90 per cent of provincial emissions.

Last year, the climate advisory panel predicted that annual revenue from carbon pricing would hit $3-billion a year. However, the budget documents released Thursday pegged annual revenues over the next several years at a figure closer to $2.6-billion. Mr. Ceci had no immediate explanation for the difference.

• Carbon levies will be added onto transportation and heating fuels, on everything from diesel and gasoline to natural gas and propane.
• The consumer carbon levies combined with a pre-existing carbon pricing program for industrial emitters will raise $9.6-billion in revenue over the next five years.
• To help consumers adjust to the new price on carbon, a $2.3-billion consumer rebate program for low- and middle-income Albertans will pay annual rebates of up to $200 for single adults, $300 for couples and $30 per child in 2017.
• The government says 60 per cent of Alberta households will be eligible for a full rebate, and 66 per cent will receive a full or partial rebate.
• To help small businesses adjust to the new carbon price, the small business income tax rate will be reduced to 2 per cent, from the current 3 per cent, as of Jan. 1, 2017.

Editor's note: An earlier digital version of this story incorrectly stated the amount of the levy on each litre of gasoline for 2017 and 2018. This version has been corrected.