Ottawa’s pre-COVID-19 holiday surprise was an updated climate plan including a proposal to significantly hike the carbon tax in the next decade. Environmental groups described the plan as bold and brave. The federal government says a higher price on carbon will force everyone to use less energy and improve efficiency.
But in Alberta, which has an already weakened economy that relies much more than other provinces on oil and gas production and other heavy industries, the federal announcement on carbon pricing is a difficult pill to swallow. Many will view the plan to have a carbon price of $170 per tonne by 2030 as yet another hurdle to any kind of economic recovery.
Prime Minister Justin Trudeau said on Friday that some jurisdictions in Canada want to “make pollution free again.” But Alberta Environment Minister Jason Nixon shot back that “the Prime Minister continues to impose his ‘Ottawa knows best’ attitude on Alberta, at a time when Albertans can least afford it.”
In Canada, the carbon price is now $30 per tonne. Subject to consultation with the provinces, the government plans to raise it above the $50 per tonne planned for 2022 in $15 increments. By 2030, it will hit $170 per tonne. The plan relies on the Supreme Court siding with Ottawa when it releases its decision on the constitutionality of the federal carbon tax.
The Alberta government’s concern is both about the province’s competitiveness relative to other oil and gas producers, and what it says is the financial impact on people. “My message to Albertans is that your government will continue to fight this unconstitutional tax grab at the Supreme Court,” Mr. Nixon told reporters.
But there’s more common ground on climate policy than the top-line messaging of partisan politics suggests. There’s recognition in Alberta that the world’s energy and investment landscape is rapidly shifting to address the imperative of climate action.
“When you look at clean tech investments across this country, from the private sector, 75 per cent of all investments come from oil and gas companies,” Mr. Trudeau said during the news conference on Friday.
Apparently, the Alberta government and Ottawa also have areas where they might have come to a meeting of the minds – including on some of the details of the lesser-known but still mightily significant Clean Fuel Standard, another pillar of the climate plan.
Mr. Nixon is concerned that a higher carbon tax will saddle Alberta families with huge new costs, but that’s not so clear. The updated federal climate plan document predicts that Albertans could receive more than people in some other provinces from the carbon tax rebates that will be known as “climate-action incentive payments.” There are a lot of caveats, but the federal document says an Alberta family of four could receive more than $3,200 a year by 2030.
But as detailed as the federal road map on climate was, concerns about Canada’s relative competitiveness will remain. A high carbon price provides climate-policy certainty to any company that wants to put money into Canada, but also likely makes it a much more expensive place to do any resource work. Avatar Innovations Inc. chief executive officer Kevin Krausert wonders whether Ottawa’s updated climate plan would allow Canadian oil and gas companies to generate “realistic cash flow pathways” as they adjust and evolve, instead of simply putting them out of business.
Other key questions include how much money will flow to Alberta under new initiatives laid out in the federal climate announcement, including a $3-billion Net-Zero Accelerator for industry.
The Alberta backdrop for all of the climate measures is a deep cynicism, to put it mildly, about whether other countries – including oil producers – with much higher emissions than Canada’s will take actions that could hamstring their own economies, or how much Ottawa cares about how its policies land in a province that doesn’t elect Liberal MPs.
Alberta still has high unemployment, and is facing existential questions about what industries will fill the gap created by a precipitous drop in new oil and gas investment. The federal Liberals should be worried that people in parts of the country with which they promised last year to build a better relationship are increasingly economically stressed – and this was true well before the pandemic, and almost certainly will continue.
Opportunities have been missed. Ottawa’s fiscal update last month contained the news that Fiscal Stabilization, the federal program designed to help provinces when their revenues drop dramatically, would get a smaller increase than Premiers – namely Jason Kenney – wanted.
Many saw the Fiscal Stabilization program as the low-hanging fruit in finding some space for agreement between Alberta and Ottawa. In an era where federal spending has gone off the charts, it didn’t appear to be as intractable a federal-provincial issue as, say, climate policy.
Other provinces might be questioning federal spending priorities, too. On Thursday, the day before the news came that the federal government will spend an “initial” $15-billion on its updated climate plan, the Prime Minister told reporters he couldn’t commit to the long-term increase in health care funding for the provinces the Premiers had requested.
“Right now, there is a lack of certainty of what our economic situation or even our health situation might look like in three months, let alone in three years.”
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