Most St. Albert families should come out slightly ahead next year under the province’s proposed carbon tax – moreso if they cut back on their fossil fuel use.
The Alberta government tabled its 2016 budget Thursday. One of its central elements was a new carbon tax that will apply to all fossil fuels bought and used in Alberta after Jan. 1, 2017.
The tax starts at $20 per tonne of greenhouse gas produced in 2017 and rises to $30 in 2018, and applies to both consumers and big industry.
The tax will add 4.49 cents to the cost of a litre of gasoline, 5.35 cents to a litre of diesel, and $1.011 to a gigajoule of natural gas next year. That rises to 6.73 cents a litre, 8.03 cents a litre, and $1.517/GJ in 2018, respectively. The tax on gasoline and diesel will be added to the basic price at the pump, while the gas tax will likely appear as a separate line item on your bill.
Biofuels, marked/coloured fuel used by farmers, and fuel bought and used on reserves are exempt from the tax.
Budget documents suggest the tax would raise $274 million next year and $1.2 billion the year after.
Much of that cash would cycle back to Albertans as a rebate, which works out to about $200 per person in 2017, plus $100 for a spouse and $30 per child (up to four). This rises to $300, $150, and $45 in 2018.
That means the average single person who makes up to $47,500 a year would get $200 back in 2017, or about $9 more than what they would likely pay in carbon tax for natural gas and gasoline, budget documents suggest. A couple with two kids that makes up to $95,000 would get $360, or about $22 extra.
The rebate drops off thereafter based on your income. If you’re single and make over $51,250, or are a couple with two kids and earn over $101,500, you won’t get a rebate next year.
The province believes about 60 per cent of Albertans would receive the full rebate and another six per cent would get a partial one. The rebates are tax-free. The province expects to pay out about $95 million in rebates next year.
Small business will also get a one-per-cent business tax break as of next January to offset the carbon tax.
The carbon tax (once you add in contributions from industry) will raise about $9.6 billion over five years which will be used to fund large scale renewable power projects ($3.4 billion) as well as energy efficiency and micro-generation ($645 million), the budget suggests.
The proposed carbon tax is pretty similar to the one in B.C. which is now at $30 a tonne, said Michal C. Moore, professor of energy economics at the University of Calgary. It’s more sophisticated, though, in that it applies to fuels other than just gasoline.
A May 2015 analysis by Nicholas Rivers (the Canada Research Chair in climate and energy policy) found that the B.C. carbon tax had little to no effect on the province’s economic growth but caused a five to 15 per cent reduction in its carbon emissions.
Alberta’s poor economy is already pushing people to make changes like getting a more efficient car, Moore said. He suspects the carbon tax will have a bigger effect on emissions once the economy picks up.
“This is all about changing behaviour,” he said, and this tax would have to rise high enough to encourage people to change their energy habits.
Simon Dyer of the Pembina Institute noted that the tax rebate is based on an Albertan’s average energy use, which, for a family with two kids, was pegged at 135 GJ of natural gas and 4,500 L of gasoline a year. The size of the rebate is independent of what you actually use.
“If you use less energy … you can actually come out ahead.”
This should give people a financial incentive to change their behaviours and use less energy, he said. Even if you make too much to qualify for the rebate, you can still tap into the energy efficiency incentives the province has planned.
Jesse Row of the Alberta Energy Efficiency Alliance estimated that the budget’s energy efficiency investments would create about 3,000 jobs a year, save Albertans about $2 billion a year, and cause emission reductions equivalent to taking a million cars off the road for a year, based on results from similar programs in other regions.
Leigh Bond, a St. Albert energy efficiency expert with Think Mechanical, said he was angry that the province was putting billions towards renewable energy projects but just $645 million towards energy efficiency.
“Where most of the low-hanging fruit is energy efficiency,” he said, and the province would get more bang for its emission-reduction buck by putting its money there.
“Why are they catering to the big wind guys?”
J.P. Cloutier, owner of St. Albert’s Aaron Taxi, said he wasn’t sure if the carbon tax would affect his rates, but said the one per cent business tax cut wouldn’t do much to offset the costs he incurred from it.
“The taxi industry already has extremely small margins,” he said, and it’s under great pressure from competitors such as Uber.
“There’s a chance we could have to pass this onto the client.”