Alberta families will likely be out up to $105 a year due to the proposed carbon tax – a punch to the pocketbook some say could push people to waste less energy.
The NDP government tabled Bill 20 in the legislature this week. If passed, this Climate Leadership Implementation Act will institute an economy-wide carbon tax on fossil fuels as of next year, create a new agency designed to promote and fund energy efficiency, and cut the small business tax by one per cent.
"Climate change is real. It is caused by human activity. It affects us all, and it requires us to act," Alberta Environment and Parks Minister Shannon Phillips said at a press conference Tuesday.
The proposed carbon tax attaches a cost to the greenhouse gas emissions released in producing goods and services, and is meant to push people towards greener investments.
The tax starts at $20 per tonne of greenhouse gas produced in 2017 and rises to $30 a tonne in 2018. That works out to about 4.49 cents more per litre of gasoline and $1.011/GJ more for natural gas next year. 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. Cash raised by the tax will be invested into large-scale renewable energy projects and the new Energy Efficiency Alberta Crown Corporation, the latter of which will promote and invest in energy efficiency in Alberta.
Another chunk would go to residents as a rebate, which, as previously announced, would work out to about $200 per family plus $100 for a spouse and $30 per child next year. A couple with two kids would spend about $338 in direct costs for the carbon tax and get $360 back as a rebate, the provincial budget suggests.
The rebate stays the same no matter how much energy you use, Phillips said, giving people an incentive to save.
"For those of us that use less, you get to keep more of that (money) in your pocket."
About 60 per cent of Alberta families are expected to receive the full rebate, which shrinks after your income rises above a certain threshold.
While that rebate will cover the direct costs of the tax for the average family, it won't cover the indirect ones.
In a technical briefing, provincial officials said their modelling predicted that businesses would pass on 50 to 75 per cent the price of the carbon tax onto their customers. Once the tax hits $30 a tonne, those indirect costs would cost Albertans about $70 to $105 a year.
These are "relatively minor" costs that don't account for investments in efficiency driven by the tax, Phillips said.
Low-income Albertans tend to use less energy and will thus pay less tax, added Sara Hastings-Simon of the Pembina Institute's clean economy program. She estimated that low-income Albertans would be $40 to $60 a year better off under the carbon tax once you account for indirect costs, while middle-income folks would be $10 to $35 worse off.
"The rebate protects you from the cost, but you still have the incentive to reduce."
Will it work?
Michal C. Moore, a professor of energy economics at the University of Calgary, said that while this tax would raise the cost of production in Alberta, it wasn't high enough to encourage businesses to invest in efficiency – it would have to hit the $100-a-tonne mark before that happened.
"If your goal is to send a message to people to change behaviour, that corporations ought to use less carbon-intensive techniques or processes, then it's not doing that."
But given the state of the economy, bringing in a big tax today isn't a great idea, he continued. Introducing this smaller tax positions the province to establish a bigger, more effective one in the near future.
Nicholas Rivers, the Canada Research Chair in climate and energy policy, has previously written that the B.C. carbon tax (which is now at $30 a tonne) shrank that province's carbon footprint by about five to 15 per cent with little to no effect on the economy.
We won't see real action as a result of the tax until the province starts giving out financial incentives for change, said Leigh Bond, a renewable energy expert with Think Mechanical. Still, he said he was optimistic that the tax would mean more business for energy-efficiency companies.
"Energy efficiency is where we can do the most good in terms of saving carbon," he said, noting how the walls of modern homes have less than half the insulation of super-efficient ones.
"We could easily save 30 to 50 per cent of our energy if we just built more energy-efficient homes."
Debate on Bill 20 is scheduled to continue this week.
