“Things as certain as death and taxes, can be more firmly believ’d,” British author Daniel Defoe - more widely known for penning Robinson Crusoe - opined in a 1726 essay aptly entitled The Political History of the Devil.
The quote is more commonly attributed to Benjamin Franklin, but for all purposes Defoe could have been referring to Alberta’s carbon tax, which jumped 50% to $30 per tonne of CO2 effective January 1, 2018, a figure which will keep rising each year to $50 per tonne by 2022. It will all but ensure the inevitable grumbling that’s likely to repeat itself each New Years Day.
That much is certain. Less so is the impact it will have on the province’s economic fortunes or how much it will stretch taxpayers’ pockets.
The most visible impact of the tax will be a two-cent per litre increase at the pumps, which should ensure that gasoline prices stay well above $1 for the foreseeable future - a bitter pill consumers and businesses alike. The other noticeable change for consumers will be on home heating, which increases to 50 cents per gigajoule, accounting for more than 10% of an average bill during the cruelest winter months.
According to the Alberta government website, the tax will cost consumers anywhere from $70 to $106 per family per year, most of which will be rebated back to households. Economists at the University of Calgary suggest the tax could shave 0.1% off economic growth this year, in a province that’s expected to grow 6.7% - in other words, almost nil.
But rest assured that the tax is significant in dollar terms. Provincial estimates suggest the levy will raise some $5.4 billion by 2020, funds the province intends to pump into clean energy technology such as wind power and carbon capture and storage (CCS). Depending on who is to be believed, the tax is alternately the price to pay for being one of the largest oil producers (or polluters) on the planet or an exercise in social engineering.
According to University of Alberta economist Andrew Leach, it’s a bit of both. As the main architect of the tax, he agrees the purpose of the exercise is to bring about a step change in how Albertans think about consuming and producing energy.
The latter point is important in a region which accounts for a little less than half of Canada’s overall greenhouse gas emissions due to its oil sands output, at some 80 megatonnes of Canada’s 180 megatonnes per year. It’s a figure which is expected to rise to 100 megatonnes (where it has been capped) by 2030.
The fact remains that Alberta is the single largest - and rising - source of emissions in the country, threatening Canada’s commitments to reduce greenhouse gases under the Paris Accord. Balancing climate change while promoting economic growth, namely oil production, is the proverbial 500-pound gorilla in the room.
Leach, who has come under fire from all sides in the Twittersphere for his role in devising the tax - those who say it alternately goes too far or not far enough - is unwavering in both the principle and practical application, even if he agrees it has flaws.
“Nobody likes paying more taxes,” he said in an interview. “It depends on who you are and what you think the alternatives are if you agree with the policy to reduce emissions. Yes or no? I’d still stand behind it… the question is, are we going to do it in a way that Alberta wants, or a way that Ottawa wants?”
What of the argument that the oil industry was largely given a pass despite the argument that taxpayers have effectively subsidized oil sands production for decades through royalty breaks - the infamous 1% solution - and capital cost allowancesthat have fuelled rampant growth and put the province in an admittedly awkward position?
Leach argues it is important for consumers to share the burden. The simple way to avoid paying the tax, he suggests, is to drive less and increase the energy efficiency of homes, hence the rebates for high-efficiency furnaces and LED lightbulbs.
Alberta’s NDP government insists the tax is a small price to pay for social license to expand oil sands production and build new pipelines to Canada’s east and west coasts. That point is debatable after the proposed Northern Gateway and Energy East projects were canceled in 2017. Even TransMountain’s 900,000 barrel per day expansion to Vancouver continues to face bitter opposition though Prime Minister Justin Trudeau cited Alberta’s climate change “leadership” as the deciding factor in its eventual approval from the federal cabinet.
On January 15th, the federal government outlined its own carbon pricing policies, which Leach notes are essentially the “Alberta model.” He argues that the tax has transformed Alberta from a “climate change laggard to a leadership position” in less than 36 months. While acknowledging opposition to TransMountain still exists, “it’s nowhere near what it was two years ago.
“Even the Prime Minister himself has said that TransMountain was a non-starter without Alberta’s leadership.”
What is absolutely beyond doubt is that carbon taxes are here to stay, despite calls from the newly distilled opposition United Conservative Party to rip them up if it is elected in 2019, on the grounds that they're unconstitutional. Even if this did happen, Ottawa is ready to step in with its own version of the tax, which advocates like Leach argue would be an order of magnitude worse.
Even so, Colin Craig, interim Alberta director of the Canadian Taxpayers Federation, argues that now is not the time to be “punishing” Albertans with new taxes as the province recovers from the oil price crash of 2014. He complains of “carbon leakage” where new investment leaves the province for other jurisdictions - notably Trump’s U.S. - where carbon taxes are a non-starter. It places Alberta at a distinct competitive disadvantage, pointing to the decision of international oil majors such as Shell to abdicate the oil sands altogether. He further argues that the levy will do nothing to meet its stated goal of reducing emissions.
Rather than increase taxes at home, he argues that the provincial government should be promoting exports of Alberta natural gas to countries such as China to displace coal-fired power emissions in that country, which would benefit Alberta’s energy sector while making more meaningful reductions in global greenhouse gases.
“What’s the point?” he said. “Now is not the time. We need to look at more taxpayer friendly ways of reducing emissions.”