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Defending Alberta’s new carbon levy

// Martin Green
// Martin Green

No one likes paying taxes, but they are one of the most effective ways to alter people’s behaviours—and in the case of Alberta’s new carbon levy, two-thirds of us will have the chance to turn that tax into money in the bank.

A major component of the NDP’s recently announced budget is the new Climate Leadership Plan, a multifaceted approach to addressing climate change in the province. In addition to targets of phasing out coal pollution, capping oilsands emissions and reducing methane emissions, the plan also includes a carbon levy—essentially, a tax on carbon emissions.

The carbon levy will most immediately affect the price you pay to fill up your car: as of January 1, 2017, gasoline is going up 4.49 cents per litre and diesel is going up 5.35 cents per litre; come January 1, 2018, those prices will climb again to 6.73 cents per litre and 8.03 cents per litre, respectively. It will also impact your monthly natural gas bill, to the tune of about $101 annually for a single person and $136 for a couple with two kids. (That’s as of January 1, 2017—in 2018, those totals will climb to $152 and $205, respectively.)

All told, the projected increase on all your bills at the beginning of next year is $191 for a single person, $259 for a couple and $338 for a couple with two kids.

The new budget has been met with expected criticism from the right wing. Of the carbon levy in particular, Wildrose leader Brian Jean remarked that it is “punishing families for driving their kids to hockey practice.”

But that’s not actually the case. The majority of Albertans will qualify for a carbon rebate that will completely offset the increase in cost, so long as your usage is at or below the average.

“The cost of gas at the pump goes up, but 60 percent of consumers are going to be getting a rebate that covers that additional cost,” says Sara Hastings-Simon, director of the Pembina Institute’s clean energy program. “But you still have an incentive to reduce your emissions, because your rebate is based not on your own usage, but on the average usage. So if you reduce your usage, you’re going to be ending up with more money at the end of the day.”

Single Albertans earning a net income of less than $47 500 annually will qualify for the full rebate of $200, while couples and families with a net income of less than $95 000 will qualify for $300 and $360, respectively. An additional six percent of Albertans will receive partial rebate amounts when their net earnings are up to $51 250 (singles), $100 000 (couples) and $101 000 (couples with two kids). 

Detractors, including Jean, also argue that taxes don’t do anything to change people’s behaviour—but it’s actually just the opposite.

“It’s pretty widely accepted—you can look among economists who have very different approaches, and pretty much everyone agrees that a carbon levy like this is effective and it’s sort of the most effective way to get real emissions reductions,”
Hastings-Simon says.

So what sorts of things do we need to start changing? Reducing the price you pay at the pump is pretty straightforward: drive less (or not at all), and choose a more fuel-efficient vehicle. Reducing your utilities bill is also fairly straightforward, and can be addressed with both immediate and longer-term changes.

“You can change behaviours or you can use new technologies or better-built environment to reduce your emissions,” Hastings-Simon says. “Changing behaviours can be everything like turning lights off when you leave a room, or turning down the heat a bit in the house, or turning it down when you’re gone. On the technology side you have things like putting better insulation in your home, better windows, replacing light bulbs with LED bulbs that use substantially less electricity but give you just as good if not better light.”

Obviously the latter approach requires investment and often isn’t something that can be done overnight. Recognizing this, the Climate Leadership Plan also includes the creation of the Energy Efficiency Agency, which will be funded with $645 million over five years (derived from the carbon levy) to support investments in energy. What that will look like exactly is still unclear, though Hastings-Simon says that Alberta can safely look to other jurisdictions for insight into how it will likely operate. And there are a lot of other examples (the PACE system in the US being just one of them), since Alberta is a laggard when it comes to implementing a climate-change plan.

“I’m sure there will be an education component, but I also think there’ll be direct support to consumers that want to do this kind of stuff,” Hastings-Simon says. “Two of the big things that these agencies in other jurisdictions tend to do, are to give rebates that help offset the costs of energy-efficiency upgrades. So you know, you put in a new furnace and you get some money back. The other thing that they can do, which has been really effective as well, is to provide financing for people. So not just a rebate, but providing basically a loan that allows you to get the money up front to say, put more insulation in your home, and then you pay that back over time.”

Ultimately, each Albertan is going to start paying for their own individual emissions—something that has been long overdue in this province.

“I don’t think it’s completely fair to say you’re putting it all on the consumers,” Hastings-Simon says. She notes that industry is not included in the carbon levy, but significant changes are being made to the pricing in that separate system—Which will be announced later, after the government completes industry consultations.

“I think that the consumers, they’re going to be seeing the pieces that come from the choices that they make,” Hastings-Simon says. “Everybody, industry and consumers, both have a responsibility to change. I think the good news for consumers—and industry—is that it’s not impossible. A lot of this stuff, we know what needs to be done. For consumers in a lot of cases, actually changing those behaviours will lead to savings, in the end.

 

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