In a call to "tighten our belts", the government needs to lead by example

The below is an open letter sent to Joe Ceci, Finance Minister and all Alberta MLAs.

Dear Joe Ceci, Finance Minister,

The premier is asking us to “tighten our belt”. Yes, she is absolutely right. We need to focus on reducing our debt in a companionably responsible way.

But what spending programs need to be tempered?

At the same time we are being asked to “tighten our belts”, the government is announcing billions more in Levies, growing annually by $1.2 Billion by 2020. Plus a $1.4 billion fund being promoted to help some industries reduce greenhouse gas emissions. This new Levy, "Output Based Allocation", is earmarked as a carrot and stick taxation plan labelled as a "Carbon Competitiveness" strategy designed in an effort to create a more diversified, low-carbon economy according to Alberta Environment Minister Shannon Phillips. It is a forward-thinking taxation idea that would financially encourage industries to invest in reduction programs. But the tax in fact might reduce the competitiveness of our industries on the global stage, making Alberta less attractive as a place to invest.

Joe, as our MLA and Minister of Finance, can we afford to keep spending money we don’t have and continue to tax industries and consumers to pay for these programs? Given that many taxpayers are already feeling the pinch, is it right to increase the tax burden especially next year with the AESO projecting a 100% increase in Power Pool prices? The balloon is going to burst one day.

It is difficult to know how much money we are actually collecting and spending. At the same time, there are those in our community who disagree with the fundamental premise of the tax altogether. It is always of value to consider or listen to other people’s points of view and you may find this article, “THE SCIENCE & POLITICS OF CLIMATE CHANGE”, by Barry Moore, P.Eng., of interest. Don’t dismiss the observations simply because it is a different opinion, but pause for a second. If the science is true it seriously challenges the wisdom of the path we are running down. I am of the belief that we should never dismiss another person’s perspective without listening, especially when we are on a path that will result in billions upon billions of dollars being spent. Below is some information from his article:

First consider the claim that “climate change is real” which carries the applied assumption that human emissions are to blame. Is this true? Our climate has been changing since the beginning of time, thus this talking point is pure nonsense. In recent years, the narrative changed from “climate change” to “global warming”, but is our globe actually warming? The longest thermometer record comes from central England dating back to 1659 and is a continuous monthly average since then. It is reported that the annual average in 1660 was 9.8 0C and in 2010 it was 9.5 0C, so much for global warming.

Other longer-term proxy temperature profiles are generated from ice cores by examining the oxygen in the water which formed the ice giving scientists a very clear indication of temperatures going back to the end of the last ice age 12,000 years ago. The profile indicates that there was a long high temperature period from 12,000 to 6,000 years ago. After that there have been four warm periods. The Minoan, the Roman, the medieval, and the modern warm periods occurred approximately 1,000 years apart, so today’s warm period is right on schedule. Does the melting of the ice have something to do with a glass roof over our planet that is trapping in hot air? Or possibly has it something to do with the fact that the earth’s core is mostly molten iron at 6,000 C0? Do you possibly think that heat might be conducted through the relatively thin mantle of rock under the ice fields? It is suggested that continental ice is melted by geothermal heat not atmospheric heat at a relatively constant rate.

The total carbon cycle is considered 207.4 Billion tonnes of carbon enters the atmosphere each year of which 7.8 billion tonnes is produced by fossil fuels and cement production. Approximately 3% of the carbon entering the atmosphere comes from fossil fuels, 96% comes from the decomposition of vegetation and water evaporation. Around the globe, trillions of dollars are being spent to try to manage the 3% of carbon.

The politics of the war on CO2 is obscure and Alberta is following the story line of the UN who had the bright idea rooted in their socialist background that we should rob from the rich and give to the poor. Political leaders around the globe, as well as here in Alberta, were told they could put a levy on carbon to generate additional income without needing legislative approval and everyone today is on this bandwagon: pass the blame onto industries emitting CO2, forcing them to pay for their sins. Call the money a Levy instead of a Tax. Sound familiar?

Reduction in CO2 is hyped as being “Green”, however science has proven that an increase in CO2 actually promotes plant growth and recent data from the NASA satellites show that since 1980 the world has become 11% greener because of the increase in CO2. 

The article will be published in its entirety next week.

Looking at Alberta’s Carbon Levy: the government is planning on collecting $5.4 Billion dollars over a 3-year period from consumers and businesses in Alberta to fund a variety of programs. Plus, another $1.2 billion per year by 2020 in addition to an estimated accumulation of the debt associated with the current and expected losses of the Balancing Pool to the end of 2020. The agency is expected to lose approximately $2.2 billion – not including interest charges of possibly a further $430 million

When the province is already running a massive debt, how can we afford this? Maybe some of the programs you are trying to fund should be delayed for a few years until we have our financial house in order. In addition to this, and as we move into 2018, the AESO is forecasting a 100% increase in Power Prices which will ultimately be pushed to the consumer to pay. All of this will start to snowball and contribute to the energy poverty problem that has Ontario on the ropes. Is this what we want? Higher energy prices, subsidies to industries and billions on the books as debt that needs to be service?

Take a pause. Reconsider the importance of being fiscally responsible.

The story just continues to get worse: when the government originally budgeted its commitment to greening the grid, it was counting on the owners of the coal plants paying a large portion of the carbon tax.

Some coal plants will be closed prior to their end of life and/or converting on an accelerated timeline to natural gas. The net of this will result in a shortfall in anticipated taxation income to the government in terms of the actual Carbon Levy collected. As this happens in 2018-19 we would naturally expect the taxation income-stream will start to slide out of balance. Yet, you are increasing spending. Income needed to support subsidies is going to have to shift from industry players to individual taxpayers in the province. At the same time, we are being asked to tighten our belts? Wouldn’t it be wise to re-think some of the subsidies and priorities that are included in the Climate Leadership plan? 

As you know, the buzz in the air is “decarbonization” as the province moves towards a greener energy future. Milner, Atco, Capital Power and TransAlta have all laid out their plans on mothballing coal plants or moving to gasification of the plants at an accelerated pace to clean energy: Genesee, Battle River, Sheerness, Sundance and Keephills will all be effected in one way or the other. Billions will be spent. In the end, Alberta will end up with cleaner air and higher energy prices. 

As plants are closed or converting to gas, earlier than originally planned, what does this really mean? Here is what we expect to happen: (a) the companies will save billions in not having to pay the increasing carbon tax being levied; (b) the government will have a shortfall in expected income from the tax; (c) AESO Power Pool prices will become more volatile; and, (d) consumer electricity prices will go up. 

Here is something else to consider: the cost to generate wind and solar in the world is falling and if you wait for a year or two, the capital building cost will fall even further. Spend our money wisely. In 2015/16 when our government decided to support increasing solar and wind generation the cost per kWh was in the 5 to 8 cent range. In just 18 months the cost has fallen by more than 60% and by 2019 it is expected to decline even further. Don’t overspend and don’t spend our money too early. The cost of generation is falling – wait. Slow down and establish a long-term game plan. Be smart. Again, with the drop in cost to build new generation declining, is the taxation plan which was conceived during a time period when prices were high really necessary now?

Last week the Mexican government signed a deal at 1.7 cents (US) per kWh, which is the lowest price for generation ever paid by a government agency. AESO is currently running an auction here in Alberta, how much are you willing to pay to add 500 MW of new generation to the grid? I hope we don’t pay more than the Mexican government did. Interesting dilemma isn’t it? The cost of energy in other countries is falling, the USA is giving tax breaks to industries, and here in Alberta we just added billions of new taxes to our major industries. It is also worth noting that the current auction that AESO is holding is just for a fraction of generation that the coal owners are taking offline at an accelerated rate. Are we moving too fast and will we end up with shortages in supply?  

Transparency in Spending is Key

What you cannot measure, you cannot improve, right?

Isn’t the spending of our tax dollars without any clear measurement of reporting against the expected benefits wrong? After spending billions: what does our carbon footprint look like. Did you reduce it?

It is difficult to keep track of the cost of all the clean air program initiatives, subsidies, free lightbulbs, energy audits, rebates, farming subsidies, money to indigenous communities, capping the regulated rate, money paid out to consultants, plus the cost of the energy efficiency programs. Open the books and publish the numbers. There must be a balance sheet someplace, providing open transparency related to all the taxes and costs related to the Carbon Levy? If you want suggestions on how to tighten our belts – maybe this is the best place to start.

Publish a balance sheet.

Sincerely,

Nick Clark, Co-founder, Utility Network and Partners Inc.