Canada tackles carbon
For Albertans, the new year rang in with a 50% rise in carbon tax, up from $20 to $30 per tonne. Despite some criticism, the province's major program to reduce GHG emissions is moving ahead in its second year, reinforcing the Canadian climate change goals. With over 70% of domestic oil and gas output, Alberta is a heavy-weight addition to other provincial carbon-less programs already in place in Quebec, British Columbia and Ontario.
Implemented in January 2017, Alberta's carbon tax program applies to diesel, gasoline, natural gas and propane at the gas station and on heating bills. Agriculture is the only economic sector with a levy exemption, which includes dyed diesel or gasoline used in farming operations.
The carbon tax for gasoline in Alberta rose from 4.49 cents per litre to 6.73 cents per litre, while for diesel it increased from 5.35 cents to 8.03 cents. Analysts don't see a significant consumer impact, as 2 cents per litre are likely absorbed by the natural fluctuation of gas and diesel prices at the pumps.
The impact on natural gas, used for fuelling residential furnaces, might be more visible. Based on values released by the Alberta government, the 50%-increase per gigajoules (GJ) of natural gas in 2018 adds up $5 per month for a family with an average use of 10 GJ. The province also estimates that the indirect cost of the tax appreciation on good and services is expected to grow between $75 and $110 per household per year.
Electricity bills, in turn, are not expected to grow as the tax does not apply to utilities, such as power distribution companies, but to generators. Specialists claim that generation companies, basically plants fuelled by natural gas, are not expected to pass down the tax since Alberta runs a subsidy program for large emitters that should hold the carbon-pricing effect.
Launched this year, the Carbon Competitiveness Incentives program (CCIs) incentivises facilities that emit up to 100,000 tonnes of GHGs per year in Alberta to invest in technology to reduce emissions. The program is budgeted with a $1.4-billion innovation package, of which $440 million is for oil sands.
Designed to attract clean technology investment to Alberta, the CCIs are expected to cut emissions by 20 million tonnes by 2020, and 50 million tonnes by 2030, or about the same as total emissions of Manitoba, Nova Scotia, and New Brunswick combined, the province said.
Lower-income and middle-income Albertans are also provided with rebates in order to cover the average cost of the carbon tax. The rebates are intended for Albertans who earn less than $47,500/year for singles or less than $95,000/year for families. Rebates were also increased by 50% on January 1, 2018. The government estimates that 60% of households in the province will get a full or partial rebate from their spending on energy.
According to the provincial 2017-18 budget, the carbon tax will generate $3.9 billion by the end of the 2019-20 fiscal year. More than half of the revenue is expected to go back into the economy through household rebates and a small-business tax cut. The rest will fund programs to reduce emissions, such as large-scale renewable energy initiatives and green infrastructure projects.
The carbon tax in Alberta complies with the federal benchmark for pricing GHG emissions. According to an agreement signed by eight provinces and three territories on December 9, 2016, called Pan-Canadian Framework on Clean Growth and Climate Change, the tax would start at a minimum of $10 per tonne in 2018, rising by $10 per year to $50 per tonne in 2022.
In British Columbia, where the carbon tax was launched in 2008, the price has remained at $30 since 2012. B.C.'s new government, elected in July 2017, has said that it will increase the provincial carbon tax rate by $5 a tonne beginning April 1, 2018. B.C.'s tax applies to the purchase or use of gasoline, diesel, natural gas, heating fuel, propane and coal, and includes combustibles, such as peat and tires, when used to produce energy or heat.
The federal agreement is flexible to include cap-and-trade programs. The agreement outlines that jurisdictions adopting this model of carbon program, such as Ontario and Quebec, are expected to achieve emissions reductions of at least 30% below 2005 levels by 2030.
Québec established its cap-and-trade program in 2013. The province promotes four auctions a year, where allowances are sold up from a floor price. Since 2014, the Quebec's floor price is linked to the California system. Due to an oversupply, allowances have been sold slightly above the uniform floor price for both jurisdictions, which corresponded with C$17.21 on November 21, 2017. The floor price increases by 5% per year plus inflation.
Ontario’s Cap-and-Trade program started in 2017. Under the program, large emitters including electricity importers, natural gas distributors over 25,000 of GHG emissions a year, and fuel suppliers over 200 litres of fuel a year, are required to procure allowances to comply with the provincial targets.
The cap in Ontario was set to decline by 4-5% per year by 2020. In the long term, Ontario targets emission 37% below 1990 levels by 2030 and 80% less by 2050. The province signed an agreement with Quebec and California on September 2017, and their first joint auction is scheduled for February 2018.
Prime Minister Justin Trudeau had initially planned to impose a minimum carbon price of $10 per tonne in 2018 for all provinces, but Canadian Environment Minister Catherine McKenna has said recently that provinces without a carbon tax or a cap-and-trade program yet will only have to submit their plans by the end of this year. Meanwhile, Alberta, Quebec, B.C., and Ontario altogether already account for roughly 80% of greenhouse gas emissions in Canada.