The Government of Alberta’s 2016-17 budget contains the details of the Alberta carbon levy that was announced as part of the Alberta Climate Leadership Plan last fall. In addition to the Alberta carbon levy, the plan includes a phase out of coal-fired electricity generation and the development of more renewable energy; a legislated limit on oil sands emissions; and a 45% reduction target in methane gas emissions from Alberta’s oil and gas sector.

In theory, a carbon price or carbon levy is a tool to help individuals and businesses reduce their greenhouse gas emissions by raising the cost of carbon intensive energy sources to ensure the cost to use that energy more accurately reflects the social and environmental cost to society as a whole. The Government of Alberta has announced that a carbon price of $20/tonne will be effective January 1, 2017, and will increase to $30/tonne, effective January 1, 2018. This price will be implemented through the carbon levy on purchases of transportation and heating fuels. The prices will be applied on individual fuel types that reflect the intensity of the emissions released during their combustion.

Fuel Type

January 1, 2017

($20/tonne)

January 1, 2018

($30/tonne)

Diesel

5.35 ¢/L

8.03 ¢/L

Gasoline

4.49 ¢/L

6.73 ¢/L

Natural Gas

1.011 $/GJ

1.517 $/GJ

Propane

3.08 ¢/L

4.62 ¢/L

 

Alberta has had a carbon tax or levy since 2007 when it introduced the Specific Gas Emitters Regulation (SGER) which applied to Alberta’s largest industrial facilities and encouraged those facilities to reduce the intensity of their emissions. The province has announced that facilities that that are subject to the SGER will not be subject to the carbon levy to avoid ‘double taxation’.

Through the carbon levy, the Government of Alberta expects to raise $274 million in 2016-17 and up to $1.7 billion by 2018-19. These funds, in addition to those raised through the SGER, are expected to collect $9.6 billion in gross revenue over the next five years.

As a means to reduce the burden on lower and middle income Albertans, the province has announced a rebate program as well as a 2% reduction in the small business income tax rate starting January 1, 2017. The rebate program is expected to apply to 66% of Alberta households of which 60% are expected to see a full rebate while the remaining 6% will see a partial rebate. The revenues collected through the carbon levy are to be returned to Albertans through three streams:  

  • $2.3 billion for consumer rebates
  • $865 million for small businesses through the tax rate reduction
  • $195 million for communities impacted by the transition for the phase-out of coal fired electricity generation

In addition to the three funding streams identified above, the province has announced that the revenues from the carbon levy will also be reinvested into the province through:

  • $3.4 billion for large scale renewable energy projects, transformative innovation and technology, and bioenergy initiatives
  • $2.2 billion in green infrastructure such as public transit
  • $645 million through Energy Efficiency Alberta, a new provincial agency to be established this year, to support energy efficiency and micro-generation initiatives ($45 million will be available in the 2016-17 budget year)

What does this mean for rural Alberta?

The Alberta carbon levy is a tool introduced by the Government of Alberta to change how Albertans use carbon intensive fuels and energy. For rural Albertans, who typically live relatively far from urban centres and are involved to a greater degree in Alberta’s primary industries (oil and gas, forestry, mining, etc.), there are fewer options to reduce carbon emissions than there are for urban Albertans. This means that rural Albertans have less flexibility to change behavior and reduce their individual tax burden from the carbon levy. This has been the AAMDC’s message to the Government of Alberta as details of the Alberta Climate Leadership Plan were being developed.

Across the province, the levy will have an impact on Albertans in different ways but most notably at the fuel pump where the price of fuels will increase. This will impact residents, businesses, and municipalities, but as noted above, different rebate and tax reduction programs are available to those who are eligible. It should also be noted that marked (purple) gasoline used for agriculture, is exempt from the carbon levy, which should alleviate some of the burden on producers in the agriculture sector.

For rural municipalities, the carbon levy will impact the cost of municipal operations particularly in the use of heavy machinery and transportation. Ultimately, these costs will be borne by the ratepayers through property taxes and other fees collected by municipalities.   

The AAMDC will continue to monitor the implementation of the Alberta Climate Leadership Plan, and in particular, the phase out of coal-fired electricity generation and its associated impacts on the communities that currently host these facilities.

For information on the Alberta carbon levy, see page 5 of the Alberta Fiscal Plan 2016-17.

Enquiries may be directed to:

Gerald Rhodes
Executive Director
780.955.4077

Kim Heyman
Director of Advocacy and Communications
780.955.4079

 

 

 

 

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