Provincial Carbon Tax: What It Means For Albertans

Say Hello to a New Tax, Alberta

The Alberta Legislature, which has an NDP majority, easily passed a new carbon tax law on Tuesday just before adjourning for the summer. The new tax is one of the first provincial taxes to be introduced in the province in decades and is far from popular amongst the electorate. The reason? Premier Rachel Notley did not mention implementing such a tax while running for election in 2015 and yet just over a year later the new tax has been passed. While no tax is ever popular with voters, this tax is particularly controversial due to the seemingly surprise inception and because calls for a referendum were rejected by the government. Regardless of the controversy, the government has argued that the new tax is good for the province and will take effect January 2017 before increasing again in January 2018.

Why the New Tax?

There are 2 major reasons the province wanted to implement a carbon tax. The first reason was, as the name might suggest, to reduce Alberta's carbon emissions. As part of the province's Climate Leadership Plan, the NDP aim to reduce greenhouse gas emissions in Alberta through numerous means including the new tax/levy on carbon. The government hopes that the tax will encourage businesses and communities to reduce their consumption of carbon-producing energy since it will cost more to use. The second reason the tax was introduced was to create income for the province which is anticipating a $10.4 billion deficit this year alone. The new carbon tax is expected to generate upwards of $6 billion over the next five years which will surely help reduce the amount of debt the province will acquire in the coming years. 

The Financial Cost

The new carbon tax will cost taxpayers more depending on how much energy they use over the course of the year and how much they earn. The following table shows the 2017 and 2018 tax increases on major fuels:

As a result, the cost to taxpayers will vary depending on how much carbon-producing energy each uses. For example, someone who drives a diesel truck hundreds of km per week will be paying significantly more over the year than someone who takes public transit. The province has estimated that the carbon tax on average will cost a family of four about $338 in 2017, rising to $508 in 2018. It's also estimated that indirect costs — such as higher food prices due to increased transportation costs — will add an additional $70 to $105 annually. However, political opponents such as the Wildrose Party argue that these estimates are too low and instead say families could see an increase of up to $1000 per year. Unfortunately, more precise numbers won't be available until 2018 and will depend on whether people actually reduce their energy consumption in an attempt to save money. 

In an attempt to reduce the burden placed on smaller businesses, the Alberta government is going to reduce the small business tax rate by one third. Likewise, a rebate program will also take effect to offset costs to individuals and families. The rebates will begin to phase out at $47,500 net income for individuals and $95,000 for couples and families, meaning higher income earners will receive lower rebates (or even no rebates) as can be seen in this table:


Few Exceptions

The most notable exceptions are for marked gasoline and diesel used by farmers and purchases of fuel on-reserve by eligible First Nations individuals and bands for personal and band use. What has come as a bit of a surprise is that non-profits and charities as well as other levels of government will not be exempt from the new taxes. Premier Notley has only promised to work with these organizations to help them reduce their consumption which will in turn reduce their overall costs. City of Calgary Mayor Naheed Nenshi has argued that traditionally lower levels of government are exempt from such taxes and that the tax on gasoline alone will cost the city $6.5 million more annually. Unfortunately for Mayor Nenshi, the province has decided to stand firm on its stance and will begin taxing all parties in 2017 as planned.

Not in Saskatchewan

Or at least not yet... The day after Alberta passed its carbon tax legislation, Saskatchewan Premier Brad Wall spoke out against the idea of a national carbon tax but also noted he would not criticise other provinces for their approach to controlling greenhouse gas emissions. Wall repeatedly stressed that the Saskatchewan Party government would not be following suit and said “Alberta has made their decision. I think the timing for another new national tax, carbon tax or levy of some sort, is just wrong.” He further stated that introducing a carbon tax in Saskatchewan makes no sense at a time when the energy sector is struggling. However, Wall did not go so far as to rule out the potential of such a tax in the future once oil prices and the economy recovers. 

Nothing New to BC

While the concept of a carbon tax may seem novel to those living in the prairies, to the people of BC this is old news. In fact, the province of BC implemented its first carbon tax in 2008 and continued to raise tax rates until 2012. Since this time, BC has maintained a carbon tax with rates that are nearly identical to those that will take effect in Alberta in 2018. However, the disadvantage will still lie with the residents of BC since they also continue to pay a Provincial Sales Tax of 7% while Alberta remains the only province to not have such a tax. 

Braden McMillian