On May 22, 2019 the Alberta government tabled the Carbon Tax Repeal Act to immediately repeal the existing carbon levy. The repeal of the Carbon Tax Repeal Act is under the provisions of Bill 1 by Alberta’s new United Conservative Party (UPC) government.
The Alberta carbon tax however was ended on May 30, 2019 prior to the repeal of the legislation in the provincial legislature.
Alberta’s carbon price prior to its repeal consisted of two parts:
- A level that adds a charge to gasoline, diesel, propane and natural gas.
- A pricing system for large industrial emitters set out in the Carbon Competitiveness Incentive Regulation.
The Carbon Tax Repeal Act eliminated Alberta’s carbon tax regime that was implemented in January 2017. The repeal will result in the price of carbon being reduced from $30/tonne to $0/tonne, along with a reduction of 6.7 cents per litre of gasoline, a reduction of 8 cents per litre of diesel, and a reduced cost of $1.52 per gigajoule of natural gas.
The repeal of the existing carbon tax regime now results in Alberta being exposed to the federal backstop carbon pricing regime that is already in effect in Ontario, Manitoba, Saskatchewan, and New Brunswick. Under the federal program the price of carbon is initially set at $20/tonne and then increased to $30/tonne in the year 2020.
What remains unclear with the repeal of Alberta’s legislation is what will happen to the numerous projects funded by the carbon tax.
The Alberta government has acknowledged that it anticipates that the federal government will impose its carbon tax on the province, similar to what occurred in Saskatchewan and Ontario. The Alberta Attorney General has been directed by the premier to prepare a constitutional challenge of the federal carbon pricing regime through the Alberta Court of Appeal. The Alberta premier made this statement despite knowing that Saskatchewan recently lost its court challenge to the federal carbon tax regime. The Alberta government has indicated its proposal to move the cash collected through the carbon tax that was earmarked for green projects and move the funds to the general revenue to spend wherever the Alberta government deems appropriate.
Currently, the carbon taxes have been applied unequally throughout the provinces. In Ontario, Manitoba, Saskatchewan and New Brunswick a 4.4 cent increase has been applied to the price of a litre of gasoline. The federal tax was applied to these four provinces due to their refusal to develop their own carbon pricing regime.
There are numerous other provinces where the carbon pricing plans have received the approval of the federal government and the actual increase in gas prices is significantly less than the federal plan. In Newfoundland and Prince Edward Island the carbon taxes imposed under their own regime are offset by decreasing provincial gas taxes. In Newfoundland the gas prices are 0.42 cents higher per litre than they were prior to the imposition of the carbon tax. P.E.I are paying only 1 cent more per litre.
In Nova Scotia, its cap-and-trade system has resulted in residents paying less than 1 cent per litre. However, Quebec’s cap-and-trade system has increased gas prices by approximately 5 cents per litre.
The federal plan gives provinces the opportunity to develop their own carbon prices. The requirement however is that the provinces must create a carbon tax of at least $20 per tonne of greenhouse gas emissions in 2019 increasing to $50 per tonne in 2022. Alternatively, provinces can create a cap-and-trade system to achieve the same emission reductions. The provinces that have implemented their own price on carbon (carbon tax or cap-and-trade) are allowed to use the proceeds from the program as they deem appropriate. This can include rebates, tax cuts, and investment in renewable energy projects, industrial and consumer energy-efficiency programs, and transit and infrastructure projects.