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Alberta pitches a big-bang climate plan

With carbon taxes and phase-outs, the game in Alberta has totally changed. What will it mean for Albertans?


 
Premier Rachel Notley unveils Alberta's climate strategy in Edmonton, Alberta, on Sunday, November 22, 2015. The new plan will include carbon tax and a cap on oilseeds emissions among other strategies. THE CANADIAN PRESS/Amber Bracken

Premier Rachel Notley unveils Alberta’s climate strategy in Edmonton, Alberta, on Sunday, November 22, 2015. The new plan will include carbon tax and a cap on oilsands emissions among other strategies. THE CANADIAN PRESS/Amber Bracken

It was one of those days where folks at podiums use the cliché “game-changer” and it sounds like an understatement. When an oilsands CEO excitedly draws a journalist’s attention to a tweet by Al Gore—yes, those tar-like sands and that Gore guy—it almost feels like more than the game has changed. Team rosters got shuffled after a referee’s whistle, the artificial turf shifted abruptly to switchgrass, the chemical composition of the ball altered and the arena lights now blink off when the score gets high enough.

In one Sunday announcement, Alberta’s NDP government has substantially reorganized its carbon economy—a.k.a. a whole lot of its economy. The impact will be widespread, and our understanding of it will unfold and adapt in the days, weeks, years and decades to come.

If this seems hyperbolic, my apologies. But in Alberta, memories of massive policy shifts will go immediately to the 2007 Alberta resource royalty review, a sizeable earthquake for oil and gas producers. Premier Rachel Notley’s “climate leadership plan” makes that Tory-era reform seem puny, and will likely also dwarf the broad effect of the further royalty review and changes the NDP will unfurl in coming weeks.

Related: Economist Trevor Tombe on the NDP’s big plan

Notley and Environment Minister Shannon Phillips dropped nothing less than a policy cluster-bomb of mandated targets, rules and often the mere hint at mechanisms and subsidy packages to enact it all. Alberta will follow British Columbia in introducing a cross-economy carbon tax, $20 per tonne in 2017 and $30 the following year—rebate and offset programs to come. The province will mimic Ontario and mandate the end to coal power by 2030—compensation and negotiated phase-outs to come. Methane emissions from venting, flaring and leaking, will have to be cut nearly in half in a decade—a goal that drillers and others will struggle now to meet in near-lockstep with the Obama administration’s approach on the greenhouse gas that’s more intense than carbon.

Lastly, there’s the oilsands policy, designed to get the biggest nods and high-fives out of foreign partners and environmentalists: a hard cap on emissions from that sector, 100 megatonnes. When Notley was asked about Oil Change International’s tweet that this means “no new tar sands growth,” the premier furrowed her brow and said no. Furrowing and shaking their heads along with her were four oilsands executives invited to share the announcement, from Suncor, Shell, Cenovus and Canadian Natural Resources Ltd. Murray Edwards, the CNRL chairman few watchers expected to appear at such an event, was gushing in his congratulations about the collaboration between industry, the province and green advocacy groups: “This plan recognizes the need for balance between the environment and the economy.” The cap was set at 100 megatonnes, with more room for bitumen upgrading; Alberta’s oilsands currently produce 70. So there’s room to expand the traditionally vilified resource for years to come, and much more if they make good on pledges to slash the per-barrel emission rates. CNRL and counterparts get room to grow, and the climate change panel report by University of Alberta economist Andrew Leach predicts that in most cases, the designed changes won’t cost more than $1 per barrel for most operators.

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But to the companies, and to the government, much rides on how many heads turn among those who castigate Alberta’s big-money export as “dirty oil” — if the rhetoric and action are enough to make the next pipeline plans actually go through, then the plan could pay for itself. The sooner Alberta can completely bury the days of corporate science denialism and Ralph Klein’s jokes about dinosaur farts, the better.

For consumers, the carbon tax will add nearly seven cents per gasoline litre by 2018, shaving off most the current price advantage Alberta has compared to provinces with sales taxes. Overall costs for heating, power and fuel are targeted to add $470 to the average household bills, though Notley pledges some kind of rebate program for the lower 60 per cent of Alberta income earners. The province is adopting a cutely novel take on “revenue neutral,” though it’s not cutting income or corporate taxes apace like the B.C. government did. In Notley-ese, that means the money taxed in Alberta gets reinvested or rebated in Alberta. That’s like saying provincial income tax is revenue neutral because all of it goes to health care and schools and all else the government does. Even before the announcement, the Wildrose party had recycled the federal Conservatives’ “tax on everything” battle cry against Stephane Dion’s carbon tax plan. Small businesses, rural groups and many others will likely join this chorus.

The oil sands near Fort McMurray, Alberta. (Jimmy Jeong)

The oil sands near Fort McMurray, Alberta. (Jimmy Jeong)

Tellingly, there weren’t any electrical-generator CEOs invited to the NDP’s big day. With a scheduled phaseout brought on in part by Harper-era regulations, coal generation was already slated to drop significantly in Alberta by 2030, to near 10 per cent of the power mix from around half today. This plan shuts the door more firmly and quickly. TransAlta, one of the companies building new-generation coal plants, said it looks forward to negotiations and the government’s noises about not “stranding capital.” That sector’s happiness will depend on how much compensation Alberta ships its way, and how easily they can become players in the province’s hoped-for wind and solar future—one that somehow won’t cause the same price shocks they did in Ontario, even though the western province is far more reliant on the black rocks.

The exact emissions reduction targets are the blurriest of goals from Sunday’s big bang: the province’s carbon output should be cut from the 320 megatonnes of business-as-usual projects to somewhere in the neighbourhood of 270 megatonnes, though that’s only based on Leach’s panel report, not based on reforms in Alberta’s policy, which diverges in many ways. That’s not even below 2013 levels, let alone 2005, so would require other provinces to cut even more deeply so Canada can meet even the Stephen Harper-era goals. Journalists quizzed the premier on the prospect that this province-rocking plan could be deemed inadequate by her brothers and sisters in Confederation.

That sell job for Notley begins in earnest Monday, at the premier’s gathering with Prime Minister Justin Trudeau. Alberta’s plans were six months in the making, but officials crammed to launch their ambitious strategy one day before. While Notley jets to Ottawa and then Paris to show off the plan, Albertans at home will be trying the grasp the sheer magnitude of ways her new government’s ambition will reshape this province.

An earlier version of this article incorrectly put the forecast at 250 megatonnes. This revision clarifies the source of that projection.


 

Alberta pitches a big-bang climate plan

  1. There’s going to be a scramble amongst the provinces to put in carbon taxes now. With a Liberal government in Ottawa, they aren’t going to wait for the feds to put in a carbon tax – they’re going to put in their own and make sure the revenue stays in province. The feds, if they wish, will be forced to put a federal carbon tax on top of the provincial one – not a popular thing to do.

    • You’re assuming the federal government would be smart enough to choose a carbon tax over cap-and-trade. Given that Ontario and Quebec went for the latter, that’s not at all obvious.

  2. Great theatre.

  3. Notley F###s Albertans again.

  4. If the CEO’s of some resource companies are in favour of these changes, you can be sure of one thing. It won’t be the companies making any sacrifices….it will be consumers. We know that the costs are just going to be passed along to the people who use the resources, but the question no one ever seems to answer will remain.

    Let’s wait a year after these changes take effect…..and measure just how much of a reduction there has been. Of course, there won’t be any effect other than various levels of Government enriching themselves…..but that has always been the goal of any climate change policy; wealth re-distribution.

    • And it should be the consumers. The only way to reduce consumption is to charge more for it. Tagging producers with the costs while trying to let the consumers skate on them is a sure fire way to create massive price distortions and resource misallocations and cost everyone more in the long run.

  5. I hope readers will forgive my ignorance, but how does a carbon tax reduce greenhouse gas emissions? My thinking is that energy producers will simply push the additional costs onto consumers, resulting in soaring energy prices and increased inflation. I must admit, I am not the most well versed in all of this so could anyone explain what I am missing?

    • The same way increasing the price of anything reduces its consumption.

      • Energy costs are as pervasive as it gets. This will result in a cost increase in virtually everything produced in Alberta. Even if consumers are able to reduce their consumption, wouldn’t this further hamstring their economy? I suppose if things get really, bad people will lose their jobs and be forced to relocate to another province, which will ultimately reduce emissions. Perhaps that’s the goal?

        • Whether something is ‘pervasive’ or not doesn’t change the fact the increasing its price will reduce its consumption.

          And the fact that every single country in the world has lower per capita co2 emissions than Alberta, makes it pretty clear that Alberta can have lower consumption and an economy.

          • I’m not sure how you have arrived at the conclusion in your second paragraph. Alberta’s economy is driven by oil. It has a population of 4 million. For some reason, you are comparing the per capita emissions of a province, to that of other countries that are more densely populated. It would appear that emissions per capita is a fairly meaningless figure and certainly not something that lends to the bold proclamation that the province can “have an economy” (whatever that means).

            As for your first point, the reduction in demand depends on the elasticity of the service being consumed. Elasticity is generally determined by the ease of access to substitutes, however, when there are no viable substitutes (such as heating in the winter) or all substitutes are similarly affected by this price increase, demand is inelastic.

          • Your claim that I was responding to, was that reducing consumption would ruin the economy.
            So, you’re dropping that claim and want to talk about production?

            Of course fossil fuels demand is elastic.
            Do you not have a choice about what size house you live in? How energy efficent that house is? How you heat it? What sort of transportation you use and how much you use it? What you buy? etc., etc.,

          • What exactly are the emissions of Alberta given we have a population of around 3.5 million. I bet we are the highest single exporter of grain and perhaps beef per capita in the world as well…..unless Saskatchewan with a population of a million out does us in the grain category. In fact, I would like to see your sources. I would like to see the emissions per capita of Saskatchewan and Ontario with all those automobiles. All of Canada has less than 2 percent of the global emissions. How about providing some sources. I know the oilsands are the biggest single emitter in the country but to make it sound that Alberta is spewing huge amounts is ridiculous when our country is a small emitter.

    • ARK2:

      Simple, in Canada, it means people with limited funds will just not heat their homes as much. Poor folks will need to turn the heat down to 60 instead of keeping it at 72. Kids can wear sweaters. It also means price of gas goes up, so you will buy less of it.
      Of course, many goods and producst are “inelastic” in that you need to buy it regardless of the cost. Things such as gasoline, energy to heat the home…food, etc..etc…

      Tresus is right for a change. Carbon taxes reduce emissions by reducing your quality of life; particularly if you have a limited income.

      but hey…..if it means the Liberals can claim to have saved the planet….no cost is too high.

      Just stay at home and throw on a sweater. Good lemming…good.

  6. Calling the Alberta carbon tax revenue neutral is indeed inaccurate. It’s unfortunate that the Alberta government is using the carbon tax as an excuse to extract more money from taxpayers rather than implementing a truly revenue neutral carbon tax as BC did – plays to the notion of the NDP being the tax and spend party.

  7. So, in a province that couldn’t afford the government we had when the economy was strong and employment high, we’re going to increase the size and scope of government intervention in the economy. That’s what a deficit is. It’s the difference between what government actually costs and what the citizenry can afford or are willing to pay. Raising taxes only increases the shortfall, as the tax increases reduce economic growth, and reduces the amount of money available to be spent as taxes.
    If we couldn’t afford it before, then there is a 100% certainty that we won’t be able to afford an even more expensive government when the economic situation is even more challenging.
    It’s not baffling that lefties such as Notley don’t get this. They’re slaves to their own ideology, and don’t tend towards intellectual depth, especially on economic matters. What is baffling, however, is that there are economists who have not indicated their understanding of the simple fundamental fact of the high costs of government not being satisfied by even the rapacious taxation powers of government.
    Market forces are even more inexorable than the forces of government. Market values for anything can have some elasticity, but they are not infinitely elastic. Thus, when the cost of governments reach a certain point beyond which the market cannot support it, shortfalls occur.
    The NDP will immediately begin earmarking $4-6 billion of their new found carbon taxes (remember, math are hard for the left). This will be compounded by reductions in economic activity in the private sector, creating a large gap between the expected and actual revenues from the carbon taxation. This means that the fiscal 2016-2017 deficit will be closer to $12 billion. $9 billion is the bare minimum, and rising.
    At the same time, we can safely expect several billion in wage and benefit increases to the public sector, including one-time multi-billion dollar pension top-ups. Some of this will be a direct response to tax increases, as the after-tax income of public sector workers is sacrosanct. Much weight will be given to the justification that our public sector works hard for us, and deserves to be well compensated.
    Thus people who face real economic disruption due to low energy prices, some of which is life altering in nature, will be expected to endure higher energy prices and taxation just so that the least productive sector of the economy can be shielded from those same market forces.
    Think about this. Ontario was still reeling from the impact of the Rae NDP government, when it got into the McGuinty mess, followed by the Kathleen Wynne wholesale fiasco. They never got government under control before letting the mindless left take over. Ten years ago, we had government under control here in Alberta. Even if we send the Dippers packing in 4-5 years (more likely 5 as they will do everything in their power to avoid facing the electorate after running our debt back up to $50-60 billion), it’s a given that my children will still be paying the price of of the Notley mistake when they are facing retirement.
    The impact of good government is often fleeting, as much of the benefit of good government is somewhat intangible beyond the security that comes with simple economic freedoms. Bad government, however, can create very real and tangible burdens that last for decades. The Trudeau years have cost me roughly $200-300 per month since 1982 or 1983. It’s now a certainty that I will not live long enough to see a return to the kind of low-debt government we had for a decade after I was born, and my children might not either, Yet no one can point to a single, solitary, tangible benefit that I have derived from the hundreds of thousands of dollars in lost economic benefit and opportunity that left-wing economics has imposed upon me.

    • That is why we should have a “means test” for voters.

      If you don’t know the difference between a socialist, a Liberal, or a Conservative, you lose points. If you don’t now, or have never paid taxes…you simply don’t get to vote.

      If you don’t contribute…you don’t get a say. If you just take, then you don’t get the chance to take more from others’ who do contribute.

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