Albertans to receive the highest carbon gift

The carbon gift is not a lump of coal. Albertans will receive the highest carbon tax rebate of any of the four provinces who have opted out of the federal plan. A family of four will receive an average tax credit of $888, compared to families in the other holdout provinces of Ontario, Manitoba and Saskatchewan who can claim a credit of $448, $486 and $809, respectively.

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Let’s call it a gift, not a rebate because most Albertans will receive more back than they pay in the so-called carbon tax. According to calculations by economists Jennifer Winter and Trevor Tombe at the University of Calgary, 80 per cent of Alberta households will get more back from the credit than they will pay in increased costs (Globe and Mail, Dec. 19, 2019).

And can we really call it a carbon tax when it isn’t really isn’t? Taxes are collected by governments to pay for health care, roads, education and so on. The goal of the carbon transfer is to reduce fossil fuel consumption, not to collect taxes. Let’s call it a carbon transfer. Money is just collected and redistributed.

The names given to the carbon transfer and carbon gift are politically motivated.  Conservatives prefer to call it a tax because it suits their political agenda of characterizing the fed’s actions to reduce fossil fuel consumption as a tax grab. The feds like calling the carbon gift “climate action incentive payments” because they like to pretend that we will meet carbon reduction targets.

And the federal Liberals are not rewarding Albertans for shutting them out of the province in the last election. The carbon gift is higher there because it covers a longer period of time than the other provinces and because Albertans spend more on fossil fuels.

You might wonder who’s paying for the carbon gift if it’s revenue neutral. Who is paying more than they receive?  It turns out that businesses are.

For struggling businesses, the carbon transfer seems unfair. But the holdout provinces are responsible for that: if they had devised their own carbon transfer system, the one proposed by the feds wouldn’t be in place. All provinces are free to create their own systems. Presumably, they could devise a system where taxpayers end up giving a carbon gift to small businesses. By refusing to create their own plan, they are accepting the fed’s by default.

B.C.’s carbon transfer is a model for the rest of Canada to follow. Businesses are not hurt –in fact they receive a reduction in taxes, as do personal taxpayers. Introduced in 2008, it has reduced per-capita emissions by 12 per cent and contrary to what conservatives claim, it hasn’t hurt the economy.

B.C.’ carbon transfer is also a model for conservatives because it was introduced by the BC Liberals, a conservative government. If the BC Liberals could introduce a carbon transfer and get re-elected, any conservative government could.

Pricing carbon is an easy sell to voters because most Canadians agree on pricing pollution, led by BC (84%) and trailing in Alberta where it’s still a majority (69%). And if there is no net cost to taxpayers, what’s not to like?

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B.C.’s Carbon Tax not as advertised

B.C.’s carbon tax is praised nationally and internationally as achieving the best of both worlds: reducing CO2 emissions (GHG) without weakening our economy. I wish that it were true because I take pride in B.C.’s  leadership.

B.C.’s economy has not been hurt, but that’s because our carbon tax is small compared to other taxes.  The carbon tax is only 7 cents per litre compared to 30 cents per litre for fuel tax, excise tax, and GST.

The only way that B.C. meets its target for GHG reduction is by buying debatable carbon credits, not through the carbon tax. Marc Lee, senior economist for the Canadian Centre for Policy Alternatives, explains the mischief:

“The B.C. government makes the dubious claim that they met their interim GHG reduction target for 2012 of 6% below 2007 levels. Even then, B.C.’s numbers showed only a 4.4% drop, which, as noted, involves a one-time drop from 2008 to 2009. The claim of 6% reduction is based on the purchase of bogus carbon credits (offsets), making it more fiction than fact.”

The trouble with the purchase of offsets is that there is no detailed reporting on how offsets were used. The whole scheme suffers from “massive credibility problems” after a scathing report by the auditor general.

The 4.4 per cent drop in GHG wasn’t because of the carbon tax. It was because of the Great Recession of 2008 when the world saw a reduction because of slowing economies. Even the U.S. reduced GHG. Between 2007 and 2009, emissions fell by 10 per cent, half of it due to less coal burned, half due to the recession. The Smithsonian magazine says:

“In effect, more than half the carbon decline was due to a drastic drop in the volume of goods consumed by the U.S. population.”

Even the claim that B.C.’s economy was not hurt by the carbon tax is suspect; all of Canada’s economy grew. From 2008 to 2013, B.C.’s economy grew by 12.6 per cent while Canada was 15.1 per cent.

“If we go to constant dollars, there is a very slight edge to B.C. over Canada, but it works out to 0.07% per year in GDP growth rates.”

Our carbon tax could be something worth bragging about if it was significant. With relatively low fuel costs, now would be the time to increase them. If the tax was increased from the current $30/tonne to $200/tonne, fuel prices would only increase to what they were last year.

And since the carbon tax is revenue neutral, there would be no net increase in taxes. Even then, a better idea would be to invest the tax in renewable energy and public transit to lower GHG further. Meanwhile, let’s get real about our carbon tax.

“We need to stop telling fairy tales about the province’s climate action policies and its carbon tax (and I say this as a general supporter of carbon taxes).”

B.C.’s Premier Clark has a lot of explaining to do. Her proposed LNG project will result in the province exceeding targets. Clark’s new plan to be released by December will tell us whether our pride in the carbon tax is warranted.