The Car­bon Co­nun­drum

A ‘tax on ev­ery­thing’ will hurt Al­berta’s com­pet­i­tive­ness

Alberta Oil - - LAST WORD -

On Jan­uary 1, the Al­berta car­bon

tax kicked in. It’s in ad­di­tion to a large-emit­ters tax on in­dus­try and, by ex­ten­sion, on con­sumers, that has been in ef­fect since 2007.

The Al­berta gov­ern­ment has de­cided to take this tax a step fur­ther and charge us for the car­bon diox­ide that we emit—driv­ing our cars, heat­ing our homes, cook­ing dinner, lit­er­ally ev­ery­thing we do. This in­di­vid­ual car­bon tax is a “tax on ev­ery­thing” be­cause there will be an ex­tra cost that will be felt through­out the sup­ply chain. Very few oth­ers on this con­ti­nent pay such a tax so the ef­fect will be a se­vere damp­en­ing of Al­berta’s busi­ness com­pet­i­tive­ness.

A tax af­fect­ing the en­tire sup­ply chain will have sig­nif­i­cant im­pact on our food sup­ply. Grain han­dlers and meat pro­ces­sors will pay for it on their op­er­a­tions; truck­ers will pay ex­tra to trans­port goods and gro­cery stores will pay ex­tra for their op­er­a­tions. Food costs are go­ing up.

Com­pet­i­tive­ness is re­ally what Al­berta and Canada should be tar­get­ing, but in­stead our pro­vin­cial and fed­eral lead­ers are pil­ing on costs like they’re go­ing out of style. These in­clude cor­po­rate tax hikes, a dou­bling of the large emit­ters’ car­bon tax, a huge in­crease to the min­i­mum wage, more reg­u­la­tions lead­ing to longer de­lays for in­dus­trial ap­provals, in ad­di­tion to the new car­bon levy.

Per­haps Al­berta should have just in­tro­duced a real sales tax in­stead of go­ing through the back­door. The fi­nance min­is­ter has said re­peat­edly that new rev­enue is re­quired and this tax ac­com­plishes that, to an es­ti­mated $3 bil­lion. Gov­ern­ment rev­enues will go up but that takes more money out of the econ­omy. Most im­por­tantly, this tax on ev­ery­thing will do noth­ing for the en­vi­ron­ment.

Al­ber­tans have been told that the car­bon tax will get us “so­cial li­cense” for pipe­lines. But many com­men­ta­tors dis­agree. The Na­tional En­ergy Board ap­provals sys­tem has lit­tle to do with what hap­pens at a lo­cal level and Cana­dian his­tory has shown that this isn’t new. Writ­ing about a project in the 1950s, for­mer West­coast En­ergy pres­i­dent Ed Phillips, fa­mously said: “Pipe­lines, pol­i­tics and logic don’t mix.”

What the tax will do is build an in­cred­i­bly large slush fund for the gov­ern­ment to spend on pet projects and to “di­ver­sify” the econ­omy. The last time a gov­ern­ment pre­pared to take on this much risk, tax­pay­ers ended up pay­ing for huge losses on Nor­tel, the Husky up­grader and other boon­dog­gles.

Do Al­ber­tans and Cana­di­ans want to do their part to pro­tect the en­vi­ron­ment? Of course we do. But we also need to pro­tect the econ­omy. The gov­ern­ment should con­tinue to do ev­ery­thing it can to en­sure that en­ergy pro­duc­ers re­duce all emis­sions— ni­tro­gen ox­ides, sul­fur, volatile or­ganic com­pounds and, yes, car­bon.

In­vest­ments are al­ready leav­ing the prov­ince rapidly. Investors ap­pear to have lit­tle or no con­fi­dence in the di­rec­tion in which Al­berta is head­ing. That should tell us ev­ery­thing we need to know. The oil sands emis­sions cap be­ing in­tro­duced to ac­com­pany the car­bon tax is re­strict­ing the abil­ity of the Cana­dian pro­duc­ers to bring in cap­i­tal to com­pete with the large multi­na­tion­als.

The Nor­we­gian car­bon tax has had very lit­tle ef­fect, at least in terms of CO2 re­duc­tion. The B.C. ver­sion has failed to re­duce CO2 emis­sions but we hear econ­o­mists say the rea­son is that it’s not high enough. And that is the pri­mary is­sue: it is never high enough. The fact re­mains that it is never go­ing to be high enough for cli­mate ac­tivists, un­til we stop us­ing oil and gas. And why on earth would Cana­di­ans, blessed with tremen­dous nat­u­ral re­sources, want to stop selling and us­ing those re­sources to our ben­e­fit?

The ef­fects that we have seen from ju­ris­dic­tions that have brought in ag­gres­sive cli­mate poli­cies have been very neg­a­tive. Ger­many, Great Bri­tain, On­tario have all seen enor­mous in­creases in elec­tric­ity costs.

What does the NDP plan to do with the elec­tric­ity sec­tor? We don’t know be­cause they’ve been silent on how coal clo­sures are go­ing to work. How­ever, it is safe to as­sume that the re­sults are go­ing to be dis­as­trous for con­sumers in terms of sig­nif­i­cant rate hikes.

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