Will Notley bend on carbon tax?

There’s a growing case for cancelling or suspending Alberta’s carbon tax on grounds of economic emergency.

Premier Rachel Notley has always said that without a pipeline, Alberta’s economy can’t support the federal dream of a $50 per tonne tax by 2021.

She added, however, that we can afford $30 per tonne without a pipeline.

That’s where Alberta’s carbon levy sits now.

But can the economy absorb even that level of tax today?

Oil prices are lower, production is being cut, the differential is high, Alberta is paying more than $2 billion for rail rolling stock, pipeline construction is uncertain, and there’s a serious threat of more layoffs.

These factors are either entirely new or much more serious than they were when Notley launched the tax.

Flat-out cancellation is what Jason Kenney’s United Conservative Party wants, of course.

There’s no thought of that now among Notley’s deep thinkers. But nothing changes minds and principles like a looming election and bad polls. Notley has shown she can take decisive action. Tanking the tax would be a snap, compared with forcing big companies to cut production or building a provincially-owned model railroad.

“It would be very easy to suspend the carbon tax or to scrap it altogether,” says Trevor Tombe, highly respected U of C economist. “The projects that are funded through carbon tax revenue — the LRT announced for Edmonton, the Green Line here — are just an accounting entry. There’s no actual link between them. The government is linking these two as a bargaining position. But there’s no fiscal requirement here. There’d be absolutely no reason why that funding would disappear if the carbon tax disappeared.”

Of course, the money for a Green Line would have to come from other sources — borrowing, yet another tax, or cutting elsewhere. But such projects were in the works long before anybody but Notley thought of a carbon tax. And they can go on without it.

Tombe isn’t advocating here — in fact, he doesn’t think abolition or suspension would be a good idea. For one thing, annual carbon tax revenue of $1.3 billion would be lost.

“The merit of a carbon tax is that it forces us to recognize the emissions that we produce,” he

says. “To get rid of the carbon tax now would have implications for emissions.”

Backing away from the tax would also do serious damage to Alberta’s new reputation as a climate change fighter. That would run powerfully against the NDP’s deepest instincts.

Tombe also believes the NDP slipped up at the start by using “social licence” as an argument for the carbon tax.

“Personally, I’ve always felt it was a mistake to link the carbon tax with this (Trans Mountain) pipeline. There’s a great deal of risk that things will fall out of their control. And we’ve seen how that has played out.”

We sure have. Because Notley connected those dots, the delays in Trans Mountain construction now threaten the legitimacy of the tax.

Taking down the tax might be easy in a technical sense. But a big problem would be lurking.

Suppose Notley declares a oneyear carbon tax holiday beginning Jan. 1.

Ottawa would then be forced to impose its own tax, set to take effect April 1.

That’s the plan for other provinces without an approved carbon pricing program.

The federal tax would be both lower than Alberta’s ( based on $20 per tonne, not $30) and spin off bigger rebate cheques to more people. Ottawa plans to rebate 90 per cent of a province’s carbon tax take to individuals. Alberta’s rebate scheme returns only 40 per cent to lower-income people.

At that point, a weird thing could happen. Albertans might decide they prefer Ottawa’s tax. That thought would be dawning only weeks before the spring election.

The upshot is that there’s virtually zero chance Notley will abolish, suspend or lower the carbon tax. Even though it looks more and more like the NDP’s self-destruct device.