Big emitters will pay $1.2B in carbon tax by 2020

New credits will allow oilpatch to compete: environment minister

CALGARY Alberta’s carbon tax will cost large industrial emitters — from oilsands mines to fertilizer plants — a total of $1.2 billion a year by 2020, but the NDP government isn’t projecting job losses as a result of the sweeping new levy.

Postmedia has learned details of the province’s plans to overhaul the carbon tax for big industrial facilities that are heavy polluters and could lose a competitive edge against other global players that aren’t facing similar tax regimes.

To help reduce these risks, the Notley government plans a system of credits, called output-based allocations, that reward efficient operations with relatively small carbon footprints, while charging more emissions-heavy facilities in the hopes that they will improve.

The government is expected to release details of its plan in Calgary on Wednesday.

The new costs for industry — including $400 million a year for all oilsands operations by 2020 — come at a time when large global players have backed away from the oilpatch, and as U.S. lawmakers consider big corporate tax cuts.

Alberta Environment Minister Shannon Phillips said the province’s system of credits — along with other steps — is designed to address industry concerns with their ability to compete internationally.

“The industry ’s approach is, let’s do this in a way that ensures that Alberta remains competitive, that ensures we mitigate against trade exposure for energy-intensive industries and ensures that we have some reinvestment back in innovation,” Phillips said.

“We have listened and we have done those things.”

United Conservative Party MLA Don MacIntyre said he’s not convinced the NDP government’s efforts to reduce the effect on industry will protect employment and private-sector investment.

“I’m concerned about jobs, and I’m very concerned about (oilsands) projects being cancelled because this government doesn’t consult very well,” MacIntyre said.

Under the government’s plan, not all industry will face the full brunt of the carbon tax immediately. As was previously announced, petroleum producers that are not involved in the oilsands and not considered big emitters will be exempt from the levy until 2023.

The province’s new system of credits will apply to a vast array of large, emissions-intensive operations, including oilsands mining, bitumen upgrading, natural gas processing, fertilizer production and pulp processing.

These facilities are currently subject to the Specific Gas Emitters Regulation, a Tory-era program that imposes a levy on large industries. On Jan. 1, they will fall under a new program in which topperforming facilities with relatively low emissions will receive credits, while others will pay.

The province plans to introduce the costs in phases in order to help cushion the blow. Next year, most big industries will pay half of their carbon costs, followed by 75 per cent in 2019 and the full costs in 2020.

This means Alberta’s carbon tax revenues from big emitters will grow over the next three years, beginning with $874 million next year and rising to nearly $1.2 billion in 2020.

The government estimates that average costs for open-pit oilsands mines will hit 18 cents per barrel by 2020, while more emissionsintensive oilsands operations that involve underground drilling will see average costs rise to 50 cents per barrel.

The province expects to reduce the effect on industry through a series of steps, including proceeds from a $1.4-billion fund announced Tuesday that sets aside revenue from carbon taxes for programs that reduce industry emissions.

The biggest slice of the sevenyear fund, $440 million, will be delivered to emission-cutting projects for oilsands operations involved with underground drilling.

The government acknowledges these measures may not be enough for some players with relatively high emissions and face a carbon levy that threatens their viability.

The province has set aside additional funds designed to address these emergencies, though the province declined to disclose the full value.

The province could reduce carbon costs for struggling operators, issue additional offset credits or, in some cases, increase the amount of funding available to them for projects that cut emissions.

An internal government document, leaked to the official Opposition and obtained by Postmedia, suggested the combined effect of the carbon tax on large emitters and pending methane regulations could kill more jobs than phasing out coal.

The government’s plan to eliminate coal-fired electricity generation by 2030 is expected to scrap up to 1,200 direct jobs in mining and related operations.

Phillips, who said she hadn’t seen the leaked report, countered that Alberta’s climate change agenda is meant to create jobs, not kill them.

“We’re not only expecting the oil and gas industry to remain resilient and a driver of the economy,” she said, “we’re also expecting that this kind of regulatory push, along with the innovation fund pull, will, in fact, have a positive economic effect.”

MacIntyre was skeptical of claims the plan will be an economic boon. “There is an awful lot of money getting thrown around here, and an awful lot of money that’s being taken away from industry, too,” he said. “What we have yet to see is any sizable reduction in emissions throughout this entire two years since they rolled this climate action plan out.”