Carbon tax used to balance books

Alberta plans to show budget surplus by 2023

CA LGA RY • Despite initial promises that Alberta’s carbon tax would be revenueneutral, the province’s NDP government confirmed Thursday it would use cash from carbon pricing to balance its books in the long term.

Alberta released its budget for the next fiscal year Thursday, which shows the oil- rich province will post a smaller-than-expected $8.8-billion deficit this year.

The budget also shows the provincial debt will grow to $ 54 billion this year. By 2023/ 2024, after multiple years of deficit spending, Alberta is on pace to be $ 96 billion in debt — a dramatic change in fortunes for a province that as recently as 2004 celebrated being debt- free, with then- premier Ralph Klein posing for photos with a sign that read: “Paid in Full.”

Alberta Finance Minister Joe Ceci said Thursday the debt accumulation was necessary to provide social services as the province continues to recover from “the worst recession in a generation.” He also said the province’s long- term plan for returning to a surplus by 2023/ 2024 will require the use of carbon-tax proceeds.

“Beginning in 2021, additional revenue resulting from the federally imposed carbon price tied to the construction of the Trans Mountain pipeline will be used to support vital public services as the province stays on track to balance the budget by 2023,” Ceci said.

The province’s tax on carbon was immediately controversial when it was first announced i n November 2015. At that time, Premier Rachel Notley said the carbon levy, which rose from $20 per tonne in 2017 to $30 per tonne this year, would be revenue- neutral because the proceeds would not be directed to general revenues.

“We will put every penny raised through the carbon price to work here in Alberta — building our economy, creating jobs, and doubling down on efforts to reduce pollution and promote greater efficiency,” Notley said at the time. “The Alberta carbon price will therefore be revenue- neutral, fully recycled back into the Alberta economy.”

Now, t he government plans to re-direct any carbon levy proceeds above $30 per tonne into general revenues beginning in 2021, when the price is expected to reach $50 per tonne.

The re- allocation would boost Alberta’s revenues by $ 100 million that year, rising to $ 1 billion per year by 2023, when the province expects to post a modest $700-million surplus.

Ceci dismissed concerns that there had been changes to plans for carbon funds. He said Alberta’s portion of the tax — which he puts at $ 30 per tonne — would still fund pollution- reducing initiatives, while the federal portion — anything above $ 30 per tonne — would go to general revenue.

“T he Alber t a Climate Leadership funds will continue to be re-invested in Alberta — that’s not changing. The additional f ederally imposed carbon price, that’s tied to Trans Mountain, we’re going to be using that to provide Albertans with vital programs and services that they rely on,” Ceci said.

In the meantime, Alberta will not be counting its carbon- tax money for its general revenues and the budget shows continued deficits.

T he province expec t s to spend $ 56.2 billion this year, compared with forecast revenue of $47.9 billion, resulting in an $ 8.8- billion deficit. The revenues are higher than expected and the deficit is lower because Alberta’s economy has begun to recover from the oil price collapse that began in 2014.

The province posted real GDP growth of 4.5 per cent in 2017 and the government forecasts 2.7 per cent growth this year.

Even as the economy recovers, the budget shows the province’s unemployment rate will come down slowly. After peaking at 8.1 per cent in 2016, the rate has fallen steadily and is expected to decline to 6.8 per cent in 2018.