Time for a strong, simple carbon price

It’s the best way to reduce emissions while strengthening Alberta’s economy, write Mark Cameron and Kaitlin Szacki.

Alberta’s Climate Change Advisory Panel recently completed its public consultations, receiving more than 459 submissions from individuals and organizations with their views on how the province can address the challenge of climate change. At the same time, with oil prices remaining low and energy companies laying off employees, Albertans want to ensure that new climate policies do not come at the expense of the economy.

The rest of the world may discuss these challenges, but as an energy-producing economy, it is critical for Alberta to actually achieve it.

Any new climate-change strategy needs to meet three objectives: to lower emissions, strengthen our economy, and foster market acceptance for our energy products.

Answers exist, and are being implemented in jurisdictions around the world. Alberta’s neighbours in British Columbia have been very successful at reducing their emissions while continuing to grow, using a fully refunded carbon fee. And polls have shown that most Albertans would be open to a broad-based carbon fee or carbon tax as a way to reduce emissions.

In its submission to the advisory panel, Canadians for Clean Prosperity commissioned new modelling from the firm Enviro-Economics to see what the impact of a gradually rising carbon fee like British Columbia’s would be if implemented in Alberta.

On the first criteria — lowering emissions — the modelling shows that a carbon fee starting at $30 per tonne in 2018 and rising gradually to $100 per tonne by 2030 would reduce emissions by 28 megatonnes per year by 2030. This would get Alberta 87 per cent of the way toward meeting the last targets the Alberta government set in 2008.

On the second criteria — a stronger economy — ensuring every dollar raised is recycled through tax cuts would allow both businesses and families to invest in energy efficiency and reduce their expenses, and help restore the Alberta Advantage by putting the revenue back in the hands of every Albertan and establish- ing an extremely competitive tax environment for Alberta business.

An escalating price on carbon would mean more than $5 billion in revenue in 2020, growing to $11.5 billion by 2030. Alberta could drastically reduce taxes on both households and job creators. For example, by 2020, Alberta could reduce corporate taxes from 12 per cent to nine per cent — the lowest rates in the country — cut small business taxes to two per cent, reduce personal income tax from 10 to nine per cent for most Albertans while raising the personal exemption to $20,000, and provide every low-income earner with an annual $300 credit for adults and $75 for children.

By committing to return every dollar raised by the carbon fee to Albertans, our province could one again have Canada’s lowest corporate and personal income tax rates (while maintaining progressivity) and fully compensate lower income, rural, and northern residents for any impact of carbon pricing.

On the third criteria — getting our energy products to market — Alberta could arrive at the international climate change conference in Paris later this year as the only major oil-producing jurisdiction in the world to announce an economywide price on carbon. Alberta would be on the leading edge of climatechange policy, while still defending our economy, and rebuilding the province’s reputation by showing domestic and international partners that we have a meaningful climate change policy.

Rather than tinkering with the existing system that is overly complex and is seen as inadequate in its stringency and coverage, Alberta can implement a textbook example of good climate policy — a revenue-neutral carbon fee. With this strengthened policy framework in place, Alberta will have a much stronger case to make for market acceptance and market access in other parts of Canada, the United States, or Europe.

A strong and simple carbon price, with the revenues being refunded to taxpayers, is the most efficient way to reduce emissions and strengthen the economy. Such a policy could find political support across the board, and would significantly contribute to the market acceptance of Alberta’s oil and gas exports outside of the province. Albertans are innovators and leaders — so let’s give our people and our economy the incentives they need to get the job done.