Ottawa, Kenney reach deal over industrial emitters
Federal levy still on track for Albertans in ’20
• At least one of the many points of friction between Alberta and Ottawa could soon be abated as the federal government prepares to announce an agreement with the province that will allow Premier Jason Kenney to proceed with his own version of an industrial carbon tax. This means the Trudeau government would not force its own tax on heavy emitters in the province against Alberta’s wishes.
However, the Trudeau government is still set to force its federal carbon tax for consumers on Albertans in January, which the Kenney government is challenging before the courts. One of the Kenney government’s first moves after being elected earlier this year was to cancel the provincial carbon tax imposed by the province’s former NDP government.
While officials with Environment Canada would not confirm any agreement over the heavy- emitter tax, a federal source close to the negotiations who was not authorized to speak publicly confirmed that federal Environment Minister Jonathan Wilkinson is in the process of working with Minister of Intergovernmental Affairs Chrystia Freeland on an official communication around Alberta’s proposal. As of Thursday afternoon the details of any potential equivalency agreement had not yet been released.
On Wednesday, Kenney mentioned in a Calgary radio interview that Ottawa would “very soon” announce an agreement with the province on its Technology Innovation and Emissions Reduction levy, or TIER, which places a $30-per-tonne carbon tax on industrial emitters like oilsands facilities.
Alberta tabled its proposed changes to the TIER system in October, which the federal government has been reviewing.
An approval of the TIER system could go some way toward smoothing tensions between Ottawa and Alberta, which have intensified following the re- election of Prime Minister Justin Trudeau in October, in which his Liberal government was wiped out in Alberta.
Some observers have suggested Ottawa would not risk an outright rejection of Kenney’s plan, despite claims by environmental groups that it eases pressure on the most emissions- intensive sources of greenhouse gas emissions.
A rejection by Ottawa would also cause the federal government to enforce its own heavy-emitters levy in the province, similar to Trudeau’s separate consumer-facing carbon tax, which raises prices on gasoline and diesel. That tax is still set to be enforced in Alberta on Jan. 1, 2020.
Among the most prominent changes in the Alberta TIER proposal was a promise to keep the carbon tax on some heavy emitters at $ 30 per tonne, the same level as that set by the former NDP government. But Kenney said he would not raise that price to $40 in 2021 and $50 in 2022, which was the indicated minimum requirement to meet federal thresholds.
In October, Kenney floated the possibility of raising that threshold as part of a bargain with Ottawa, potentially in exchange for assurances that the Trans Mountain pipeline would be built to completion.
The Kenney proposal also reverted back to an older system where individual facilities are measured against their past emissions rather than an industry standard, which experts say will create more cushion for the province’s most emissions-intensive operations.
GMP Firstenergy analyst Michael Dunn said in a research note last month that the proposed changes would decrease costs on the most emissions- intensive steam- driven oilsands projects by as much as 80 per cent. Other observers however said the change would hurt the most efficient projects, which had earlier benefited from emissions profiles that were above the industry average.
“It’s ultimately weaker than straight-up sector-based benchmarks because it rewards companies that haven’t taken any action and punishes progressive companies,” Jan Gorski, analyst at Pembina Institute, recently said of Kenney’s proposal.
Alberta has had a carbon tax on heavy emitters since 2007.