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Moving Cautiously Ahead

Edmonton businesses are determining how to work with (or against) the carbon tax

Edmonton Transit is taking proactive steps to make the city's transit fleet more green and sustainable. Photo credit: Edmonton Economic Development (EEDC),

Taxes may account for one of only two certainties in life, but that hasn’t stopped the Edmonton business community from feeling a sense of uncertainty—peppered with frustration or optimism—over an increase in a provincial tax.

Alberta’s carbon tax was increased, as planned, in January of this year, and no industry has been left untouched. From transportation to retail to property management, businesses in every sector are bracing for an impact on their operations and bottom line. Though some foresee a barrier, others are hoping to find opportunity.

The Breakdown
Matthias Alleckna is a commercial energy associate with Energy Rates (energyrates.ca), a company with a mission to help consumers understand energy options and bills by providing unbiased information about rates and issues affecting the energy sector. “From January 1, 2018, the Alberta Carbon Levy is set to increase by 50 per cent, and when in the context of natural gas consumption the cost will rise from 1.011 dollars per gigajoule to 1.517 dollars per gigajoule,” Alleckna explains of the carbon tax increase. “The average small business in Alberta consumes around 1,500 gigajoules per year. With this in mind the increased Levy will add $759 dollars per year to the average small business’ natural gas bill. In an attempt to offset this increase in cost, the corporate income tax on small businesses has been reduced from 3 per cent to 2 per cent.”

An Uncertain Impact
For many business owners, it’s not just the immediate rise in operational costs that has them concerned. They’re looking out for further costs and effects down the road.

“I believe that the true effects of the carbon tax will become more prominent as we continue further into 2018,” says Mark Barron Wilbert, a partner/realtor with Coldwell Banker Venture Realty. “With the additional increases from 2017 to 2018, it may become more apparent as businesses and consumers start receiving their monthly statements, and realize how drastic that increase actually is.”

“The hidden cost here is that currently 45 per cent of Alberta’s electricity is generated by natural gas fired power stations, set to increase to 77 per cent by 2030 due to the coal phase out plans,” explains Alleckna. “Although small businesses will not be paying the Carbon Levy directly on electricity consumption, the effect this increase will have on electricity generators will eventually fall down to consumers in the long term.”

The Way Forward
It’s probably no surprise that many business owners are feeling neither positive nor optimistic about the tax and their ability to work with it. As the Alberta director of provincial affairs at the Canadian Federation of Independent Business (CFIB), Amber Ruddy has heard from many of them.

“Taking billions of dollars out of the productive yet delicate economy is a flat out bad idea,” she says, summarizing the sentiments she hears from CFIB members. “Small businesses want appropriate environmental safeguards, but 82 per cent of Alberta small businesses reject this tax that layers on making a bad situation worse. Business owners report that the carbon tax has led to increased operating and input costs, reduced profitability, and the delay of business investments.”

Of course, being unhappy with the tax doesn’t make it go away. Despite the challenges businesses foresee with the increased taxes, they still have to make changes in order to accommodate it. But does that mean changing their operations or pressuring the province to change the tax itself?

According to Ruddy, the way forward is to push back.

“CFIB is pushing for a full economic impact assessment of the carbon tax to assess the impact it has had on the economy,” she says. “Business owners are encouraged to join 2,500 Alberta entrepreneurs that have signed CFIB’s petition regarding the carbon tax.”

Some businesses, however, have accepted the tax and have resolved to adapt their operations accordingly, even going so far as to see opportunity for new streams of revenue.

“While new buildings are being built downtown, which are greener and incorporate new technologies, the older buildings are seeing a drastic increase in operating costs and property managers are looking for solutions to bring down costs and attract tenants,” explains Wilbert of the impact on the real estate and property management industries. “This has resulted in a market of new companies that are thriving on the demand for updates and change. The potential savings to retrofit cannot be overlooked.”

It’s not just the private sector feeling the pinch. Mark Brostrom, branch manager of city environmental strategies with the City of Edmonton, says that Edmonton Transit Services has been working to accommodate the increased tax.

“The City knows that the provincial carbon levy will increase its cost of transportation fuels and natural gas, but is actively implementing programs to reduce that impact,” he says. “For example, in May 2018, the City is producing a comprehensive greenhouse gas management plan for the corporation. It outlines the investment required over 12 years to make energy retrofits, install renewables, electrify the bus fleet, and accelerate street light replacement. Scenarios will be presented to council at varying carbon reduction levels.”

Of course, as a public entity, the City actively works toward making its operations more environmentally friendly, so trying to reduce the impact of the carbon tax fits into many of those strategies. “ETS will be adding up to 40 battery electric buses to its fleet of over 900 diesel buses in 2019,” says Brostrom. “The electric buses are significantly more fuel efficient than diesel buses.  Electric buses also reduce greenhouse gas emissions, even with today’s significant use of coal and natural gas to generate electricity in Alberta, and will reduce emissions even further as coal is phased out and more renewable sources are added.”
Only time will tell how businesses ultimately respond to the tax, and whether they adapt or find a way to push back. However, for many, the response might lie somewhere in the middle. According to Wilbert, balance is the key to maintaining commercial success in these changing times, at least in his industry. “It will be interesting to see if the increases will continue or if there will be pushback to find a better way,” he says. “There are programs in place to assist with the retrofits and provide rebates, but we will still need to find a balance between older building and greener solutions.”