Home Regular Contributors David MacLean Time for An Alberta-Made Carbon Tax

Time for An Alberta-Made Carbon Tax

David McLean

In a 6-3 decision rendered in March, the Supreme Court ruled the federal Liberal government’s carbon pricing scheme is constitutional. This means the federal government is free to push ahead to ensure every province and territory has a price on carbon to curb emissions.

The provinces opposed to the carbon tax – Alberta, Saskatchewan and Ontario – now have big decisions to make. Do they allow the federal backstop to remain in place, or create their own system?

After the decision came down, Saskatchewan Premier Scott Moe immediately announced his intention to create a Saskatchewan plan. “We plan to return as much money from this ineffective tax to Saskatchewan people as quickly as we can,” said Moe in response to the decision.

Premier Kenney should do likewise for Alberta, and he probably will. Given the Alberta government’s distrust for all things Ottawa, having the federal government spending Alberta tax dollars just won’t stand.

So, what might a made-in-Alberta carbon tax look like? Premier Moe is already signaling his intention to model the Saskatchewan plan, which could be implemented in 2022, after New Brunswick’s. One unique feature of New Brunswick’s plan is that, while it complies with federal requirement for a 6.6 cent per litre tax on gasoline at the pumps, it also slashed the provincial gas tax by 4 cents. That means New Brunswickers are only dinged for two cents per litre.

Shielding consumers from significant tax hikes at the pumps is nice, but the competitiveness of the provincial economy is what really matters. A vast majority of Alberta manufacturers are trade exposed. They can’t simply pass a carbon tax onto their customers because their competitors don’t pay the tax in the first place. Many Alberta companies are in direct competition with Asian and US-based firms who don’t pay a nickel in carbon taxes.

There’s an Alberta manufacturer (that I won’t name) that currently employs 300 people. Their competition comes from all over the world – including firms in Asia and the United States. Their carbon tax bill this year will be a whopping $900,000. By 2024, as the feds ratchet up the carbon tax, they expect their bill to increase to more than $1.9 million per year. That’s serious cash, straight off their bottom line, that could be better spent on new equipment and technology.

Here’s the kicker – this company also has operations in Ontario. While those other operations will be paying a carbon tax, Ontario power is often hydroelectric or nuclear. That means the carbon tax paid in Ontario is a fraction of what the Alberta plant pays.

Alberta is desperate to attract capital investment. Not only are we competing with countries around the world that don’t tax carbon, but we’re also competing with jurisdictions in our own back yard with less carbon-intensive power generation profiles.

The Alberta government should develop a carbon pricing scheme that is tailored to the unique nature of our local economy and minimizes the impact on competitiveness. Any carbon tax dollars collected from Alberta manufacturers should be returned to them in the form of grants, tax credits or other incentives to help them compete globally and improve their environmental performance.

The Alberta government lost in court, now we need to work together on a plan that protects the Alberta economy.

Canadian Manufacturers & Exporters (CME) is the voice of Canadian manufacturing. CME represents more than 2,500 companies who account for an estimated 82 per cent of manufacturing output and 90 per cent of Canada’s exports.