Today the province of Alberta’s government announced its newly developed comprehensive carbon policy. This was meant to provide transparency for all stakeholders and observers prior to the Paris climate conference, but also to stake its position relative to whatever commitments may be made by the new federal government of Canada.
Four key elements are contained in the new Alberta policy:
- An economy-wide carbon tax of $30/tonne by 2018, rising at 2% year, “as long as similar prices exist in peer and competitor jurisdictions”
- Accelerated shutdown by 2030 of Alberta’s remaining coal-based electric power generation infrastructure
- Revenue neutral – all collections spent in Alberta to of-set regressive impacts of the tax, and foster low carbon investment and technology development
- An overall cap on ultimate carbon emissions from oil sands development on the order of 100 megatonnes
Other elements relate to aspirational goals on fugitive emissions from all oil and gas operations in the province, renewable investment in the electric sector, and end use efficiency improvements.
But overall these initiatives are projected to achieve a stabilization of Alberta’s emissions by 2030 at around current levels of roughly 270 megatonnes/year.
All of which is in the context of a national target tabled by Canada in the range of an absolute reduction in Canadian emissions by 2030 of almost 200 megatonnes/year. Alberta has laid down its marker on what it is capable of contributing to that achieving that target.
It is important to recognize that although Alberta is prepared to impose on itself a carbon tax that is clearly both credible and comparable to what is currently applicable directly or indirectly in other parts of Canada and North America, it is not yet willing to make it the sole policy instrument for carbon policy. The announced aggregate cap on oil sands emissions could prove to be very problematic over time if commodity markets recover and carbon intensity improvements to not concurrently materialize. It could act as a real barrier to oil sands growth. Renewable mandates and regulated accelerated shutdown of existing coal-based infrastructure are all interventions that are at odds with what ought to logically follow from the imposition of the carbon tax.
Unfortunately, the Alberta government made no linkage of these policy initiatives with its current impasse over achieving a breakthrough on improved market access for both its oil and gas production potential. Alberta is imposing this tax on itself with no quid pro quo on market access from the rest of the country and certainly not the North American environmental movement.
Nevertheless, imposing this tax across all of its emissions should represent a significant step for Alberta to improving its entire social license position associated with its oil sands resource. One would hope that both the Canadian federal government and Obama administration would acknowledge that.
Carbon taxes should be the pre-eminent policy instrument for dealing with the risk of climate change–especially for a jurisdiction like Alberta, with its specific circumstances and interests. But even Alberta felt compelled to add certain interventions to improve the prospect of achieving actual emission reductions over time. That apparent reality deserves considerable reflection by all advocates of carbon taxes.