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Policy
| 09/14/16

Conservative eco-think-tank: Alberta ‘hybrid’ CO2 tax best option

TCE

An Alberta-style carbon tax if implemented nationally could actually boost the country’s economic performance while taking a big bite out of Canada’s greenhouse gas emissions. This is the key finding of a modelling study performed by a conservative environmental think-tank.

Canadians for Clean Prosperity, headed by Mark Cameron—former Conservative Prime Minister Stephen Harper’s director of policy and research—compared the two main carbon pricing options in western Canada and considered their application at a national and multi-provincial level.

A BC-style ‘pure’ carbon tax, which covers most sectors and is revenue neutral—meaning that revenue is used to reduce corporate and personal taxes as well as provide assistance to lower-income groups—would result in faster emissions reductions than an Alberta’s ‘hybrid’ approach, according to the group, so long as it were expanded to cover not just emissions from combustion of fossil fuels, but also fugitive emissions from the natural gas sector and emissions from industrial processes. Alberta mixes a broad-based carbon tax with a carbon-trading option for emissions-intensive industries that face stiff competition from jurisdictions without a price on carbon. Furthermore, Alberta spends some of the tax revenue on emissions-reductions projects. For both models, the group assumed a steady ratcheting up of the price from $30 per tonne (BC’s current price) to $110 by 2030.

By the end of the next decade, a BC approach would reduce national emissions by 15 percent on 2005 levels while an Alberta approach would achieve a 14 percent reduction. Under the current suite of policies, emissions are projected to climb by five percent above 2005 levels. While the hybrid approach achieves slightly lower emissions reduction, it clocks in at a much lower cost than the pure carbon tax option. The pure tax option would reduce GDP by 0.6 percent by 2030, while the hybrid option would increase GDP by 0.35 percent.

The distinction is particularly striking in Alberta and Saskatchewan. In the latter province, emissions are expected to rise 10 percent by 2030 under current policies without widespread adoption of carbon capture and storage. Under a BC-style carbon tax, emissions would decline by 18 percent by 2030, and 33 percent under the hybrid route. The hybrid option would see provincial GDP rise by 1.43 percent in Alberta and 4.23 percent in Saskatchewan.

But the report concludes that a carbon tax of $110 per tonne is not sufficient on its own to realise Canada’s existing international commitment to reduce emissions by 30 percent on 2005 levels by 2030.

The report does not detail what complementary policies would be necessary beyond carbon taxation, but some mitigation measures such the build-out of a national electricity grid or electric-vehicle charging stations that need to be rolled out for deep decarbonisation to take place are unlikely to be realised via the price-signal of a levy on carbon pollution alone.

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Conservative eco-thinktank says Alberta-style carbon tax could boost the country’s economic performance

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