It cost Kenney $2.8B to get Trudeau to spend $1B on AB climate initiatives

But at least low-income Albertans get an extra 22 bucks a month.

In January 2017, the Alberta NDP introduced their carbon levy—popularly known as a carbon tax—on all fuels that emit greenhouse gases when burned, including diesel, gasoline, natural gas and propane.

For the first year, the rate was $20 per tonne, which increased to $30 per tonne in 2018. The rate was based on the amount of carbon pollution that is released by the fuel, not the mass of fuel itself.

First Nations and farmers were exempt from the levy for certain fuels and uses, such as fuels purchased on reserve and marked fuels used in farming operations, respectively.

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The levy generated $250 million for the 3 remaining months of the 2016–2017 year after it was implemented.

In 2017–2018, that increased to $1.046 billion in revenue. The government used this revenue for the following initiatives:

  • Consumer rebates ($306 million)
  • Capital grants ($253 million)
  • Subsidized small business tax rate cut from 3% to 2% ($180 million)
  • Operating programs ($130 million)
  • Coal transition payments ($97 million)
  • Capital investment ($15 million)

The following year, the carbon tax generated $1.324 billion in revenue. Unfortunately, the UCP, when they compiled the 2018–2019 year-end report, failed to include which programmes the carbon levy funded that year. They did mention in a footnote, however, that $523 million of it went out as consumer rebates.

So, $250 million in the first year, $1.046 billion in the second, and $1.324 billion in the third (and $250 million), for a total of $2.62 billion generated before the UCP cancelled the levy last summer.

In their 2018–21 Fiscal Plan, the NDP forecasted a further $1.381 billion in the 2019–2020 budget year, and $1.526 billion in our current budget year. Over a 5-year period, the carbon tax could’ve generated $4.8 billion in additional revenue for the province.

The amounts allocated for rebates were $152 million in 2016–2017 and $306 million in 2017–2018. The NDP estimated that $536 million would’ve been spent on rebates in 2018–2019, and budgeted for $518 million in 2019–2020 and $506 million in 2020–2021. Combined, that’d be $2.018 billion over 5 years.

The remaining $2.782 billion was—and would’ve been—spent on capital projects and other initiatives, particularly those that would help reduce carbon emissions.

Last May, just days after being elected, the UCP passed legislation to cancel the carbon tax.

As a result, the federal carbon tax, which was implemented in June 2018 for any provinces that didn’t have carbon pricing in place, began applying in Alberta as of January 2020.

The Office of the Parliamentary Budget Officer released a report earlier this year outlining what the federal carbon pollution pricing system—commonly also referred to as a carbon tax—what would collect from each province.

First, a bit of background.

The federal carbon pricing programme started in 2019 with a fuel charge of $20 per tonne, increasing by $10 a tonne every year until 2022–2023, when it would remain at $50 a tonne for subsequent years.

Since Alberta technically was enrolled into the federal programme in the 2019–2020 fiscal year, we paid the $20/tonne fuel charge for the first 3 months of this year. For the rest of the year, and until March 2021, we’ll be paying $30/tonne.

Which, of course, is the same amount we were paying under the provincial carbon tax. Except, now we have to also pay GST on the federal tax.

In practical terms, as of April 2020, this amounted to a 6.63¢ per litre for gasoline and 5.87¢ per cubic metre on natural gas in Alberta.

Here’s what the federal government expects to collect from Alberta in carbon pricing revenue for 5 full years (not counting the 3 months of 2019–2020).

Fuel charge1,4661,9422,3812,3762,367
$ millions

Over the next 5 years, Albertans will be paying out $10.886 billion in carbon tax to the federal government. That’s about twice as much as the NDP forecasted for a 5-year period under their provincial plan.

Luckily, the federal government returns 90% of the revenue collected to households via a rebate. In fact, all but 20% of Alberta households, the ones with the highest incomes, will receive more back on their rebates than they they paid out in the carbon tax.

That means over the next 5 years, Alberta households will receive $9.479 billion. This, of course, doesn’t include the $354 million in GST, which the federal government will keep.

The remaining $1.053 billion—roughly $200 million a year—will be retained by the federal government but will be spent in Alberta to support “schools, hospitals, small and medium-sized businesses, colleges and universities, municipalities, not for profit organizations, and Indigenous communities” as these sectors try to reduce emissions.

Remember, however, that this $1.053 billion is what will be sent to these sectors over a 5-year period.

Let’s take this year for example.

The federal government anticipates collecting $1.466 billion in carbon pricing revenue from Alberta this year. Affected sectors will receive 10% of that, or $146.6 million.

Under the now cancelled provincial programme, Alberta would’ve collected $1.526 billion in carbon levy revenue. Assuming the same roughly 70% allocation that we saw in 2017-2018, that means the province would’ve spent $1.068 billion on the same sorts of initiatives that the federal government will be.

In other words, Alberta businesses, organizations, and institutions are receiving under the federal carbon tax only 13.7% of what they were receiving under the NDP carbon tax.

On the other hand, households will collectively receive $1.319 billion under the federal tax this year, compared to $457.8 million they would’ve under the provincial plan.

For those in the lowest 20% of incomes, that’ll amount to $566 each, on average. Once you account for the $303 they had to pay out first, they’ll end up with $263 this year—or about $21.92 a month—on average in their pockets. Even less for those with higher incomes.

So businesses, organizations, and institutions will receive 13.7% of what they used to and low-income consumers will get an extra 22 bucks a month.

But, at least we cancelled the provincial carbon tax.

Now, granted, that may all change if the Alberta government succeeds in their joint lawsuit against the federal government. They argue the federal tax is unconstitutional.

Appeal courts in Saskatchewan and Ontario have already ruled that the tax isn’t unconstitutional, but the Alberta appeal court sided with Alberta.

It’s now before the Supreme Court, which finished hearing arguments two months ago. We may not receive a ruling for months.

And even then, we probably will never know how much we paid to cover the court costs.

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By Kim Siever

Kim Siever is an independent queer journalist based in Lethbridge, Alberta. He writes daily news articles, focusing on politics and labour.

4 replies on “It cost Kenney $2.8B to get Trudeau to spend $1B on AB climate initiatives”

Thank you for your research and writing. Your articles are essential reading in these times.

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