Carbon tax in Alberta an idea whose time has come

Put a price on carbon that is high enough to discourage emissions

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carbon taxCALGARY, AB Jul 26, 2015/ Troy Media/ – “Never in my wildest dreams did I think global warming would be such a hot issue,” said former Alberta premier Ralph Klein.

Nor, in his wildest dreams, would Klein have ever imagined that Prime Minister Stephen Harper would commit, along with the other leaders of the G8, to end the use of fossil fuels by the year 2100, nor that Alberta would elect a majority New Democratic government. Yet here we are, and the new Alberta government has created an advisory panel to recommend a new Climate Change Strategy which will almost certainly contain some kind of a price on carbon.

There are different approaches to pricing carbon, but the best is to adopt a fully transparent, broadly applied carbon tax, such as that used in B.C.

Several mainstream organizations in recent years – from the insurance industry to the OECD, the IMF, and the International Energy Agency – have called for aggressive action on climate change. Stanford University and the Church of England have divested from coal stocks and former Bank of Canada Governor Mark Carney, now Governor of the Bank of England, has echoed the warning by scientists that most identified fossil fuel reserves cannot be burned if we are to avoid catastrophic levels of climate change.

Some industry leaders agree that change is needed. Several weeks ago Steve Williams, CEO of Suncor, declared at an event in downtown Calgary that “Climate change is happening, and doing nothing is not an option we can choose.” Williams assured the audience that industry is ready to engage in discussions on how Alberta prices carbon and urged that any new carbon pricing policy also include consumers, since 80 per cent of CO2 emissions are not from the production of oil, but from its combustion.

At the same event, Alberta’s former Treasurer under Klein, Jim Dinning, clearly stated his preference for how carbon should be priced: “My electricity bill, and my home heating bill, should have a line item saying ‘Alberta’s Carbon Tax’ . . . Leadership is what’s needed. Politicians need steel in their spines to say ‘We’re going to help you change your behaviour.’ ”

Now that Canada’s two largest provinces, Ontario and Quebec, have chosen to join California’s cap and trade program, we can feel the pull for Alberta to do the same.

Early mistakes notwithstanding – the legislation lumbered through the U.S. Congress in a 1,400-page piece of legislation that never made it past the U.S. Senate and cap and trade floundered and collapsed in Europe, leading The Economist to describe it as “worse than useless” – there have been some successes.

For example RGGI, the Regional Greenhouse Gas Initiative, is a cap-and-trade scheme, albeit covering only power plants, that has worked pretty well to reduce emission in nine northeast U.S. states since 2008. The revenue generated is used for energy efficiency measures, education and job training, or assisting low-income customers to pay their electricity bills.

While Alberta’s review panel has to consider cap-and-trade as an option, many observers prefer a carbon tax because:

  • Cap and trade allows for carbon price volatility, which weakened Europe’s Emissions Trading System in its early years until low sluggish prices became embedded by poor policy design; and
  • Cap and trade presents opportunities for misuse of emission permits and sale on the international market: Interpol warned in 2013 that the $176 billion carbon market had become a magnet for organized crime.

On the other hand:

  • Carbon taxes are predictable and allow business to plan for the future; and
  • Carbon taxes are more easily administered, require less bureaucracy, and are more transparent than cap-and-trade systems;

The time has come to put a price on carbon that is high enough to discourage emissions, is applied fairly across the board, and is completely transparent. A carbon tax is the best way to achieve all three.

Roger Gagne is founder of the Carbon Conversations Project. He ran for the Green Party in 2012.

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