As the Globe and Mail reported, the budget tabled by the Alberta government in April forecast revenues from the carbon levy of $9.8 billion over five years. Some of that money will be redistributed to lower-income earners, some will be given back to small businesses as a reduction in Alberta’s small business tax, but at the end of the day, the government expects to net $6 billion to fund a giant green energy spending spree.
According to estimates in the Edmonton Journal, the new tax scheme will cost a family of four about $338 extra in 2017, rising to $508 in 2018 in direct energy costs, and another $70 to $105 in “indirect costs,” that is, when products and services have to increase in price as a result of the tax on producers and service providers.
The legislation at about 100 pages long includes three acts, one to establish the carbon tax, one to allow for reductions in small business taxes, and one to create a new Crown corporation to spend the tax revenues, called “Energy Efficiency Alberta.”
The mandate of this corporation is: (a) to raise awareness among energy consumers of energy use and the associated economic and environmental consequences, (b) to promote, design and deliver programs and carry out other activities related to energy efficiency, energy conservation and the development of micro-generation and small-scale energy systems in Alberta, and (c) to promote the development of an energy efficiency services industry.
But as we pointed out in a recent study by the Fraser Institute, this approach to managing greenhouse gas emissions has been tried – and failed – repeatedly in both the United States and Canada. Ontario has done a masterful job at avoiding transparency with regard to the benefits of its “demand-side management programs,” despite spending some $400 million on efficiency programs in 2013 alone.
The most rigorous study of a home efficiency program in the United States, the $5 billion Weatherization Assistance Program, looked at 34,000 homes, where some were aggressively offered weatherization assistance and some were not. The study, conducted at uber-environmentalist University of California, Berkeley found that of the households aggressively offered assistance with weatherization, only six percent actually followed through to participate in the weatherization program. Only one percent of the non-outreach households did so. And the households that participated did reduce energy consumption by some 20 percent, but – and it’s a big but – they spent twice as much money on the retrofits than they saved in reduced energy spending. And that 20 percent reduction was far below the economic models used to promote the program.
And as researchers at the Breakthrough Institute have found, efficiency programs are subject to the “rebound effect,” also known as the Jevon’s Paradox. That is, if you actually do make things more energy efficient, people tend to buy more energy-consuming products, wiping out any potential reductions in either energy consumption or emissions related to it. They point out that in developed countries, the rebound effect eliminates 40 to 60 percent of potential emission reductions.
Alberta’s new climate plan, by the government’s own admission, will not lead to significant greenhouse gas reductions for many years, if it ever does. The tax is far too low to have significant impacts on consumer behaviour, which is further proof that it is not “market-based carbon pricing.” It’s simply a funding mechanism for bureaucratic expansion of failed efficiency programs, a mechanism for redistributing the wealth of Albertans, and a green fig leaf for an Alberta government that wants to look as if it’s proactively promoting “social license” for the continued development of Alberta’s oilsands.
Kenneth P. Green is senior director of Natural Resource Studies at the Fraser Institute.