Alberta’s Carbon-Tax Repeal Already Bearing Fruits

Commentary, Energy, Fergus Hodgson

Residents Have Enjoyed Immediate Cost Reduction

Utopian legislators in the United States often look with rose-tinted glasses upon the Canadian approach to everything, from higher education and medical care to global warming and international affairs. Since Canadians are the ones who live with such policies, they are more inclined to recognize their own mistakes and to reverse the course, as exhibited by Alberta’s carbon tax.

The repeal of the carbon tax in Alberta has had one indisputable beneficiary: Albertans. Alberta’s Premier introduced the repeal bill in May as one of his first actions in office, arguing the tax imposed on families an undue burden with no significant environmental benefit.

In theory, the carbon-pricing scheme was supposed to internalize externalities, decrease fossil-fuel consumption, and incentivize alternative energy. In practice, over the course of a single year, it cost individuals $286 and couples $388, on average. Couples with two children paid $508.

And these stiff prices did not account for indirect burdens arising through more expensive groceries further inflated by higher transportation costs to the Prairie province. 

As well, the carbon tax, which went into effect in 2017, set back Alberta businesses by $1.4 billion per year, a downer for investment and job growth.

Celebration under Threat from Ottawa

The repeal, however, may not be the final word on the matter. Ottawa still plans to impose a carbon tax on Alberta on January 1, 2020—in the same way the capital has done with Saskatchewan, Manitoba, Ontario, and New Brunswick. In these four provinces, in 2019, the federal carbon tax started at $20 per tonne of carbon emitted. This means an additional 4.4 cents per litre of gas, which is scheduled to increase annually until it reaches 11 cents per litre in 2022, or $50 per tonne.

The Albertan government has vowed to challenge the federal imposition in court when the time comes, even though Ontario and Saskatchewan had previously failed in that endeavor.  

A study by the Taxpayer Federation shows Canadians pay on average 34 per cent of the pump price in taxes. Another lesser-known fact is that they pay sales tax on the excise and carbon taxes when buying gasoline. This “tax on tax” adds an extra 3.4 cents per litre making the combined total tax burden range from around 34 cents per litre in Manitoba to almost 55 cents per litre in Quebec.

Aussies Have Learned Their Lesson

Australian elected officials acknowledged the unaffordability of the misguided clean-energy initiatives when they killed their own carbon tax in 2014. Repealing it cut down over 1,000 pages of red tape, retail energy costs by 9 per cent, average household costs by $500 per year, and business compliance costs by tens of millions. Further, the repeal boosted the country’s economic growth and international competitiveness.

The major problem with carbon-tax schemes is that they fail to deliver. Allegedly, the motive is not to increase fiscal revenue but to make pollution substantially costlier than emissions-saving sources and technologies. However, governments end up raking in billions while making life harder for families and businesses, with miniscule or nonexistent environmental benefits. 

In Australia, the carbon tax decreased carbon emissions by only 1.4 per cent in the second year while increasing energy prices by 10 per cent for the average family. The hike was even more significant for small and medium-sized businesses, since carbon costs and other so-called green schemes constituted up to one third of their energy bills.

Cost-Benefit Analysis versus Lofty Rhetoric

Proponents might be well intentioned, but Australians, as well as Albertans, have paid the price directly for what they saw as an insufficient gain. Alberta’s repeal is in line with wanting both economic prosperity and environmental protection: without the former, we cannot have the latter.

The continued push to burden voters in Australia led to a surprise loss for the Labor Party down under. Daniel Wild, director of economics at the Melbourne-based Institute of Public Affairs, opined in the election leadup that “the interests of the out-of-touch elite ha[d] taken precedent,” as they have across Canada.

Rather than mandating changes and taxing constituents, legislators would be better off focusing on how to provide a business-friendly jurisdiction. Innovation would then thrive as we are transitioning to a more environmentally-friendly economy.

The Stone Age didn’t end because mankind ran out of stones; we simply found better and cheaper substitutes. Likewise, fossil fuels will predominate until they are no longer economically advantageous.

Most inhabitants of this world, especially those in poor countries, still rely on coal and petroleum to power their homes, hospitals, and schools. Severe impediments to these energy sources, without readily available alternatives, are heartless and inefficient—akin to asking the poor to remain poor.

A scientific paper in Nature: Climate Change notes China, India, Germany, and the United States have all been substituting coal with natural gas in power plants. This transition, which can take place without stiff intervention, has enabled lower carbon emissions with minimal, if any, penalties on families and businesses.

If more efficient green-energy sources are available at competitive prices, people will prefer them. The solution is not in making fossil fuels more expensive, or in dictating policies from Ottawa, but in rendering clean energy cheaper.


Mauricio Bento contributed to this article.