Carbon Tax

Edmonton Journal: January 2019: “The carbon levy has become a political punching bag for politicians and journalists that want to win votes and sell newspapers. This is very unfortunate as the levy — which has been in place for almost two years now — hasn’t damaged the economy or cost jobs.” Joshua Buck

Buck arrives at these conclusions by considering economic data for 2017, what they found was that in 2017 key economic indicators, including gross domestic product (GDP), weekly earnings, and the unemployment rate. What they found was that in 2017 Alberta grew at a rate of 4.9 per cent, wages were up, and unemployment was down. Conclusion? The carbon levy did not hinder Alberta’s economy.

I am inclined to agree with this view. What about you?

28 thoughts on “Carbon Tax”

  1. I agree wholeheartedly with the conclusions of Buck. It seems they did a comprehensive study of the economics of the Carbon levy. I’ve never done any research on what was done with the money from the Carbon Levy, and I am genuinely surprised and pleased with some of the investments they are making with the funds. It’s most definitely not affecting the economy in a negative connotation, and it’s wonderful that they’re using some of the money from the carbon levy to help further improve the energy efficiency of Alberta to help offset the amount of carbon dioxide that we as a province produce. Even with the increase in gas prices, it is not affecting the general public because it’s not that much more expensive and it causes them to be more conscious of their impacts. As well, it is creating some work for people in other sectors (ie. Construction workers for transit, people to install energy efficient products etc.). All in all, as much as I am for the oil and gas industry, I am glad to see some steps towards reducing emissions, improving energy efficiency, and making public transportation a much better option.

    1. Good thoughtful answer. I do really believe that the money should only be used on development of new tech and industry. Otherwise, meh… feel free to respond back.

  2. I agree with this as well.

    The unfortunate part about this all is that it’s really preaching to he choir. The people who were on board with it in the first place already foreseen this outcome, and then it falls upon deaf ears otherwise. I’m inclined, but hesitant, to call this progress, but true progress will be when we see people who were previously vehemently anti carbon tax take their heads out of the sand, see the numbers, and agree.

    1. Wicked! Hard left point of view. I do think it is easy to oversimplify. Main questions for me are (1) is it the right way to impose a tax; and (2) what do they actually do with the money. People are right that governments are really bad at redistributing wealth efficiently, so there is always concern when the government finds ways to grab new monies to redistribute.

  3. I read an article in the Edmonton Sun a couple weeks ago about the kinds of things that are funded by the carbon tax. The article said a little over 50% of the revenue from the levy is redistributed to Albertans via rebates. The rest funds a variety of programs. One example was a grant indigenous communities can apply for to improve infrastructure on reserves. Saddle Lake Cree Nation is a community which is benefiting from this grant. The article contained a story about a man leaving his coffee on his desk in the band administration building during the winter to go to a meeting. He came back to ice on his coffee. This building is being retrofitted with modern insulation thanks to grant money provided by the carbon tax. This community is very concerned about what will happen to this funding if the carbon tax is repealed. In the last 4 years the provincial government has invested 10 times what the federal government has in energy efficiency on Alberta reserves.

    It seems to me, climate change or not, this is something we should’ve started a long time ago.

    1. You make a good case that government needs to look after reservation / treaty land infrastructure. I really thought that the Carbon-Tax monies would be used to promote green industry and technology all along. Not subsidize the Federal Government’s responsibility for looking after First Nations communities.

  4. The question as to whether the carbon levy affected the economy is not one of pure GDP numbers, but rather where that GDP is coming from, and how much of an effect other changes have had. A levy that is designed to mildly disadvantage one energy source as compared to others in an economy that produces that energy source is going to have a negative effect on the growth rate of that energy source, unless it is re-invested well. This is where the idea behind the carbon levy can be differentiated between being a tool to make the economy become more efficient so our producers of fossil fuels become more competitive and better at what they do and being a levy intended to reduce consumption of a product that we, as a province, produce and profit from. Re-investing the money into the economy to encourage research and innovation towards the goal of maximizing the growth and competitiveness of that sector and the economy as a whole is something I think has merit. If the levy is at all used to reduce the competitiveness of our oil and gas industry in Alberta, though, or is used as a non-revenue-neutral levy, then I tend to disagree. I think a place like Alberta, which is largely an exporter of commodities, should aim for maximum competitiveness of all sectors, not just some. The fact that the oil industry has been dominant is clear, but I don’t think artificially shifting momentum away from fossil fuels and towards other forms of energy or other initiatives is the right way to go. It is ok to try and build a focus towards other aspects of the economy too, because these fringe aspects may also help the rest of the economy become more efficient too. This province’s (and this country’s) economy shouldn’t be approached like a zero-sum game, if we are to be concerned with the prosperity of our province and country in particular.
    I tend to believe that the way we treat our economy needs to be within the context of the world economy, and any chances to optimize the competitiveness of our economy should be actively sought and pursued. Actively reducing the value of the commodity (assuming not full re-investment), even marginally, that we export as a province and a country seems counterintuitive to me from a purely economic standpoint. Global consumption of fossil fuel is still growing substantially, consumers are expecting increasingly larger, more inefficient vehicles (in much of the western world at least) such as SUV’s and pickup trucks, and many developing economies like India are expected to see massive growth of their air travel demand in the near future. All of this growth that remains to occur means there are probably more than 3 billion people to properly bring into the consumer-oriented capitalist fold of the modern economy within the next few decades. This growth will largely have massive positive effects for political stability and freedom, economic freedom, reduction of war, and massive increases in prosperity. It will also result in massive increases in consumption of fossil fuels, especially in the near-to-medium-term. The long-term economics of climate change of course involve large costs to society in general, but for the economy to solve that problem it needs to see natural increases in efficiency that are not reliant on sympathetic left-wing governments. Pushing too hard against the politics of the situation can produce reactive and populist outcomes, such as Brazil’s new president who has promised (and then walked-back a bit) to maximize resource extraction in the Amazon rainforest, and sell off all indigenous lands. The reality of the situation is that if we are going to fully honour democracy, we need to moderate our response until society is more or less on-board, not half (or barely more than half) of those in society. Western alienation is a situation to be concerned about for Canada and Alberta, as actions taken to drastically change the ideological underpinnings of the economy and society will undoubtedly cause those who oppose them to further entrench their viewpoints. I for one do not want to see Alberta become an increasingly right-wing populist place, or a more politically divided place, because of our implementation of ideological actions too quickly, so I would certainly prefer to see the politics arrive there at a more measured pace. I believe our top priority, no matter the risk posed to the economy and society by outside factors like climate change, should be to fully support a cohesive, collaborative democracy and support economic freedom as much as we can. These factors absolutely need to be in order if we are to tackle any other issues.
    To be clear, I am not opposed to the concept of a carbon levy, in fact I think when implemented correctly and with the right controls and stated intent, it could stand to be beneficial to even Alberta. However, I am much more concerned about polarized and ideologically-driven politics rising, inevitably creating inefficiencies, unpredictability, and destroying forward movement as it does so. In my opinion, slow change is the name of the game.

    1. “Polarized and ideologically-driven politics…” Yup, there in a nutshell. One could argue that the age-old formula of letting the market sort out its own inefficiencies is the one way to get it right. There was a time when governments would promote new industry by finding startups and providing tax breaks for industries that they want to succeed. Heck, even recently Alberta did that for small beer making outfits. The concept of punishing one industry to the benefit of another is definitely not “efficient”. Not to mention that it punishes workers in one industry. Back to your point “political”. This is political in that the rest of Canada hates Alberta’s money earning, carbon producing ways. So now we can say “we too do our part”. Seems daft on some levels, but might be really important. Myself, I have not decided yet.

  5. I personally also support the carbon levy in Alberta. In the Fall I took an HGP course focused on environmental policy, and we analyzed multiple case studies in North America where different government policies were used to combat emissions and resource depletion. One of the most effective methods that had the least effect on the economy was shown to be implementing taxes on emission related services. Also, the University of Alberta business professor who spear headed the Alberta carbon tax plan came to talk to my class. His talk was very eye opening, as he made it very clear how much work actually went into planning the tax plan. Environmental groups, oil and gas representatives, indigenous leaders, and public people were all consulted during the drafting of the tax. Some individuals may say that this was implemented too quickly, but I personally believe that this kind of action is decades too late. I believe it is in Alberta’s best interest to be at the forefront of embracing action to decouple environmental degradation from economic growth, and the results from Buck’s piece have shown that it is possible to have a strong economy while trying to be environmentally accountable. Alberta should be demonstrating to the world that carbon taxes can be beneficial.

    1. I think you are right about emissions, but perhaps the resource depletion is no longer a concern. With tight oil and heavy oil, we have enough resource for a long time yet. Carbon tax too late? Yes, perhaps. I wonder when the first carbon tax appeared and where… do you know?

  6. It appears that, based on the data in the study, the carbon tax has been beneficial for Alberta with regard to implementing realistic and efficient programs that can be used as steps towards the goal of a more sustainable future in the province by creating ambitious initiatives with adequate funding for them. I don’t see any of the legislation surrounding the carbon tax as detrimental to Alberta’s economy and think that it will, if anything at all, allow the province to continue to experience growth while keeping the multiple priorities it has in mind, such as environmental protection and indigenous involvement in the move towards a much more diversified future. The province should be build upon the progress they’ve made by ensuring that subsequent parties in charge of the Alberta government are aware of these benefits and communicate it with the population. This will raise the importance of the carbon tax and its connected programs in the eyes of Alberta’s workers and allow it to play a significant role in the decisions they make when determining which political platforms best represent their and the province’s interests as it continues to grow. In addition to these goals, Alberta would be able to preserve the progress they’ve made by continuing to create new beneficial programs and expand the current ones and reach out to nearby provinces to form joint ventures and a greater scale of collaboration throughout the entire country to show that Canada can be a leading player in energy and environmental responsibility in its development moving forward.

    1. Very well said. I think when all is said and done it will very much depend on how the tax money is spent … and the success of those projects. At the end of the next decade, O and G will still be Alberta’s #1 economic driver.

  7. While I agree that pricing carbon emissions is almost becoming somewhat necessary in today’s political and environmental landscape, I am hesitant in agreeing that the carbon levy did not hinder Alberta’s economy. Although the source indicates that GDP is increasing and unemployment is decreasing, it is hard to pinpoint exactly the effect that the carbon levy has had on the Albertan economy in isolation of other factors, such as also recovering from a major recession. If there had been no carbon levy, perhaps the key economic variables might have been even more favorable (i.e GDP may have risen 6% or unemployment would be even lower), although that is purely speculative. The carbon pricing report stated that “the income threshold means that approximately 66% of Albertans will receive a rebate that will be larger than the estimated amount the carbon levy will cost them”. The carbon levy is largely meant to capture the negative social costs that accrue due to carbon emissions. If 66% of Albertans are ending up with more money than they are paying due to the levee, then that means the negative social costs that they have accrued are in fact not captured, and are also placed upon the 33% of Albertans who are paying more tax than they are receiving in rebates. Although the oil and gas sector is obviously a major contributor of carbon emissions, activities such as transportation and electricity (which the 66% of Albertans certainly contributes to) emit more carbon than oil and gas (see attached GHG report). In my opinion, it is hard to see how Alberta’s economy is not hindered in any way by the fact that sectors such as oil and gas, forestry, agriculture, etc.. are bearing the weight of the majority of the provinces social costs, although as previously mentioned, the fact that they are paying more in the carbon levy is not necessarily a negative thing in achieving the overall goal of reducing GHG emissons.

    1. Well said. I do wonder a little about the report. It just seems hard to believe that GDP is going up and unemployment is going down. I do wish I understood those numbers better.

  8. I also tend to agree with this report. While I don’t necessarily believe that the carbon tax has a direct effect on lowering carbon emissions on the household scale, I believe if the money is being used on improving Alberta’s infrastructure and researching green energy then it is a benefit to the province. I am currently working on a geothermal energy project funded in part by Alberta Innovates which receives funding directly from the carbon tax, so I may have biased view.

    1. I agree, but one could say that about any tax, I suppose. I would say that the governments have the means to fund green projects anytime they want. The oil and gas revenues of the last 50 years COULD have been used similarly.

  9. I would also agree with this view as the carbon tax like the article says is a free-market solution to pollution as it allows industry and people flexibility in meeting pollution standards. One thing I would add is that the other economic tools that would be imposed to enforce inevitable environmental standards are much more intrusive and economically harmful. Command and control economic tools like mandated regulations do not allow industry and the public flexibility and innovation in meeting environmental goals. For example in the 1970s they tried to mandate all cars must have catalytic converters, but I believe the 1970 honda civic proved to produce less nitrous oxide and exhaust for a cheaper price with no catalytic converter than cars with expensive catalytic converters. This is an example of how the free-market can produce cheap creative solutions to environmental problems, and why its better to have a carbon tax than lets say a procedural or technological standard. Carbon tax allows for flexibility and innovation to meet goals because it doesn’t mandate how you do something only that you must do it to save money.

    1. I think I agree: of course one could take the California route. Set a standard and leave it up to industry to meet that standard. Ahhh, good old catalytic converters…

  10. This is a very interesting argument…
    There is no doubt that Alberta is a province where the people who typically have the loudest voice unequivocally hate change. Attach the word “Tax” to it and people will typically just shut their ears to the notion of it. I was definitely the same way when I first heard about the carbon tax being rolled out provincially and federally.
    But, so far the carbon tax does not appear to be a negative thing. The biggest benefit for me is how low and middle class income people get their carbon tax as a rebate anyways. Some people may argue that this is stupid and unnecessary but it does make me think twice about my carbon usage, and that is what I assume is exactly the point of it.
    This is also the first time I have seen economic stats attached to carbon tax data and this is very interesting to me. Even though you could argue that correlation does not necessarily equal causation these stats still cannot be ignored. Conservative minded people can usually be found ranting about the carbon tax online about how it is going to drive away competitiveness in our economy but if that was the case why are we seeing modest growth in GDP and a rising Alberta economy? That cannot be ignored either.
    Also, data and studies seems to suggest that carbon emissions are reducing due to the carbon tax. It is painfully obvious that climate change is real and if a dramatic change in peoples habits do not change than their are going to be irreversible effects. People will not make these changes on their own just by seeing the data. Too many radical minded people exist on both sides that dull arguments so, a tax is obviously needed. And there is evidence that the tax actually works.

    1. Difficult to argue with you on this. I do wonder, however, how much carbon taxes actually reduce emissions? In Alberta the decline of the economy would have a more significant impact on the amount of CO2 produced. If the aim of a carbon tax is to discourage consumption, then it would need to be much higher… like the cost of fuels in Europe.

  11. I am inclined to agree if with the carbon taxe the economy increased by 4.9% there is no reason to think that the carbon taxe has hindered the Alberta economy

    1. Well, in principle all taxes discourage economic activities, but it seems to me that there is a price to pay for producing CO2…

  12. I would 100% agree with the conclusions above. Looking at the numbers and ignoring any bias’ shows that over all any impact that the carbon tax has on the Albertan economy is negligible. This policy also allows for Canada to increase their name in a cleaner, better oil and gas industry which in my opinion will be worth quite a lot in the next 50 years as people around the world start to move towards buying only certain levels of eco-friendly oil and gas. Of course there is always room for longer term studies to be done but from the data presented there isn’t anything to be concerned about the Albertan Carbon Tax.

    1. Well, I have to agree that this is about putting our best foot forward in front of the world. BUT, there are many Canadians who think that oil and gas should not be used any longer, and they strongly support the tax.

  13. While I agree in principal with the carbon tax, this article does a poor job defending it. It seems questionable to equate the economy performing well with the economy being completely unscathed as it is difficult, if not impossible, to say where it could be with no carbon tax at all. Also, bringing up positive GDP growth while ignoring the corresponding increase in government spending and resulting debt is more disingenuous than any of the criticisms the author refutes.
    Furthermore, it is misleading to suggest that anger at the carbon tax exists in a vacuum and is directed exclusively at the tax itself. While purely speculative, I think it is likely that if the Northern Gateway and Energy East pipelines were being built and the Keystone and Trans-Mountain pipelines were being expanded, the reaction to an increased carbon tax would have been much more subdued. Few people are suggesting that the carbon tax is the sole ruin of Alberta’s economy, it’s just twisting the knife in an industry already burdened by an overabundance of regulation and bureaucracy.
    A better defence of the carbon tax would acknowledge that if climate change really is the impending disaster we believe it to be, then sacrifices are necessary and unavoidable. Higher prices will be a small part of much larger changes. Anyone evoking the consequences of climate change while suggesting they have a solution with no negative impacts is just fearmongering for votes.

    1. Oooh… really good points. The government has done a terrible job justifying and explaining the carbon tax. And, what have Albertan’s gotten from it?

  14. With regards to the information presented, I am inclined to be in favour of the Carbon Tax. However, this is reliant on the hopes that the fund generated by the levy are put into projects and initiatives that are beneficial. A large basis for my support of the Carbon Tax is geographic in nature as I, a university student in Edmonton, stand to gain significantly from the funding of public transit (LRT expansion). There are alternative means of commuting to where I need to be such that I can choose to limit my carbon use. However, I certainly see how there are portions of Albertans who are opposed to the levy. As an example, day-to-day commuting in rural areas alone presents a significantly larger need for carbon usage. Where I can take the bus into campus to gain an education, there are students that need to drive many more kilometers than myself for the same purpose and are therefore disadvantaged in terms of travel costs.

    I believe that the move towards pricing carbon usage is in the best interest of the whole of the province, but could do with revising. Ideally, such that densely populated zones with the best means of providing carbon-reducing alternatives can continue to reduce GHG emissions and perhaps introducing a scaled carbon tax to more remote or rural areas which do not have the same options available. Such systems are in place for income tax, and could arguably be put in place on the basis of geographic location in the province.

    1. Hmmm… pretty good point. I did not really think of the differential impact the levy might have on rural Albertans.

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