Ottawa wants yet another carbon tax for Albertans

The Alberta government is pushing back against a federally-proposed Clean Fuel Standard (or CFS) that comes into effect in 2019 for liquid fuels and 2020 for solid fuels. CBC’s Kyle Bakx reports that the CFS might raise gasoline prices by 5 cents per litre at the pump, and that natural gas and other energy prices would rise as well. The Alberta economy could lose one per cent of GDP by 2030.

Bakx is correct, because in essence, the proposed clean fuel standard is basically another carbon tax on top of the existing escalating federal carbon tax put into place by the Trudeau government. That federal “backstop” will require that all provinces have the equivalent of a $50 per tonne carbon tax by 2022. So this is a good time to raise awareness of the next carbon tax poised to hit Canada, with Alberta hit particularly hard given its large energy sector.

Under a clean fuel standard, according to the Ottawa’s discussion paper, “Requirements would be set to reduce the lifecycle carbon intensity of fuels supplied in a given year based on lifecycle analysis.” In plain English, this means that the federal government will mandate that firms that sell liquid and solid fuels reduce the amount of greenhouse gases generated per unit of fuel they sell. Firms unable to meet this target can buy clean fuel credits from other firms that can. In that regard, it’s a cross between a carbon tax and a cap-and-trade program. We saw how that played out in Ontario. Not very well.

To understand clean fuel standards, you must know four things about them. First and foremost, they are basically hidden energy taxes. Companies are forced to switch to “low carbon” fuels that are usually more expensive and often less reliable than conventional energy. By raising the costs of energy, the government is basically taxing carbon emissions yet again, though indirectly, through increased costs for goods and services that will result from higher cost fuel inputs.

A second thing to understand about clean fuel standards—they are also hidden subsidies, as the lower-carbon power generators (such as wind and solar power) can sell emission-reduction credits to industries that can’t find ways to meet the new efficiency standard. The costs of those actions inevitably land on the backs of energy consumers—basically everyone. This is in essence how Elon Musk funded Tesla under California’s Zero Emission Vehicle mandate.

A third thing to understand is that the CFS isn’t about “clean” fuels—it’s about reducing non-toxic greenhouse gas emissions. With regard to toxic air pollutants, conventional energy can be made “clean” with existing technologies, even coal power plants.

Finally, though government insists the CFS is a “performance-based approach,” in reality, it is a de facto technology standard. By setting a standard so stringent that only a few existing technologies can achieve it, those technologies will be the ones that get subsidized with emission credits. The winners in this case will be wind and solar power generators, electric vehicle makers and the producers of ethanol for cars, which has been demonstratively proven to be an environmental disaster. The losers will be, well, the rest of us.

Alberta’s government is rightfully challenging the proposed CFS, which is simply an additional carbon tax levied in an oblique way. Edmonton should stick to its guns. The carbon tax we already have is one tax too many.