A tax grab cloaked in green

With Alberta’s economy sinking rapidly, the new Alberta government has decided to throw the province a few new anchors. First, Premier Rachel Notley announced her plan to follow through on a campaign promise to review (that is, raise) Alberta’s royalty regime on oil and gas. More recently, the government announced plans to hike Alberta’s carbon levy, followed by even more greenhouse gas controls to be formulated by a newly created advisory panel.

There are primarily two arguments made about why Alberta should raise its carbon levy and enact an aggressive greenhouse gas control regime. The first is that we are concerned about climate change, and have to do our part to stop it, regardless of what other emitting countries do. The second is, if we raise our carbon levy and enact a new greenhouse gas control regime, we might market access to operate for Alberta’s oil sand sector.

Will Alberta’s actions slow down or in any way affect projected climate change? In a word, no. The same models that project climate change also show that this policy will do nothing to stop it or slow it down. It will, however, make Alberta poorer and therefore less able to adapt to any future climate changes that may come.

It is true that Alberta generates greenhouse gas emissions and global greenhouse gas emissions contribute to climate change. But the key word is global. Canada’s greenhouse gas emissions account for 1.6% of the global total, and the oil sands represent about eight per cent of that, or about one-tenth of one percent of global emissions. As Faith Birol, Chief Economist at the International Energy Agency observes, even if Canada increased production by 150 per cent over the next 25 years, “…the emissions of this additional production is equal to only 23 hours of emissions of China — not even one day.”

But even if every country took action together, it is not the emissions that matter for climate but the total stock of carbon in the atmosphere. Had every signatory to the Kyoto Protocol followed through on their commitments back in 2008, climate model simulations showed that the level of carbon in the atmosphere that we would have had in 2100 without Kyoto would have been reached in 2105 with Kyoto (PDF). In other words, we’d have experienced the same climate change as if the agreement were never signed.

This is the basic problem that stymies every grand scheme to “tackle” climate change: affordable policies have no global effect while policies that might eventually have an effect are globally unaffordable. Nothing in Alberta’s plan will solve this, no matter how much we spend trying. Still, if Alberta really wants people to think it is acting for the environment rather than just implementing a tax grab and pandering to anti-industry activists, there is a simple alternative to doubling the carbon levy. Emission permits currently trade in Europe for under eight euros per tonne. Let Alberta firms buy these in lieu of paying the existing or proposed new levy, and in lieu of complying with any new homegrown regulations. Global emissions will come down just as much, but at a fraction of the cost. Taking Alberta at its word, this ought to be an ideal outcome. Assuming, that is, that reducing emissions in a cost-effective way is actually the goal.

Will imposing a greenhouse gas straitjacket on Alberta’s economy buy social licence to operate for the oil and gas sector? It is dangerously naïve to think so. The current position of those concerned about catastrophic climate change is that the vast majority – 85 per cent – of Alberta’s oil sands must remain in the ground. No economically tolerable amount of carbon taxation or regulation is going to satisfy that demand. As Bill McKibben of 350.org put it, “There's nothing useful Canada can offer if it’s going to develop the tar sands.”

Giving in to their demands will not turn the anti-oil sands crowd into our friends. The ink will not be dry on such a policy before they are back with new and even harsher demands. And they will gleefully quote the Notley government’s own climate alarmist rhetoric to back Alberta into an impossible political corner.

Carbon pricing is politically the rage these days and is seen both in Canada and the United States as a shiny new source of revenue for big-spending governments. But the arguments for carbon taxes in Canada don’t hold water: there are virtually no environmental benefits and no reputational benefits to be had, even at high economic costs. All that’s left is an easy, green-garbed cash grab.