50-75 Percent of Alberta’s New Carbon Tax Will Be Passed onto Consumer

Between 50 percent and 75 percent of Alberta’s new carbon tax will be passed onto the consumer, thanks to new legislation passed on Tuesday, but some of the largest emitters will be exempt.

The new tax will levy around US$15 on every ton of carbon emissions as of January 2017, and increasing to US$23 per ton in 2018. The tax will also be levied on consumers at the pump in the amount of US$.05 per litre of gas, and a US$1.29 upcharge per gigajoule for natural gas.

Exempt from parts of the new carbon tax, ironically, are 109 large greenhouse gas emitters who already pay Specified Gas Emitters Regulation (SGER) levies, among which are oil sands operators, refineries, and upgraders. The exemption is expected to prevent taxing both at the point of distribution and emissions.

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Natural gas suppliers are currently being individually notified whether they will be exempt from the new carbon charge, which will go into effect next January.

According to a government-run study, economists determined that businesses over 473-reviewed commodities specific to Alberta would likely hand off the majority of costs imposed on them down to the consumer, adding to the tax consumers will be paying at the pump.

Economists further noted that businesses would likely be restricted to shirking 75 percent of the costs if they wished to stay cost-competitive.

The study pointed out that these costs would likely decrease over time, as businesses increasingly step away from fossil fuel consumption and reap the benefits from energy efficiency measures that will be the natural by-products of higher-priced carbon.

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In hard numbers, a typical family will see an increase in expenses for consumer goods and services of US$54 to US$81 per year, according to the study.

Alberta’s Wildrose Party is skeptical of these figures, believing that the government is drastically underestimating the proportion of costs that will be passed onto end users, citing a more realistic figure of $768 per year, per family.

The carbon tax is part of the Climate Leadership Plan—a plan that will impose new taxes and standards in an effort to curb greenhouse gas emissions and put US$4.6 billion into government coffers over the next five years. The plan is to invest the US$4.6 billion into green infrastructure and a new Energy Efficiency Agency.

The Climate Leadership Plan also calls for a partial rebate to offset the costs that will be passed onto consumers, which will be available to approximately two-thirds of all Alberta households—a move that will essentially place the majority of the tax burden on only the top third of consumers.

By Julianne Geiger for Oilprice.com

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