18 April 2016

Alberta's carbon tax—benefits plus

The Alberta government released its 2016 budget last week, revealing the details of the new carbon tax and the details look good. The tax will kick in on January 1, 2017, at $20 per ton of carbon burned and increase to $30 per ton in 2018. The bulk of the revenue will be used for renewable energy technology, green infrastructure and increasing energy efficiency for homes and businesses. About a third will go to rebates, reduction of the small business tax and helping coal and other communities adjust.

Critics have been quick to attack the tax, some claiming it will cost Alberta households $500 or more per year. In fact, most Albertans will ultimately pay no more for energy than they do now. Sixty per cent of families will receive a full rebate and six per cent at least a partial rebate. The rebates are designed to cover the average cost of the carbon levy to an individual, couple or family with children, with the amount tailored to net taxable income. As lower-income people tend to use less energy than the average, they could even come out ahead.

According to the Pembina Institute, assuming emissions don't change, lower-income families will have a net gain in income on average of $95 per year, middle-income families will see no net effect, while higher-income families will experience a net loss of $400 per year. The levy is, in effect, a tax on the rich. Of course, if lower and middle-income families reduce their energy use, they could wind up with even more change in their pockets.

Rebates of $400 or more will be paid every three months; those between $200 and $399, twice a year; and those under $200, once a year. The rebates may very well have added benefits. Once most Albertans start receiving their cheques, they may begin to feel that a carbon tax is a pretty good idea after all. And by reminding them that the current government keeps its promises, it shouldn't hurt the NDP's chances in the next election. The rebates also, in a small way at least, redistribute income from the rich to the poor, and that's not such a bad thing either.

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