Why a Price On Carbon?
Economists have long recognized the flexibility and efficiencies provided by carbon pricing policies. An increasing number of industry and environmental organizations are now calling on governments to put an effective price on carbon. Most recently, 43 CEOs across 20 economic sectors — with operations in 150 jurisdictions and $1.2 trillion in revenue in 2014 — called for an explicit or implicit price on carbon as part of their vision of a climate deal. Similarly, Europe’s largest oil and gas companies — while accepting cost implications — jointly called on governments to price carbon due to its benefits in providing “a clear roadmap of future investment, a level playing field for all energy sources across geographies and a clear role in securing a more sustainable future.”
In the Alberta context, carbon pricing could help the province address three key challenges that presently confront it. Firstly, the province is suffering economic impacts by not doing enough to fight climate change. Secondly, the economy lacks the diversity and innovation needed to succeed in a rapidly changing world. Thirdly, the delivery of government services is too dependent on highly variable resource revenues.
A meaningful, economy-wide carbon price could help solve all three challenges by reducing carbon pollution, encouraging economic diversification and raising revenue. Despite the recent increases to the province’s carbon price, the policy remains weak relative to B.C.’s carbon tax. Alberta could make progress on these challenges using an economy-wide carbon tax approach. In our recommendations, we discuss a carbon tax because of its simplicity and because of the economic and environmental success that B.C. has achieved to date with its carbon tax.
Alberta Green Economy Network (AGEN) therefore recommends that the Government of Alberta:
- Replace Alberta’s failed SGER approach to climate management which has not resulted in any absolute reduction in emissions.
- Apply an economy-wide carbon tax that applies to all measureable sources of emissions, rather than a cap-and-trade system carbon pricing policy
- The tax should be applied on 100 percent of emissions across all sectors of the economy, starting at fifty dollars per tonne of carbon dioxide in 2016 and escalating by ten dollars per year to one hundred and fifty dollars per tonne in 2026.
- The tax must be progressive, with sufficient rebate mechanisms to ensure that it does not disproportionately affect low income households.
- Government income accruing from the tax should not be directed towards general revenues, but rather into funds designated for investments in renewable technology, energy efficiency and transportation infrastructure as specified in these recommendations.