Minister Phillips recently hosted two interactive telephone town hall discussions on the Climate Leadership Plan, paying special attention to the carbon levy and rebates. Over 50,000 Albertans participated and asked many excellent questions. What the town hall revealed was that, unfortunately, there are still a few myths circulating.
Myth #1: The carbon levy is going to raise household expenses by thousands of dollars per year.
Reality: The carbon levy will marginally increase the cost of gases used for heating and transportation. To help offset these costs, rebates will be provided to lower- and middle-income Albertans. More about that below.
Impacts of the carbon levy will vary, depending on your household’s energy use and driving patterns. In 2017 estimated direct costs for a household per year are $191 for a single, $259 for a couple, and $338 for a couple with two children.
Indirect costs from the carbon levy are expected to be relatively low since a large portion of commodities bought by Alberta households are imported from outside the province. These imported commodities are not subject to the levy. Estimated indirect costs of the carbon levy on households will fall within $50 to $70 per Alberta household in 2017.
Myth #2: Rebates make the levy ineffective by handing back collected revenues to consumers.
Reality: The purpose of the carbon levy is to provide a financial incentive to everyone to reduce their energy use. Carbon pricing drives innovation and changes behaviour, encouraging individuals and businesses to shift away from higher emission fuels and become more energy efficient.
The purpose of the carbon levy rebate is to protect those who spend a higher percentage of their income on energy (i.e., heating and transportation) and have fewer financial resources to make investments to reduce future energy emissions. If the rebate is tied to consumption (i.e., the more energy used, the bigger the rebate), then that removes any incentive to reduce energy use, which fundamentally undermines the purpose of the levy.
Myth #3: The price on carbon won’t actually reduce emissions.
Reality: Economists agree that a price on carbon is the most cost-effective way to reduce emissions. Carbon pricing is meant to influence behaviour. When individuals and businesses know they will have to absorb an extra cost, they will look at alternatives (i.e. driving less or using a programmable thermostat) to save themselves money. It is these changes in behaviour that reduce emissions.
We know this works. According to Statistics Canada, since B.C. implemented its price on carbon in 2008 fuel use in that province dropped by 16%. Over the same period in the rest of Canada, it rose by 3% (counting all fuels covered by the tax). Additionally, energy-related greenhouse gas emissions in B.C. dropped by 6% overall (and 9% per capita) between 2007 and 2011.
You can listen to the recordings of the telephone town halls at: