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to emissions-intensive industries. If a business exceeds its
emissions limit, it can buy unused quotas, or carbon credits,
from other companies.
According to Jennifer Winter, an assistant professor
of economics and scientific director for the energy and
environmental policy area at the University of Calgary’s School
of Public Policy, the outcomes of both mechanisms are the
same—increased cost of production for carbon emitters.
“These policies work because they change incentives. The
point is to make emissions-intensive goods more expensive,
so a cap-and-trade system is going to make emissions-
intensive goods more expensive in the same way a carbon tax
will,” she said. “What you get with a cap-and-trade system is
certainty about emissions reduction and uncertainty about
price. A carbon tax gives you certainty about price and
uncertainty in the amount of emissions reduction.
“It is also important to remember that greenhouse gas
emissions don’t just come from fossil fuels, so carbon taxes
or cap-and-trade systems are not necessarily a silver bullet in
terms of fixing our emissions problem,” she added.
Climate policies often use a combination of market
mechanisms, along with regulation, to deal with things that
can’t be priced or are difficult to measure. Winter pointed to
Alberta’s new climate policy, announced in November 2015,
as a hybrid approach to emissions reduction.
Alberta’s newclimate policy
On Jan. 1, 2017, Alberta’s new carbon
levy came into effect—applied to fuels
at a rate of $20 per tonne. One year
later, the levy will increase to $30 per
tonne. It will be included in the price
of all fuels that produce greenhouse
gas emissions when combusted. These
include transportation and heating fuels,
such as diesel, gasoline, natural gas and
propane. The plan also includes a cap of
100 million tonnes on greenhouse gas
emissions from the province’s oilsands.
“The province is very concerned about
the competitiveness of large emitters.
They have provided a baseline for the
oilsands industry, and they will issue
credits to that industry,” Winter said. “If emissions intensity is
above the baseline, then they will pay, but if they are below,
they will have credits they can trade. It’s a merging of a carbon
tax and cap-and-trade system.”
Alberta farmers play a role in that system through the carbon
market that allows farmers to sell offset credits earned by using
conservation cropping practices that increase carbon storage
in soils and lower emissions from fuels and fertilizer. Since
2007, the voluntary management changes made by Alberta
farmers have reduced greenhouse gas emissions by more than
11 million tonnes of carbon dioxide equivalents (Mt CO2e),
representing a value of $150 million in carbon offsets.
The provincial government has also excluded farm fuel from
the carbon tax. According to Alberta Agriculture and Forestry,
an estimated 84 per cent of grain and oilseed producers’
energy costs are associated with diesel and gasoline. In
addition to the exemption, many farmers will benefit from the
small business tax cut and new funding for energy-efficiency
programs and innovation.
On Oct. 24, 2016, the NDP announced a $10-million
investment to strengthen programs that will help producers
become more efficient and reduce consumption, emissions
and costs. Overall, Alberta’s Climate Leadership Plan commits
to a strategy that will see all revenue from the carbon tax—an
estimated $2.5 billion—reinvested in measures to reduce
pollution, including clean energy research, public transit and
programs to help Albertans reduce their energy use.
Lessons learned from B.C.’s carbon tax
With growing apprehension among Prairie farmers, many are
looking to British Columbia, where a carbon tax has been
in place since 2008. Between 2008 and 2012, the price on
carbon emissions increased from $10 per tonne to $30
per tonne.
“In the beginning, we took about a five per cent hit on fossil
fuels,” said Rick Kantz, president of the B.C. Grain Producers
Association, who farms near Fort St. John, B.C. “Since then,
we have had the tax removed from our
fuels. We still pay it on natural gas, so
grain drying and activities like that get
taxed.”
The greater impact for B.C. grain
producers has come through increased
costs passed on through shippers,
including rail and commercial haulers,
who help get the grain to market.
Kantz is watching the situation in
other provinces carefully because the
decisions made in other parts of the
country will impact one of B.C. farmers’
most important inputs—fertilizer.
“If other provinces put a price on
fertilizer production, we’re going to be
hit for sure,” said Kantz. “Most of our fertilizer is shipped in
from out of B.C. An increase to fertilizer costs will be a bigger
hit for us than our fuel, per acre.”
When the B.C. carbon tax was introduced, the BC
Agriculture Council (BCAC) lobbied hard for exemptions,
eventually getting a partial rebate on natural gas used in
greenhouse production, and a partial reduction on marked
gas and diesel. BCAC executive director Reg Ens rejects the
commonly held belief that B.C. farmers are exempt from the
carbon tax.
“A carbon tax is an input
tax. Income tax is paid
when you have a successful
year. Input taxes can affect
cash flow and make it more
challenging because if
farmers have a bad year, they
still have to pay the tax.”
–Reg Ens