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Canada Carbon Tax | Alberta Withdraws Provincial Carbon Tax

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On May 30, the Canadian province of Alberta officially withdrew its consumer carbon tax, removing a surcharge mechanism that added incremental cost to fossil fuels like gasoline and diesel. United Conservative Premier (UCP) Jason Kenney won Alberta’s April election with the pledge to repeal the carbon tax, which served as a catalyst to his victory. Kenney and his UCP advocates claim that the nation’s efforts to financially penalize fossil fuel consumers have failed to reduce emissions, while simultaneously burdening household income. Alberta is Canada’s largest oil producing province and has historically been the nation’s heaviest emitter of greenhouse gasses.

Members of the legislature officially passed the Carbon Tax Repeal Act on June 4, 2019, just one week after the bill was first introduced. Prior to the May 30 date of enforcement, the carbon tax of 30 CAD per metric ton (MT) of carbon added 8.03 CAD ¢/liter for diesel in Alberta. Though this tax is now legally removed, the federal government’s carbon backstop price of 20 CAD per MT of carbon – approximately 5.37 CAD ¢/liter for diesel – will kick in, since Alberta is now considered non-compliant with the nation’s carbon requirements, as laid out in the Pan-Canadian Framework.

The federal backstop price includes annual increases of ~2.68 CAD ¢/liter on diesel each of the next three years, as shown in the table below, with variance by province based on each region’s unique carbon program. Alberta now joins New Brunswick, Ontario, Manitoba, and Saskatchewan as provinces that have avoided implementing their own carbon levies, forcing Prime Minister Justin Trudeau and his Liberal Government to enforce the federal mandate on each province individually.

In response to the government’s imposition of the federal backstop, Alberta is expected to join Saskatchewan and Ontario in fighting the mandate, deeming the tax unconstitutional. The federal government won Saskatchewan’s lawsuit in an initial split decision, with a verdict still pending in Ontario, leaving the diesel tax structure throughout Canada a bit uncertain. Each province is expected to appeal the cases in Canada’s Supreme Court, prolonging an official ruling. This recent opposition acts as a likely precursor for potential conflict over the country’s carbon requirements ahead of a national election this fall.

For more information on Alberta’s carbon tax decision, or to learn more about carbon pricing throughout Canada, contact us.

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