Fraser Forum

Alberta’s carbon tax will lead to loss of jobs, income, exports, revenues, etc.

Printer-friendly version

The Alberta media is abuzz with the findings of an internal NDP analysis of its first-concept carbon tax. Chris Varcoe, at the Calgary Herald dropped some of the bombshell findings on June 17. To be fair, the carbon tax was not implemented exactly as what was modelled, and the results may not be as severe, but if it’s even close, we’re in for a very rough ride.

Among the joyful consequences of the tax as it was then modelled, are:

• 15,000 lost jobs.
• $4 billion of lost household income (1.3 per cent)
• Reduced provincial GDP of 1-1.5 per cent by 2022
• A 0.5 per cent reduction in oil exports by 2018/19
• Reduced royalties of $250 million compared to the business-as-usual case for 2020/21
• Reduced government income tax revenues of $450 million in 2020/21

As Don Braid points out in the National Post, the government is spinning like mad to distance itself from these painful numbers, claiming that the way they’re implementing their Climate Leadership Plan will somehow avoid all of this, while they furiously change the subject, and imply that even asking about the tax impacts is a form of that dreaded “climate denial.”

But as Varcoe points out, the government has implemented (or is implementing) the central parts of the modelled plan: they have raised the carbon tax to $30/tonne (in 2018), and they’ve committed to phasing out coal power and replacing it not with cheap and abundant natural gas, but with costly wind and solar power.

Of all the government’s claims one is perhaps the most risible: that because they’re committing to spending all of the revenues, (rather than keeping some in general revenue as was modelled) the previous analysis is not valid.

But let’s do a thought experiment.

Let’s say the government did take half the carbon tax receipts and put it into general revenue. What would they do with it? Well, this government has shown no interest in controlling either debt or deficits, so it’s rather unlikely they’d put the money toward debt reduction. It’s also unlikely that they’d put it toward the Alberta Heritage Fund, given their spending priorities. No, it’s most likely that they would simply spend it, and probably on the same things they’re planning to spend on in their Climate Leadership Plan—more rail transit, more bicycle infrastructure, more electric car subsidies, more home energy efficiency subsidies, and so on.

In other words, the distinction between the government spending carbon tax revenues on special projects (freeing up general revenues to do other things), or having the government first put the tax into its “general revenue” and then spending it on more or less the same things is meaningless, and the prior analysis is probably more realistic than the Notley government would like us to believe.


Subscribe to the Fraser Institute

Get the latest news from the Fraser Institute on the latest research studies, news and events.