The new carbon tax and emissions cap: Will it work and who will pay the price?

CALGARY, Nov. 26, 2015 /CNW/ - In 2007, Alberta became the first North American jurisdiction to put a price on carbon- demonstrating that it could be a leader in the effort to reduce greenhouse gas emissions. Unfortunately, that emissions policy was more symbolism than a meaningful reduction in greenhouse gas emissions.

Last Sunday, the NDP released its plan - a carbon tax and a cap on oil sands emissions. But some details have yet to be revealed. In looking ahead to the next iteration of Alberta's climate change strategy — and the regulations that will support it — one would hope the province's future emissions-reduction targets and regulations are better aligned.

The School of Public Policy with authors Sarah Dobson and Jennifer Winter released an eye-opening report today with strong recommendations for the Alberta government on how to set up the tax and add insight to the debate.

According to Dobson "Our recommendation is a carbon tax, applied to all energy-based emissions (those that fall under the "energy" category for UNFCC reporting) in the province along with a revenue-recycling guarantee to minimize any negative impacts on households, firms and the province's economy as a whole. One of the benefits of the carbon tax, both to start and over time, is that its value can be tailored to support the province's reduction target."

The authors have priced the impact of carbon taxation. For a $20 per tonne tax, the cost would be 0.9 per cent of gross output (or 1.7 per cent at $40 a tonne). As in B.C., the proceeds should be recycled in the form of reduced corporate income taxes, personal taxes, and subsidies to low income households, to offset the extra burden and distortions a carbon tax would create.

The papers can be downloaded at http://www.policyschool.ucalgary.ca/?q=research

SOURCE The School of Public Policy - University of Calgary

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