Alberta, Canada's biggest energy-producing province, expectsto raise C$9.6 billion over the next five years through a tax on greenhouse gasemissions even as income from oil and natural gas production dropped to its lowestin four decades.
The government will rebate approximately C$3.4 billion of thetax through direct payments to consumers and a decrease in its small business tax,according to documents released April 14 as part of the provincial budget package.About C$6.2 billion raised through the levy will be invested in renewable energyprojects and so-called "green energy" projects like public transit andenergy efficiency initiatives. Details of those projects were not provided.
Alberta, which has been hit hard by faltering oil and naturalgas revenues, estimates it will run a C$10.4 billion deficit in the fiscal yearending March 31, 2017, Finance Minister Joe Ceci said in a speech in the AlbertaLegislature. The government has seen a 90% drop in the royalties it charges companiesto extract natural resources, to C$1.4 billion, the lowest in 40 years, Ceci said.
"Unemployment has risen dramatically, peaking at 7.9% thisyear, and revenues to government have fallen off a cliff," Ceci said in hisbudget speech. "In 2013-2014 the province booked almost [C]$10 billion in non-renewableresource revenue. This year, we are forecasting an almost 90% drop to [C]$1.4 billion,less revenue than we've seen for 40 years. Dollar for dollar, less royalties meansthere will be a higher deficit."
Alberta owns the mineral rights to most of its territory andtakes a percentage of the oil and natural gas that is produced from it. The province'sshare is sold and the income is used to bolster its coffers. Alberta has no provincialsales tax and Ceci said despite the dire financial situation, the government hasno plans to implement one.
When the new carbon levy comes into effect Jan. 1, 2017, consumerswill pay an additional 4.49 Canadian cents per liter for gasoline and 5.35 Canadiancents per liter for diesel fuel. Natural gas will jump by C$1.011 per gigajoule,tacking more than 90% onto the C$1.065/GJ spot price at the benchmark AECO hub April14. The levy will initially be set at C$20 per metric ton and increase to C$30/tonnein 2018, meaning more increases in fuel costs. More than 60% of Albertans will beable to participate in rebate programs, Ceci said. Large emitters like oil sandsgiant Suncor Energy Inc.and power generator TransAlta Corp.already pay a carbon levy.
The government plans to invest C$3.4 billion of its carbon taxincome in large-scale renewable energy projects, innovation and technology development,and plan implementation. It will spend C$2.2 billion on green infrastructure andC$645 million on energy efficiency and micro-generation initiatives.
"All Albertans will benefit from investments in the greeninfrastructure and energy efficiencies that the carbon levy will support, creatingthousands of jobs, diversifying our energy economy and driving new technologiesthat will add to our exports," Ceci said. "It's a win for our environment,it's a win for our energy industry and above all it's a win for Albertans who willbenefit from a stronger, more-sustainable economy with good-paying jobs."
For the first time the province has included a risk adjustmentin its estimates to account for swings in oil prices. The budget anticipates pricesfor benchmark West Texas Intermediate crude will average US$42 per barrel in the2016-2017 fiscal year. It also includes a low price scenario of US$36/bbl whichwould pare provincial revenue by about C$700 million.
"To account for the extreme volatility in oil prices, particularlyin the last year, the deficit includes a [C]$700 million risk adjustment,"Ceci said. "Faced with the collapse in prices for our most-valuable commodity,Albertans are confronted with a choice that will have profound consequences forgenerations to come."