Ottawa green-lights Alberta’s industrial carbon tax, but still imposing consumer version on Jan. 1

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Ottawa has approved Alberta’s proposal for an industrial carbon tax, and won’t impose its own version on the province.

The Friday decision avoids escalating a fight between Ottawa and the Prairie province but does nothing to end the battle over the consumer-based carbon tax, which the federal Liberals say will still come into effect in Alberta on Jan. 1.

Ottawa is navigating a fractured relationship with Alberta, mostly over policies to mitigate climate change, at the same time that it is negotiating the final elements of the Paris Agreement in Madrid and signalling that it will raise its emissions-reduction targets.

Federal Environment Minister Jonathan Wilkinson said his government accepted Alberta’s proposed industrial carbon tax, called the Technology Innovation and Emissions Reduction System, which Premier Jason Kenney revealed in October as a replacement to one implemented by the previous NDP government in Alberta. The tax would come in at $30 a ton for next year – in line with Ottawa’s benchmark carbon price.

The industrial carbon price is a “step forward in terms of ensuring that provinces across this country are taking action on climate change,” Mr. Wilkinson said outside the House.

But he also noted that for his government to accept the provincial program in future years, it must continue to rise by $10-a-ton for each year until at least 2022.

The province has not agreed to do that. Mr. Kenney said Friday he would oppose an escalation in the tax, but also doesn’t want Ottawa "big-footing into Alberta, and enforcing their own separate regulatory regime.”

“I won’t close the door to go into $40 if we have no choice except the imposition of a federal regulatory regime in Alberta," Mr. Kenney told reporters in Edmonton.

Climate scientists and economists say that to reduce emissions, a carbon price needs to continue to increase.

But Mr. Kenney said a hike to the tax would hurt the province’s oil and gas sector competitiveness.

“At some point, it continues to lead to the flight of capital and carbon leakage – basically, from our energy sector to the energy sector in the U.S., that doesn’t have a carbon price.”

Ontario and New Brunswick have also proposed their own industrial carbon taxes in the hopes that Ottawa stops imposing its heavy-emitters regime on the two provinces. Unlike those two provinces, Alberta has not had the federal industrial carbon tax applied, and the system brought in by former premier Rachel Notley is still in effect.

Last month, the Calgary-based Pembina Institute, a green-energy think tank, released a report that said Alberta’s proposed industrial carbon tax meets Ottawa’s benchmark as long as its price continues to go up each year.

The report found the proposals from Ontario and New Brunswick would allow significantly increased emissions than would be permitted under the federal carbon tax.

Mr. Wilkinson said a decision on the remaining two provinces will be made in the coming weeks, but noted that it doesn’t need to be decided before year end.

Alberta is waiting to hear whether Ottawa will also accept its proposed equivalency agreement for methane regulations. The federal government said it’s still reviewing Alberta’s proposal. Methane is a greenhouse gas between 30- and 80-times more potent than carbon dioxide. Almost half of Canada’s methane emissions leak from oil and gas facilities and the governing Liberals have announced targets to reduce them by 45 per cent.

With reports from Kelly Cryderman and The Canadian Press