Canada's leader on climate change is now Alberta. Just like that, the province has gone from pariah to paragon. On Sunday, Premier Rachel Notley's New Democratic government unveiled a program to lower greenhouse gas emissions; at its centre is a plan to put a price on carbon, across the provincial economy. By 2018, the new carbon levy – not officially a tax, but acting like one – could be raising $3-billion a year, according to the expert panel that crafted it, led by economics professor Andrew Leach. That's more ambitious than any other province's carbon-pricing plan.
Some are calling this the most radical change to Alberta's economy in decades. But the goal of this policy is to be as un-radical as possible, and to achieve the most carbon reduction with the least cost and disruption. If the policy works as intended, Canada's most carbon-based province will meaningfully lower its greenhouse gas emissions without destroying its oil industry or economy.
For example, by 2018, gasoline will carry a charge worth roughly 7 cents a litre. Consumers in British Columbia have for years been paying the same levy, and it appears to be having the intended effect. People in B.C. have not abandoned their cars, but millions of consumers have reacted to slightly higher gasoline, diesel and oil prices in a million little ways, such that carbon-based fuel use has dropped more in B.C. than in the rest of the country. That's the price mechanism, the heart of free-market economics, at work.
Dealing with climate change need not involve choosing between the economy and the environment – between a "drill baby drill!" status quo and end-to-oil environmentalism. The fear was that Alberta's NDP, which had never expected to govern, would fall into the latter camp. Instead, Ms. Notley has introduced a policy that is measured and thoughtful. It has won support from many in the oil patch, and deserves to.
The plan is designed to avoid handicapping Alberta's exporters, but consumers will see higher costs, with the average family paying $500 a year in 2018, and $900 by 2030. Some of the money raised will be used to offset costs for lower- and middle-income taxpayers; some will subsidize industries in transition. In theory, it's supposed to be "revenue-neutral." But there will be challenges – and opportunities to get it wrong. More on that, later this week.