01 Jun Alberta’s Carbon Tax arrived: Bill 20 proposes the Climate Leadership Act and Energy Efficiency Alberta Act
This is the seventh post in the Environmental Law Centre’s new blog series exploring climate change law in Canada. This blog series provides updates on climate change law developments and includes insights from our related law reform research. This blog series is generously funded by the Alberta Law Foundation.
A carbon tax was first recommended by the Alberta Government’s Climate Leadership Plan as one of several tools to reduce greenhouse gases (GHG) by putting a price on carbon emissions (see our previous post on the Climate Leadership Plan here). In April 2016, the Alberta Government announced its fiscal plan for 2016 to 2019 (Budget 2016) and there provided first information on the carbon tax. See ELC’s previous blog on Alberta’s carbon tax here.
On May 24, 2016, Alberta’s Minister of the Environment introduced Bill 20 which, if passed, will enact both the Climate Leadership Act and the Energy Efficiency Alberta Act. With Bill 20, Alberta’s controversial new carbon tax will be implemented and a new agency called Energy Efficiency Alberta will be established. This blog briefly reviews these two matters: the carbon tax and the Energy Efficiency Alberta Agency.
Climate Leadership Act
Schedule 1 of Bill 20 contains the Climate Leadership Act (CLA). The purpose of the CLA is to implement a carbon tax (officially referred to as carbon levy) on fuel consumption throughout the fuel supply chain. The CLA stipulates that the revenues from the carbon tax are to be used for GHG reduction initiatives in Alberta and to provide tax credits or tax rate reductions to carbon tax affected consumers, businesses and communities.
The CLA defines a “consumer” as “a person that produces or purchases fuel in, or imports fuel into, Alberta (i) for use by that person, (ii) for use by another person at the first person’s expense, or (iii) on behalf of, or as agent for, a principal for use by the principal or by another person at the principal’s expense.”
The CLA imposes a carbon tax on different types of fuel. There are special provisions on some fuel types such as locomotive diesel (section 6), natural gas (section 8), miscellaneous fuels, such as coke oven gas, refinery gas, low and high heat value coal, refinery petroleum coke, upgrader petroleum coke, and coal coke (section 9). Some fuel types are exempted from the application of the carbon tax by regulations. Recipients of fuel must pay the carbon tax to the Crown. The tax rate is determined according to the fuel type (see the Table of Schedule 1).
The following activities trigger the imposition of the carbon tax (for the full list see CLA, s 4(2)):
- purchase of fuel,
- import of fuel into Alberta,
- sale or removal of fuel from a variety of industrial facilities such as oil production site or oil sands processing plant or from a specified gas emitter;
- flaring and venting of fuel.
But not all these activities will be immediately taxed. Section 4(3) of the CLA stipulates when the carbon tax is not payable. For example, the carbon tax is not payable at the time when the fuel is imported into Alberta for delivery to a refinery or terminal; or fuel is exported from Alberta in bulk.
There are exemptions (section 15 of the CLA) from paying the carbon tax in the following cases:
- the consumer holds at the time of purchase a valid carbon tax exemption certificate or other prescribed evidence of exemption and the fuel is intended for a prescribed purpose or use;
- the fuel is marked fuel that is used for farming operations; or
- the fuel is not put into a fuel system that produces heat or energy, and is not flared or vented.
Although aviation gas or aviation jet fuel is exempt from the carbon levy, the consumer must pay carbon tax on aviation gas or aviation jet fuel used for any flight or segment of a flight that began at a location in Alberta and arrived at a location in Alberta, regardless of where the fuel was purchased. However, no carbon tax is payable on aviation gas or aviation jet fuel used by a recipient for a flight or segment of a flight (a) that departs from a location in Alberta if the first scheduled arrival on the flight is located outside of Alberta and the flight is made for a commercial purpose, or (b) that arrives at a location in Alberta if the flight is arriving from a location outside of Alberta.
If a consumer is exempted from the payment of the carbon tax, he can file an application to the Minister to receive a carbon tax exemption certificate that identifies the consumer as a person exempt from the carbon tax.
Section 25(1) of the CLA enumerates a comprehensive list of all direct remitters. A direct remitter is a person such as, but not limited to:
- that sells or remove fuel from a refinery;
- that sells or removes fuel from a terminal;
- that manufactures, refines or acquires in, or imports into, Alberta not less than a total of 500 million litres of clear fuel annually;
- that imports fuel into Alberta for the purpose of sale or resale;
- that flares or vents fuel;
- that produces, processes or refines fuel;
- that rebrands fuel;
- that sells or removes natural gas from a natural gas distribution system.
Depending on the status as direct remitter, remitter or other, the CLA determines who pays the carbon tax to the Minister or to the person that supplied the recipient with the fuel (see section 25 of CLA).
The CLA (section 27) requires specified and listed activities to register first before they are carried out. These activities are for example, in Alberta: to produce, process or refine fuel, sell or remove fuel from a gas fractionation plant, sell or remove fuel from a specified gas emitter, flaring and venting fuel, sell or remove natural gas from a transmission pipeline, sell or remove natural gas from a natural gas distribution system, etc.; to import fuel into Alberta for sale or resale; to export fuel form Alberta in bulk; use locomotive diesel in Alberta.
The CLA comes into force on January 1, 2017.
Energy Efficiency Alberta Act
Schedule 2 of Bill 20 enacts the Energy Efficiency Alberta Act (EEAA). The central matter of the EEAA is to establish the Crown-owned corporation called Energy Efficiency Alberta (EAA). The mandate of EEA is to raise awareness among energy consumers of energy use and the associated economic and environmental consequences. Further, EEA aims to promote, design and deliver programs and carry out other activities related to energy efficiency, energy conservation and the development of micro-generation and small scale energy systems in Alberta. In addition, EEA intends to promote the development of an energy efficiency services industry. The EEA is for all purposes an agent of the Crown in right of Alberta. The remainder of the fairly short Energy Efficiency Alberta Act deals with aspects of a corporation such management and administration.
Consequential Amendments of other Acts
Bill 20 amends the following acts: the Alberta Corporate Tax Act, the Alberta Personal Income Tax Act and the Climate Change and Emissions Management Act. Bill 20 and the consequential amendments to other acts implement the Alberta’s carbon tax, the rebates to low and middle income Albertans, and the reduced income tax rates for small businesses.
Bill 20: Another Step towards the Implementation of the Climate Leadership Plan
The enactment of Bill 20 shortly followed the announcement of the carbon tax in Alberta’s Budget 2016. The Climate Leadership Act will implement Alberta’s laudable but controversial carbon tax (see our previous comments on Alberta’s carbon tax here). However, the administration of the carbon tax may prove a daunting task in the year ahead. Similarly, the establishment of Energy Efficiency Alberta, a new agency mandated with raising awareness and promoting energy efficiency, seems a promising step towards the fight against climate change but the effectiveness of this agency in carrying out its task remains to be seen. Both, the carbon tax and the promotion of energy conservation are important parts of Alberta’s Climate Leadership Plan. However, Alberta’s Government has committed to do more than this. The other major measures announced in the plan are yet to come:
- phasing out coal-generated electricity and developing more renewable energy,
- legislating an oil-sands emissions limit, and
- employing a new methane emission reduction plan.