Carbon Levy – What does this mean to you?

Background

The Carbon Levy came into effect January 1st, 2017 and will be charged on all fuels that emit greenhouse gas emissions at a rate of $20/tonne in 2017 and $30/tonne in 2018.  Fuels include diesel, gasoline, natural gas and propane.  The amount of Carbon Levy applied to each fuel is based on the amount of carbon pollution released by the fuel when it is combusted, as illustrated below:

Type of Fuel January 1, 2017
$20/tonne
January 1, 2018
$30/tonne
Diesel 5.35 ¢/L 8.03 ¢/L
Gasoline 4.49 ¢/L 6.73 ¢/L
Natural Gas 1.011 $/GJ 1.517 $/GJ
Propane 3.08 ¢/L 4.62 ¢/L

Source: Alberta Tax Plan – Fiscal Plan 2016-19, Carbon Levy Rates pg. 106 (http://finance.alberta.ca/publications/budget/budget2016/fiscal-plan-complete.pdf)

The Carbon Levy does not apply to certain fuels, such as marked gas and diesel used on farms, biofuels, biodiesels, and fuel sold for export.

Impact on Albertans

As we are now beyond January 1st, 2017 and the Carbon Levy is in effect, what is the anticipated impact to the average Albertan?

The primary direct impact is in the additional Carbon Levy paid on our fuel and heating; and, the indirect impact will be in the general increase in the price of goods & services we purchase and consume that are subject to the Carbon Levy.

To mitigate the Carbon Levy, the Alberta government has introduced measures to stimulate small and energy efficient business and reimburse additional expenses to household consumers.

Reinvesting in economy

The Carbon Levy fund will be used (or “its supposed to be used”) for the transition to a more diversified economy. Over the next 5 years, the levy is expected to raise $9.6 billion, which will be reinvested in the economy and rebated to Albertans.

  • Most part of the levy will be invested in large scale renewable energy, bioenergy and technology, green infrastructure like public transit,
  • Alberta small business tax rate will be reduced from 3% to 2% effective January 1, 2017.
  • In addition to exempting gasoline and diesel for farming operations, the Alberta government is going to invest $10 Million (yes, only 6 zeros after “10” but still…) to help farmers reduce their emissions and costs through efficiency upgrades.

Carbon Rebate

To help Albertans offset the introduction of the Carbon Levy, Alberta has introduced Carbon Rebates.  Rebates will be provided to lower- and middle-income.

The table below outlines the maximum income levels to earn the Full and Partial Rebate.  For incomes above the maximum amount to receive Full Rebate, the rebates are reduced by a percentage (http://www.cra-arc.gc.ca/bnfts/rltd_prgrms/lb-eng.html#Q3).  The government estimates that 60% of Albertans will qualify for the Full Rebate based on their incomes: $200 for an adult, $100 for a spouse and $30 for each child under 18 (up to four children). Single parents can claim the spouse amount for one child, and the child amount for up to 4 more children.

Maximum Income

to receive:

2017   2018
Full Rebate Partial Rebate   Full Rebate Partial Rebate
Single $47,500 $51,250 $47,500 $55,000
Couple $95,000 $100,000 $95,000 $103,750
Couple with 1 child $95,000 $100,750 $95,000 $104,875
Couple with 2 children $95,000 $101,500 $95,000 $106,000
Couple with 3 children $95,000 $102,250 $95,000 $107,125
Couple with 4 children $95,000 $103,000 $95,000 $108,250

 

The rebates are expected to start being paid in January 2017.

You can use CRA’s Child and Family Benefits Calculator (http://www.cra-arc.gc.ca/bnfts/clcltr/cfbc-eng.html) to estimate your households rebate amount.

Summary

The Carbon Levy will have a wide-ranging impact on the cost of the goods & services we purchase.  The level of impact for each of us will be dependent upon how much of the products & services we purchase are directly or indirectly affected by the Carbon Levy.

The consistent theme to reduce our energy costs is to change our behaviours to increase our energy-saving practices and choose more energy-efficient products.  Not only do we reduce our costs by applying energy-saving choices, but the overall consumption of greenhouse gas emissions is also reduced – which is why the government chose to implement a Carbon Levy.