Alberta’s carbon levy will reward families, businesses and communities that take steps to lower their emissions.
The levy will also help diversify our energy industry and create new jobs, while improving opportunities to get our traditional energy products to new markets.
Carbon rebates will offset costs associated with the levy to help low-and middle-income households adjust. To help businesses, the small business tax rate is being cut by one third.
Together with the new performance standards for large industrial emitters, the carbon pricing model covers 78-90% of Alberta’s emissions.
The carbon levy will be included in the price of all fuels that emit greenhouse gases when combusted. These include transportation and heating fuels such as diesel, gasoline, natural gas and propane. It will not apply directly to consumer purchases of electricity.
Starting January 1, 2017, the carbon levy will be applied to fuels at a rate of $20/tonne. One year later, the levy will increase to $30/tonne.
Carbon levy impact on major fuels
Table 1. Carbon levy impact on major fuels.
|Type of Fuel||January 1, 2017||January 1, 2018|
|Marked fuels for agricultural purposes||Exempt||Exempt|
|Diesel||5.35 ¢/L||2.68 ¢/L|
|Gasoline||4.49 ¢/L||2.24 ¢/L|
|Natural Gas||1.011 $/GJ||0.506 $/GJ|
|Propane||3.08 ¢/L||1.54 ¢/L|
The carbon levy is the key tool that will pay for the transition to a more diversified economy. Over the next 5 years, the levy is expected to raise $9.6 billion, all of which will be reinvested in the economy and rebated to Albertans.
$6.2 billion will help diversify our energy industry and create new jobs:
- $3.4 billion for large scale renewable energy, bioenergy and technology
- $2.2 billion for green infrastructure like transit
- $645 million for Energy Efficiency Alberta, a new provincial agency that will support energy efficiency programs and services for homes and businesses
$3.4 billion will help households, businesses and communities adjust to the carbon levy:
- $2.3 billion for carbon rebates to help low- and middle-income families
- $865 million to pay for a cut in the small business tax rate from 3% to 2%
- $195 million to assist coal communities, Indigenous communities and others with adjustment
Impacts of the carbon levy will vary, depending on a household’s energy use and driving patterns. All Albertans who take steps to reduce their emissions – by turning down the heat when no one is home, installing smart thermostats, choosing more fuel efficient cars, using public transit, walking, biking, or taking advantage of coming energy efficiency programs – can reduce the cost of the carbon levy.
Six of 10 Alberta households will receive a rebate that covers the average cost of the carbon levy they pay.
The table below outlines the typical direct impact a household may face.
Estimated direct impact on households
Table 2. Estimated direct impact of the carbon levy on a household.
|Single||Couple||Couple with 2 children|
|Consumption Assumptions||Natural gas (GJ)||100||123||135|
|2017 Impacts||Natural gas||$101||$124||$136|
|Total 2017 Costs||$191||$259||$338|
|2017 Maximum Rebate Amount||$200||$300||$360|
|2018 Impacts||Natural gas||$152||$186||$205|
|Total 2018 Costs||$286||$388||$508|
|2018 Maximum Rebate Amount||$300||$450||$540|
Estimated indirect impact on households
In addition to direct costs, there will be indirect costs from the carbon levy in the form of higher prices for other goods and services. However, the impact of the carbon levy on indirect costs is expected to be relatively small in Alberta since a large portion of commodities bought by Alberta households are imported from outside the province. Imported commodities are not subject to the levy, although the distribution and retailing of those goods will face some carbon levy related charges. The indirect costs of the carbon levy are estimated to range between:
- $50 to $70 per household in 2017
- $70 to $105 per household in 2018
Indirect costs of the carbon levy on Alberta households were calculated using a detailed Alberta Input-Output model, which is based on Statistics Canada data and reflects inter-industry as well as cross-border trade flows that occur while producing a specific good or service consumed by Alberta households. To develop the ranges, it is assumed that businesses subject to the levy pass through 50% to 75% of the related costs to consumers.
To offset the costs associated with the levy, carbon rebates will be provided to lower- and middle-income Albertans. Six in 10 Albertan households will be eligible for the full rebate, and an additional 6% of households will receive a partial rebate.
The rebate is tied to income and not energy use, so eligible recipients have a financial incentive to reduce household emissions.
You don’t need to apply for the rebate. You only need to file a 2015 tax return and meet the income criteria.
Potential carbon rebate recipients must:
- be Alberta residents;
- file a 2015 tax return; and
- meet the income requirements (see table below).
The rebate will begin to phase out at $47,500 in net income for single Albertans, and $95,000 for couples and families.
The rebate will provide up to $200 for an adult, $100 for a spouse, and $30 for each child under 18 in the household (up to a maximum of 4 children).
Single parents can claim the spouse amount for one child, and the child amount for up to 4 more children.
The Climate Change Advisory Panel had proposed that the carbon price should increase over time. However, the government will not increase the price further until the economy is stronger and the actions of other jurisdictions, including the federal government, are better known.
Table 3. Rebate parameters.
|Benefit Amounts||First adult||$200||$300|
|Spouse/Equivalent to spouse||$100||$150|
|Child (maximum 4)||$30||$45|
|Phase-out Thresholds (Family Net Income)||Single||$47,500||$47,500|
|Income at which Rebate is Fully Phased Out (Family Net Income)||Single||$51,250||$55,000|
|Couple with 1 child||$100,750||$104,875|
|Couple with 2 children||$101,500||$106,000|
|Couple with 3 children||$102,250||$107,125|
|Couple with 4 children||$103,000||$108,250|
Payments will be made according to the amount you’re eligible to receive:
- $400 or more delivered in 4 payments (Jan, Apr, Jul, Oct)
- $200-$399 delivered in 2 payments (Jan, Jul)
- $100-$199 delivered in 1 payment (Jan)
Small business tax relief
To help businesses adjust to the carbon levy, Alberta’s small business corporate income tax rate will be reduced by one third, from 3% to 2%. The cut takes effect on Jan 1, 2017.
Some exemptions will apply, including the following:
- the use of heating fuels on sites subject to the Specified Gas Emitters Regulations (SGER)/performance standards regime
- natural gas produced and consumed on site by conventional oil and gas producers (until Jan 1, 2023)
- industrial exemptions in cases where fuel is used in industrial processes but not combusted
- purchases of fuel on-reserve by eligible First Nations individuals and bands for personal and band use
- marked gasoline and diesel used by farmers in farming operations
- biofuels, including biomethane, biodiesel and ethanol
- inter-jurisdictional flights
- fuel sold for export
For a full list of rates and fuels, see page 106 of the Fiscal Plan (3.1 MB)
Large Industrial Emitters will continue to be subject to the SGER framework until the end of 2017, when the province will transition to product and sector-based performance standards. Further details will be available after industry consultations.
The new framework, which is endorsed by energy leaders, is designed to reduce the amount of carbon pollution in every barrel of oil.
Under SGER, facilities that emit 100,000 tonnes or more of greenhouse gas emissions are required to annually reduce their site-specific emissions intensity by 15% (this increases to 20% as of Jan 1, 2017).
There are 4 ways facilities can comply:
- make improvements at their facility to reduce emissions
- use emission performance credits generated at facilities that achieve more than the required reductions
- purchase Alberta-based carbon offset credits
- contribute to Alberta’s Climate Change and Emissions Management Fund (Fund)
Facilities that contribute to the Fund pay $20 for every tonne over their reduction target. The price changes to $30 as of Jan 1, 2017.
On-site combustion in conventional oil and gas will be levied starting Jan 1, 2023 while that sector works to reduce methane under the government’s new Joint Initiative on Methane Reduction and Verification.