Alberta's carbon tax steers clear of making airlines pay

Airlines burn fossil fuels just like most of us do with cars, trucks and boats. However, they have soared right over the carbon tax, largely avoiding the full force of the new program.

Carriers will only be affected on flights within the province

In Alberta, the carbon price on aviation jet fuel will be 5.17 cents per litre in 2017 and 7.75 cents per litre in 2018 for flights within the province. (Andrew Vaughan/Canadian Press)

In seven months, many Albertans will start paying the carbon tax. Buy gas for your car, fill up your propane tank, or turn on the natural gas furnace and it'll cost a little more.

Carbon pricing systems are supposed to include just about every person and every business to create buy-in throughout the province and make sure everyone has an incentive to reduce emissions.

I would exempt no one. For political buy-in reasons, you want everyone in this together.- Chris Ragan, Ecofiscal Commission

Airlines burn fossil fuels just like most of us do with cars, trucks and boats. However, they have soared right over the carbon tax, largely avoiding the full force of the new program.

Only flights that depart and arrive in Alberta (such as Calgary to Edmonton) will be included. 

Such an exclusion from a carbon price is a mistake, according to Chris Ragan, with the Ecofiscal Commission and a professor at McGill University.

"I would exempt no one. For political buy-in reasons, you want everyone in this together," said Ragan.

He'd rather have an economy-wide carbon price, but provide cash rebates to those groups of people and businesses that are unfairly affected, such as low-income households and industries that have competition in jurisdictions without a carbon price.

That way, he suggests, there is incentive for all parties to reduce their emissions, whether it's an airline or a taxi company.

"You reduce emissions, but you keep the businesses in the province."

Airline protest

Airlines around the world have fought carbon pricing, even taking legal action in the EU.

They are mobile operations and can move their business where they want.

It's not a good sign from Alberta to be going down this path, at all.- Robert Kokonis, airline analyst
In Canada, the competitiveness issue is valid. An airline flying from Calgary to Vancouver could be at a disadvantage from other airlines that are buying their fuel elsewhere. 
The carbon tax will add about $2.25 to the cost of a round trip between Calgary and Edmonton in 2017, and about $3.40 in 2018, according to analyst Robert Kokonis. (Kyle Bakx/CBC)

Airline costs keep climbing

Giving the airline industry a pass with the carbon tax is a smart move, says aviation analyst Robert Kokonis, since airlines already face too many taxes, which increases costs for passengers.

"It's the sum of all the fees and charges. It becomes a significant amount of additional money for consumers," said Kokonis, the founder of AirTrav Inc.

"The danger is now Alberta has put on a carbon tax, as has B.C. Maybe Quebec or Ontario will be next to follow suit.  Ontario has already increased massively the size of our provincial tax on airline kerosene from where it was for years at about 2.7 cents to about five or six cents per litre."

He estimates the carbon tax will add about $2.25 round trip between Calgary and Edmonton in 2017, and about $3.40 in 2018 when the tax rises from 5.17 to 7.75 cents a litre.

"It's not a good sign from Alberta to be going down this path, at all," said Kokonis.

If a carbon tax was applied to all flights departing the province, he estimates flying from Calgary to Tokyo in 2018 would cost an extra $30.

Linking carbon taxes

While Alberta's new carbon tax won't have much of an effect on the aviation industry at first, that could change in the future.

Alberta and B.C. will have similar carbon pricing systems by 2018 and could link their programs so any flights between the two provinces would be subject to the tax.

"You could actually expand this region that you apply the carbon price to airlines," said Ragan. "All airlines on that route would be facing the same costs, you wouldn't be competitively disadvantaging anybody."

This type of partnership between provinces could become commonplace in a few years as more and more provinces introduce carbon pricing.


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