Jason Kenney says he supports a carbon tax — but only on major industrial emitters in Alberta

United Conservative Party Leader Jason Kenney says he wants to ditch the carbon tax that applies to all Albertans but is still in favour of "a tax on major emitters" in the province.

United Conservative Party leader wants to end economy-wide carbon pricing but keep industrial CO2 regulations

Alberta's United Conservative Party Leader Jason Kenney speaks to Power & Politics host Vassy Kapelos on Monday. (CBC)

United Conservative Party Leader Jason Kenney says he wants to ditch the carbon tax that applies to all Albertans but is still in favour of "a tax on major emitters" in the province.

Emissions from those sources — which include large industrial operations like power plants and oilsands operations — account for about two-thirds of Alberta's total carbon-dioxide output that is subject to carbon pricing, according to University of Calgary economist Trevor Tombe.

Kenney has expressed support in the past for continuing to charge major emitters but refrained from using the word "tax" when talking about such a system.

On Monday, however, he expanded on his view during an interview on CBC's Power & Politics, and used the T-word to describe it.

"One thing I've said is we would be comfortable, probably, going back to what we had as a levy — a tax — on major emitters, where the companies that produce the emissions actually paid into a research fund," Kenney said.

This type of regulatory system was introduced in Alberta in 2007 by the Progressive Conservative government of Ed Stelmach and modified in 2018 by the current NDP government.

The regulations only apply to large emitters and are separate from the broader-based carbon tax that the NDP introduced in 2017, which applies to the consumer-level sale of gasoline, diesel, propane and natural gas.

Technology fund

Both the old and the new regulations on industry involve having large emitters pay into a technology fund aimed at reducing the intensity of Alberta's greenhouse gas emissions.

A government agency doles out grants from the fund, on a project-by-project basis. Grant recipients have included municipalities, universities and major players in the oil and gas industry.

"That fund, paid for by major emitters, I think is a good way of doing it," Kenney said of his ideal climate-change policy for Alberta.

"I think the solution is through research and development, science and technology, that will find thousands of small innovations that reduce the carbon intensity of our economy."

But some economists disagree, tending to favour a more broad-based carbon price over regulations that apply only to some emitters.

Regulations vs. carbon price

"If you think innovation and technological change are the answers to climate change, a carbon price is the best policy choice," University of Alberta economist Andrew Leach told a parliamentary committee in Ottawa on Monday.

A broadly applied carbon tax "organically" creates incentives to reduce emissions while boosting demand for cleaner technologies, Leach said, and is also a "useful alternative to governments picking winners with regulations and subsidies."

Dale Beugin with Canada's Ecofiscal Commission echoed that, telling the committee that broad-based carbon pricing is more efficient, from an economic point of view. 

"Other policies, such including subsidies or prescriptive regulations, will cost more," he said.

Kenney also spoke to the committee Monday, outlining his opposition to the federal government's plan to impose carbon taxes on provinces that don't meet its pricing thresholds.

He vowed that, if the UCP wins the 2019 provincial election, he would repeal the portion of Alberta's carbon tax that applies to consumers and launch a legal challenge over Ottawa's mandated minimum carbon prices.

"We will see the federal government in court," he said.

Federal Environment and Climate Change Minister Catherine McKenna said she was disappointed by Kenney's comments.

Environment and Climate Change Minister Catherine McKenna speaks to reporters in Ottawa on Monday. (CBC)

"It's really unfortunate — especially unfortunate for our kids — that the conservatives think that this is something that you can play partisan games over," she said.

"We're going to continue taking practical, cost-effective measures to tackle climate change and to grow a clean economy because, at the end of the day, that's what we owe to our kids."

Official UCP policy still in the works

The UCP held its first annual general meeting over the weekend but Kenney said its official platform on climate change won't be finalized until a year from now.

Personally, however, Kenney has supported not only ditching the carbon tax but also returning to the old PC policy for large emitters, known as the Specified Gas Emitters Regulation (SGER).

The new NDP regulations, known as the Carbon Competitiveness Incentives (CCI), took effect on Jan. 1.

That meant new formulas to determine how much industrial facilities pay for their carbon emissions and how much they receive in associated subsidies.

This chart illustrates how carbon costs changed for various oilsands producers when the NDP government modified the regulatory regime that the previous PC government had introduced in 2007. (Trevor Tombe)

The new system rewards oilsands operations that emit relatively low amounts of greenhouse gas per barrel of oil produced, and penalizes those that are more emissions-intensive.

Under the old system, by comparison, large emitters' carbon costs were based on a threshold that varied from facility to facility, based on each facility's own emissions intensity in the past.

Tombe said this meant, in effect, "dirty facilities would receive a larger subsidy than cleaner facilities."

"The recent changes provide the same subsidy to every oil and gas firm," he said.

"So what that does is really strengthen the incentive for an individual facility to improve its performance."