Carbon tax gap significant between Alberta and Quebec: report

Montreal Economic Institute says policy and layers of taxes are crippling Canada's oil and gas industry

The Montreal Economic Institute, an independent public policy think-tank, says Alberta’s $30 carbon tax is around 50 per cent higher than the rate in place in Quebec, as a result of the latter province’s cap-and-trade system.

MEI has just published a research paper, The Cumulative Impact of Harmful Policies – The Case of Oil and Gas in Alberta, on the subject.

Jean Michaud

“There is no reason that justifies such a gap,” said Jean Michaud, an associate researcher at the MEI and co-author of the publication, in a news release.

“One province should not pay an effective rate that’s higher than another, or even worse, twice as high, as will be the case in the provinces where the federal carbon tax applies when it reaches $50 per tonne of CO2. We are therefore punishing certain producers more than others, which will certainly hurt an industry already faced with many problems.”

The report said the Canadian oil and gas sector is dealing with several challenges, led by the lack of pipelines keeping resources from reaching foreign markets.

Germain Belzile
Germain Belzile

“The lack of market access, due to the difficulty of building pipelines, and the numerous delays surrounding energy projects are the challenges that currently have the biggest financial impact on this sector,” said Germain Belzile, a senior associate researcher at the MEI and co-author of the publication. “This lack hurts not only provincial public finances but also the Canadian economy as a whole. We’re talking about a cost of some $4 billion a year in recent years, but that cost is certainly far higher now since oil production exceeds pipeline capacity.”

The report said new regulations also make the process of developing projects more burdensome in an industry where investments have fallen in recent years. In Alberta, for example, permitting delays are much longer than in the United States, our main competitor, which hurts the competitiveness of Canadian companies, said the institute, adding that federal government is also planning to impose another policy, the Clean Fuel Standard, which will add another layer of regulation.

Michel Kelly-Gagnon and the carbon tax gap
Michel Kelly-Gagnon

“The cumulative effect of all of these measures, often adopted piecemeal, will end up stifling the Canadian oil industry, which has already been hit quite hard. Moreover, experts project that the global demand for oil will continue to grow until at least 2040. That’s why Canada must continue to supply some of that demand, in a responsible manner, as it already does, rather than leave its resources in the ground unused in favour of other producing countries — some of which have environmental and human rights records that are far less exemplary than Canada’s,” said Michel Kelly-Gagnon, president and CEO of the MEI.

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