VIDEO: Highlights of the Canadian Federal Government Carbon Tax

On January 15 2018, the Canadian Federal Government laid out the details of it plan to implement a  $50/tonne carbon tax in proposed legislation named the “Greenhouse Gas Pollution Pricing Act”.  The highlights are:

  • The Federal Tax will only apply in Provinces and Territories that do not have a comparable carbon tax already in place
    • That means, as of today, it will apply only to 20% of the Canadian population
    • Specifically those in Saskatchewan, most Atlantic provinces, NWT, Nunavut, Yukon will be subject to the Canadian Federal carbon levy
    • Newfoundland & Labrador and others are expected to announce their own carbon tax systems in the spring of 2018
  • The tax will start at $10/tonne in 2018 and will be at $50/tonne by the end of 2022
  • There are two parts to the system, a consumer gas tax and and industrial emissions tax

Consumer Gas Tax:

  • 2018 Gasoline = $0.023 / liter       2022 Gasoline = $0.115 / liter
  • 2018 Diesel = $0.027 / liter             2022 Diesel = $0.135 / liter
  • 2018 Propane = $0.015 / liter         2022 Diesel = $.075 / liter

Industrial Carbon Emissions Tax:

  • The tax is an “output based system” which means it will be charged where the carbon is released (think burning gasoline in your car vs producing gasoline)
  • Only those companies that produce more carbon than the average today will pay the carbon tax
    • Before the end of 2018 the Canadian Government will evaluate each industrial sector (think Oil & Gas, Mining, Transportation…) and determine the current average energy used per unit of output in each of those sectors
    • Companies that produce more carbon than industry average will have to buy carbon credits
    • Companies that produce less carbon than the industry average will be able to sell the difference in carbon credits

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Alberta’s Carbon Tax: The Right Tax at the Right Time?

Alberta's Carbon TaxIt used to be very clear that Alberta had a spending problem and not a revenue problem.  However, since the 2014 oil crash, the world and Alberta have forever changed.  Historically, oil ‘busts’ were the result of a downturn in some key economy that reduced the demand for oil & gas products.  Today we have the worlds first notable price downturn caused by over production of oil, with no end in site.

Saudi Crown Prince Mohammed bin SalmanThis over production was started intentionally by Saudi Crown Prince Mohammed bin Salman in an effort to kill shale oil fracker’s and other non-state owned small players.  The idea was to have OPEC lead an over production that would drop the price of oil for a few years and force the marginal upstart players (i.e. US based frackers) out of the industry.  Then Saudi lead OPEC would reduce supply and drive the price back up.  Well, the Crown Prince was wrong and it didn’t work.

More importantly it won’t work in the future.  Saudi Arabia and friends can reduce the global price of oil by increasing production but they can no longer raise the price because they no longer control the global output, here’s why:

  1. American fracking companies scale up their oil production in a matter of weeks
  2. Canadian oil sands in Alberta and Saskatchewan have vast reserves backed by billion dollar upgrader investments that just keep coming online
  3. Iran, which has had its oil embargoed for decades, now is pushing 3 billions of barrels onto the open market as of the 2017 lifting of sanctions
  4. OPEC nations like Venezuela and Nigeria are desperate states the need cash and they will continue to cheat their OPEC agreements and produce produce produce
  5. Putin and Russia so desperately want to be a world powerhouse but only has an economy the size of Spain’s, with 20% of its citizens without even running water.  The Russian federal government gets nearly HALF of its revenue from oil so when the price drops, they just produce more which keeps pushing the price down.

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