An increase in the carbon tax will hike the cost of gas at the pumps in 2018. File Photo

Alberta carbon tax increase only one part of puzzle

Economic impact not nearly as bad as opposition states, not as good as government proclaims

The new year saw Albertans facing higher costs as a result of the hike in the price of carbon, although one economist feels the impact won’t be as ominous or effective.

The Alberta government’s carbon levy went from $20 to $30 per tonne of emissions in an attempt to diversify the economy and reduce harmful emissions. Meanwhile, opponents such as the UCP and the Canadian Taxpayers Federation state the levy is killing jobs and economic growth.

“Raising taxes on struggling businesses will make it harder for them to stay in business or hire more workers,” said CTF Interim Alberta Director Colin Craig.

However, according to one economist, the government and opposition are focusing on their own agendas instead of what is actually going on.

Dr. Stephanie Powers, a professor at Red Deer College’s Donald School of Business, explained the levy is supposed to assist in lowering the use of carbon generating products.

“It is essentially an excise tax, which is meant to decrease the consumption of products like natural gas, gasoline and diesel that create carbon dioxide. It’s supposed to do that by making it more expensive,” stated Powers, who has degrees in finance, economics and statistics.

Powers noted that use isn’t falling because the products are a necessity and prices aren’t dramatically higher. That point was made using gasoline as an example. She looked at the price before and after the levy took effect in 2016. Back then, drivers stocked days prior to the 4.5 cent per litre levy taking effect. That was followed by companies raising the price by 10 cents on Jan. 1 then a seven cent price drop occurred a couple weeks later.

“This year, the levy increase is only three cents, though the larger price jump now is being combined with uncertainty and turmoil over supply in the Middle East. So, I anticipate the actual rise will be about 1.5 cents as prices come down over the next couple of weeks,” she said.

Looking at another sector — natural gas — Powers noted that residents will essentially pay less if people examine their expenditures over the longer term.

“People tend not to remember what it cost last year or a few years ago, but only compare it to what they paid last month,” Powers stated. “To get a proper perspective, you need to look at the bigger historical picture over multiple years.”

As for the overall effect on the provincial economy, Powers stated it really depends on which economist you’re talking to and what numbers they are looking at. However, she believes people won’t see much difference if one looks at the impact year-over-year.

“Over the entire year, Albertans will not feel much difference as it might add about $150 to the average person, especially when the government says 60 per cent of residents will get a rebate and some economists believe that is closer to 50 per cent,” she stated.

“Yes, there is a negative impact if you look at simply cost, but the actual impact is probably a fraction of one percent. Compare that 0.1 per cent of growth slowdown to the looming legalization of marijuana which will have a major impact of more than one per cent growth in the economy. So, adding the carbon levy is going to be very small.”

The government has said the average single Albertan will get a $300 rebate, while an average couple could see $450. Parents will see an additional $45 per child to a maximum of four kids.

As for how effective the levy has been or will be, Powers explained it’s too early to know.

“It’s too early to predict if this strategy has been effective, since in order to be effective — if it’s not a necessity — then usage must decrease drastically,” she said, noting emissions have not fallen since 2007 despite the Conservatives own emission reduction plan.

“As for the $1 billion in revenue that will be taken in, it’s basically a short-term pain for long-term benefit through projects that won’t see a return for many years. However, if a different government were to kill the levy, then what would they do, keep or find that revenue instead, and no one has provided that answer yet.”

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