On June 7, 2016, Alberta's Bill 20: the Climate Leadership Implementation Act (the "CLIA"), passed its third reading in the legislature. The CLIA allows for the implementation of a carbon levy on Alberta's industry and citizens, and signifies the first step in the NDP government's plan to combat climate change. The carbon levy, which comes into effect on January 1, 2017, will be included in the price of all fuels that emit greenhouse gases when combusted. The carbon levy will initially be applied to fuels at a rate of $20/tonne. One year later, on January 1, 2018, the levy will increase to $30/tonne.
New Laws Created & Current Laws Affected
The CLIA enacts two separate statutes: the Climate Leadership Act (the "CLA") and the Energy Efficiency Alberta Act (the "EEAA"). It also amends the Alberta Corporate Tax Act, the Alberta Personal Income Tax Act and the Climate Change and Emissions Management Act.
CLIMATE LEADERSHIP ACT
Who Will Pay & What are They Paying For?
As noted, the carbon levy will be applied throughout the fuel supply chain. The levy will be applied to the sale and import of fuels, such as at the time the recipient purchases fuel or imports fuel into Alberta, and at the point of removal of fuel from a refinery, terminal, plant, gas well, or oil or gas battery.
Large industrial emitters will continue to be subject to the Specified Gas Emitters Regulation framework until the end of 2017, at which time the province will transition to product and sector-based performance standards. For regular citizens, the carbon levy will be included in the price of all fuels that emit greenhouse gases when combusted, which includes fuels used for transportation and heating such as diesel, gasoline, natural gas and propane, but does not include consumer purchases of electricity. The government has published the following table outlining the carbon levy rates for major fuels for the 2017 and 2018 years.
Reinvesting the Revenue
The CLA explicitly restricts the use of the revenue generated by the carbon levy to initiatives related to reducing emissions of greenhouse gases which, in turn, supports Alberta's ability to adapt to climate change.. It also provides rebates or adjustments related to the carbon levy to consumers, businesses and communities, including adjustments in the form of tax credits or tax rate reductions. The government estimates that the levy will raise $9.6 billion over the next 5 years.
According to the government, the revenue generated by the carbon levy will be distributed as follows:
- $6.2 billion will help diversify the energy industry and create new jobs:
- $3.4 billion for large scale renewable energy, bioenergy and technology;
- $2.2 billion for green infrastructure such as transit;
- $645 million for Energy Efficiency Alberta, a new provincial agency that will support energy efficiency programs and services for homes and businesses.
The intention of the $645 million investment in Energy Efficiency Alberta is to move to reducing energy use and associated costs, greenhouse gas emissions, and to support green jobs. Further, $3.4 billion will help households, businesses and communities adjust to the carbon levy in the following ways:
- $2.3 billion for carbon rebates to help low- and middle-income families
- $865 million to pay for a cut in the small business tax rate from 3% to 2%
- $195 million to assist coal communities, Indigenous communities and others with adjustment
Liability of Third Parties & Directors
Section 39 of the CLA allows the Minister to seek recovery from third parties or directors of a corporation where the Minister knows or suspects that a person is or will be, within one year, liable to make any payment to a person that owes an amount under the CLA. In such a case, the Minister can require the first person to pay the amount on account of the amount owed by the debtor.
Directors of a corporation may also be liable for amounts owed under the CLA in certain situations. Section 41 of the CLA notes that directors of a corporation are jointly and severally liable with the corporation when the corporation has failed to remit the carbon levy owed by it. However, the director must be notified in writing by the Minister of the director's liability under section 41. Also, the section provides directors with a defence, pursuant to which they will not be found liable if it is determined that they have exercised due diligence in attempting to ensure that the corporation has properly paid or remitted the carbon levy owed.
While the Regulations to accompany the CLA have not yet been released, Division 3 outlines certain criteria which, if met, exempt a consumer from paying a carbon levy on fuel.. An example will be if the fuel is marked for use in farming operations.
Section 79 of the CLA provides that the Lieutenant Governor in Council may make Regulations for the purposes of these exempt transactions. However, as noted, until these Regulations are released, the scope or application of the above exemptions cannot be fully ascertained.
THE ENERGY EFFICIENCY ALBERTA ACT
The Energy Efficiency Alberta Act enables the creation of a new Crown Corporation, Energy Efficiency Alberta. This is significant as Alberta was one of the only provinces without a provincial agency to support and promote energy efficiency programs and services for homes and businesses.
Amendments to Alberta Corporate Tax Act and Alberta Personal Income Tax Act
Amendments have also been made to Alberta's corporate and personal tax regimes, which the government indicates has been done to assist taxpayers in adjusting to the carbon levy. The small business corporate income tax rate will be reduced by one third, from 3% to 2% effective January 1, 2017. As for personal income taxes, the Province will provide rebates to consumers with respect to amounts paid under the CLA. Albertans with no dependents earning up to $47,500 will receive $200 annually and couples with no dependents earning up to $95,000 will receive $300 annually. Albertans with children will receive an additional $30 per child to a maximum of four children. There will be no rebate for individuals with no dependents who earn more than $55,000 and for couples with no dependents who earn in excess of $102,500. The government has indicated that it plans to adjust the criteria in 2018 when the levies increase.
There has already been criticism expressed with respect to these rebates, such as questioning whether the rebates offsetting the increased costs of heating and the purchase of transportation fuels will be enough to incentivize Albertans to reduce their carbon footprint. The government has stated that 60% of Albertan households will receive a rebate that will cover the cost of the carbon levy they will have to pay. However, some commentators have cautioned that those same households could pay an additional $70 to $105 annually in indirect costs related to the levies as Alberta-based companies pass on their new costs to consumers.
AMENDMENTS TO CLIMATE CHANGE AND EMISSIONS MANAGEMENT ACT
As for the impending changes to the Climate Change and Emissions Management Act, this legislation continues to apply to Alberta's large industrial carbon emitters who release over 100,000 tonnes per year of carbon or equivalent emissions. In 2017, the province will transition to product and sector-based performance standards.
Notably, Bill 20 amends section 10 of the Climate Change and Emissions Management Act which is the provision dealing with the Climate Change and Emissions Management Fund. It adds several purposes for which the Fund can be used to reduce emissions. These include reducing emissions of specified gases and improving Alberta's ability to adapt to climate change for the purposes of education and outreach initiatives.
Given the recent passage of Bill 20 and the fact that the Regulations remain outstanding, there are still many unknowns about what the CLA will mean for Albertans. More details about the carbon tax regime and its effects on Albertans should become available in the fall.
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