The Texas of Canada Just Turned Its Back on Oil
ALBERTA IS SOMETIMES called the Texas of Canada. It’s home to one of the largest rodeos in the world, a respectable number of annual tornadoes, and a plethora of oil and gas reserves. Falling in the not-quite-so-Texas category: blankets of winter snow, the way they pronounce their vowels, and most recently, a tax on carbon emissions.
The tax, which goes into effect January 2017, will add a few cents onto every dollar spent on coal, oil, and gas. When formerly cheap fossil fuels are forced to compete on even economic playing field with renewables, the thinking goes, people will choose sustainable energy.
That’s Alberta’s play. But carbon taxes aren’t the only marriage of capitalism and environmentalism—the more popular approach is cap and trade. As far as results go, the two strategies are pretty much interchangeable, but environmentalism isn’t just about results. It’s also about economics.
A carbon tax is pretty straightforward: The government levees a fee on any energy source that creates CO2 as a byproduct. In Alberta, that fee will be about $15 per ton (that’s in US, not Canadian)—and bumped to $22.50 in 2018. For consumers, that adds up to about a quarter or so per gallon of gas. The tax is higher for coal, because it emits more carbon. For wind and solar, the tax is zero. “That provides a nice financial incentive for people to switch,” says Yoram Bauman, a Seattle economist who helped craft British Columbia’s carbon tax and is working on another in Washington State.
A US Energy Information Administration study shows that a carbon tax like Alberta’s could reduce CO2 emissions by as much as half by 2040 (bearing in mind that comparing Alberta to the entire US is not quite apples to apples). You might recognize this strategy—using money to shape your behavior—from taxes on cigarettes, booze, and Keno. Pretty simple, pretty darn effective.