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Tar Secret #4: Alberta lets tar sands industry write off half their carbon penalties


 

The "Tar Secrets" series delivers you essential climate facts missing from government and tar sands marketing spin.

In a nutshell

What the tar sands industry says

Large climate polluters in Alberta pay $15 in carbon fines for every tonne of CO2 that exceeds their intensity limits.

What they leave out

The net cost for the tar sands industry is half of that.

That is according to a recent economic study from Carleton University, "Carbon Taxes and Financial Incentives for Greenhouse Gas Emissions Reductions in Alberta’s Oil Sands". It estimates that a typical tar sands producer ends up bearing only half of the cost of their carbon fines. The other half is "borne by the public".

This happens because Alberta's royalty and tax rules allow polluting companies to write off their CO2 penalty payments. The study estimates the companies recover around half of their CO2 penalties via reduced royalty and tax payments to the public.

The tar sands industry ends up with only half as much economic incentive to stop polluting.

The public gets paid less for the resources they own.

The result? Both Environment Canada and the Canadian Energy Research Institute (CERI) projections show that Alberta's climate policies are far too weak to stop their carbon pollution from soaring -- leading to national climate failure.

At a glance

Below is Figure 10 from the Carleton University study showing how much of a carbon tax is borne by the company emitting the climate pollution. At the top of this article is the same chart which I modified slightly to highlight the basic findings.

 

Chart highlights:

  • Study: "As long as WTI prices are at least $(US) 75 per barrel, then the estimated producer-borne share of such a [carbon] tax is less than 50% in all cases considered."
  • Study: "The remaining portion of the carbon tax would be borne by the public (mostly Albertans) in the form of reduced royalty and CIT [Canadian Income Tax] revenues."
  • The current price for West Texas Intermediate (WTI) oil is around $100. At that level the study estimates that the CO2 producer bears ~46% of the pollution costs and the public bears the rest.

Climate fail

Both Environment Canada and the Canadian Energy Research Institute (CERI) projections show that Alberta's climate policies are far too weak to stop their carbon pollution from soaring. The resulting provincial and national climate failure isn't such a surprise when you consider that Alberta's climate policy:

  1. exempts 96% of emissions
  2. charges just $15 per tonne to the few remaining emissions
  3. allows polluters to cut even that small penalty in half

Here are two charts showing how Alberta's weak climate policies are driving our national climate failure. Both are based on Environment Canada projections:

 

Surging climate pollution from the tar sands industry is projected to cause all of Alberta's dramatic rise in greenhouse gases. The tar sands will also, single-handedly, nullify the combined climate pollution cuts made by all other provinces in Canada.

The next chart shows how close each province is projected to get to Prime Minister Stephen Harper's climate promise: cutting emissions to 83% of the 2005 levels by 2020. This promise is Canada's formal international agreement under the global Copenhagen Accord. It exactly matches the one made by the USA.

 

As you can clearly see, Canada's projected failure is caused overwhelmingly by Alberta's inability to control their surging climate pollution -- mostly from their tar sands industry.

Hockey chaos

Imagine if we refereed hockey the way Alberta referees climate pollution.

First, the hockey refs would only call one out of every 25 fouls. High sticking? No call. Offsides? Carry on.

More in Climate Snapshot

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Car Carbon series: cool new animation, plus the jaw-dropping impact it left out

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