President of Treasury Board and Minister of Finance, Joe Ceci, released the 2016 Alberta budget on April 14, 2016. This year’s budget concentrated on four key priorities: support for families and communities; infrastructure investment; supporting businesses; and diversifying the provinces energy industry and markets. The province continues to trumpet its overall tax advantage compared to the rest of Canada, based on the fact that it does not have any sales tax, payroll tax, or health-care premiums. However, this year’s budget contained one significant commodity tax proposal as part of Alberta’s new Climate Leadership Plan, which is discussed below.
This year’s budget has proposed a carbon levy to commence on January 1, 2017, which will apply to fossil fuels producing greenhouse gas (“GHG”) emissions when combusted. Fuels used for heating and transportation will be subject to this levy, including diesel, gasoline, natural gas and propane. The initial rate of this levy will be set at $20 per tonne, effective January 1, 2017, increasing to $30 per tonne, effective January 1, 2018. Commencing January 1, 2017, the levy will apply at the rate of 5.35 cents per litre for diesel, 4.49 cents per litre for gasoline, 1.011 dollars per gigajoule for natural gas and 3.08 cents per litre for propane, increasing on January 1, 2018 to 8.03 cents per litre, 6.73 cents per litre, 1.517 dollars per gigajoule and 4.62 cents per litre, respectively. The levy will be included in the price of gasoline and diesel when purchased by consumers, whereas natural gas bills are expected to display the carbon levy on a separate line.
Large Final Emitters will remain subject to the Specified Gas Emitters Regulation (“SGER”) standards until the end of 2017, at which time it is proposed they will pay $20 per tonne of GHG emissions that exceed targets established on January 1, 2016, which increases to $30 per tonne on January 1, 2017.
Exemptions to the proposed carbon levy will be available for certain types or uses of fossil fuels, including:
- the use of heating fuels on sites subject to the SGER/performance standards regime;
- natural gas produced and consumed on site by conventional oil and gas producers (available to January 1, 2013);
- use of fuel in industrial processes, but not combusted;
- purchases of fuel on-reserve by eligible First Nations individuals and bands for personal and band use;
- marked gasoline and diesel used by farmers in farming operations;
- biofuels, including biomethane, biodiesel and ethanol;
- fuel consumed during inter-jurisdictional flights; and
- fuel sold for export.
The government plans to reinvest the revenue generated from the proposed carbon levy into the Alberta economy, which is estimated to be $9.6 billion over a 5 year period. The most significant investments to be made with the revenue generated from the levy will include spending on: large–scale renewable energy projects; transformative innovation and technology development; bioenergy initiatives; green infrastructure; and the creation of a new agency, Energy Efficiency Alberta, to support micro-generation and energy efficiency initiatives. These investments are expected to cost $6.2 billion. In addition, $3.4 billion of the revenue generated from the levy is budgeted to be paid out in the form of consumer rebates, assistance to Indigenous communities and to fund a small business tax rate reduction.
Small Business Tax Relief
In order to help small businesses adjust to the increased costs resulting from the proposed carbon levy, Alberta’s corporate income tax rate on small businesses will be reduced from 3% to 2%, effective January 1, 2017.
Climate Leadership Adjustment Rebate
A Climate Leadership Adjustment Rebate will accompany the new carbon levy in order to assist low to middle income residents of Alberta with the financial impact of this proposed levy. It is anticipated that the full rebate will be available to 60% of households in Alberta when it commences in January 2017. The rebate rates will equal $200 for an adult, $100 for spouses and $30 for every child under 18 to a maximum of four children per household. Coinciding with the proposed carbon levy rate increase planned for January 1, 2018 will be an increase in the rebate rates for the year 2018, which rise to $300 for an adult, $150 for a spouse and $45 per child to a maximum of four. Rebates will begin to phase out when net family income reaches $95,000 for couples and families and $47,500 for singles. Recipients will receive a single payment for rebate amounts between $100 and $199, two payments for rebate amounts between $200 and $399, and four payments for rebate amounts of $400 or more. No rebates will be paid when the amount due is less than $100.
The province expects to introduce legislation for this proposed carbon levy later this spring. Ryan will release additional information on the application of this levy when the regulations are released later this year.
Further information on Alberta’s 2016 budget may be found on the province's web site at: