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Alberta — Carbon Tax Changes & More

Alberta — Carbon Tax Changes & More

Alberta may also release more legislation implementing other election tax promises…


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Alberta has released legislation to repeal parts of the province's carbon tax, effective May 30, 2019. The repeal, which the newly-elected United Conservative Party proposed in their election platform, is one of several provincial tax measures expected by Alberta's new government. Alberta also indicated that it would release additional legislation to implement other election tax promises, including a decrease to its general corporate tax rate to 8% (from 12%) over four years. The legislation to repeal the province's carbon tax is included in Alberta Bill 1, which received first reading on May 22, 2019. The bill does not eliminate the carbon pricing on "large emitters". Alberta said it intends to amend the rules applicable to large emitters with a new Technology Innovation and Emissions Reductions (TIER) regime.

Alberta joins Ontario, Manitoba, Saskatchewan, New Brunswick, Nunavut and Yukon as provinces and territories that have chosen not to enact provincial carbon tax rules that meet the federal standard and therefore may also be subject to the federal carbon tax "backstop" rules if the federal government includes Alberta in the federal program. Although Alberta announced that it intends to launch a legal challenge if the backstop is applied in the province, Saskatchewan recently lost a similar court decision on the constitutionality of the federal rules.

In 2018, Finance released carbon tax legislation and details of a related regulatory framework that will apply to any province or territory that did not implement a carbon pricing system that meets the federal standards by March 30, 2018. The federal carbon pollution pricing backstop includes fuel charges applied to fossil fuels, as well as a pricing system for industrial facilities that emit greenhouse gases above a certain threshold. Finance noted that, where a province enacts a fuel charge that does not meet the federal thresholds, the backstop will "top-up" the provincial system to the federal level.

The federal carbon tax rules impose a fuel charge at $20 a tonne for 2019, which will increase $10 per year until it is $50 a tonne in 2022. The levy will apply to fuels used in a jurisdiction (regardless of whether they are produced in or brought into the jurisdiction). Fossil fuels that are subject to the federal levy include liquid fuels (e.g., gasoline, diesel fuel, and aviation fuel), gaseous fuels (e.g., natural gas) and solid fuels (e.g., coal and coke). The fuel producer or distributor at the top of the supply chain will generally have to pay/collect the levy to the CRA on a monthly basis.

Generally, facilities that emit 50 kilotonnes or more of greenhouse gases per year will be subject to the output-based pricing system. These facilities will be able to purchase fuel levy-free, and will instead pay a carbon price on emissions of $10 a tonne, which started in 2018 and will also increase $10 per year until it reaches $50 a tonne in 2022.

Finance also announced relief measures to offset the costs of these new federal charges. Specifically, individual taxpayers in affected provinces are able to claim a federal Climate Action Incentive amount on their personal tax returns. Finance also proposed relief for greenhouse operators and power plant operators that generate electricity for remote communities.

Reimbursements under Alberta's carbon tax
Alberta's new legislation repeals the existing Climate Leadership Act. The new rules also provide that certain taxpayers who already made payments under the program may be eligible for reimbursement by filing a report on or before June 29, 2019.

Technology Innovation and Emissions Reductions rules
Although Alberta's government did not announce specific details about its plans to introduce Technology Innovation and Emissions Reductions rules, which apply to "large emitters", the government's election platform noted that this regime would reduce the cost of Alberta emission credits to $20/tonne (compared to $30/tonne) and would be effective January 1, 2020.

For more information, contact your KPMG adviser.

Information is current to May 28, 2019. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

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