Alberta pauses its provincial gas tax Friday as federal carbon tax increases

The federal carbon tax goes up Friday, the same day the province launches a temporary break in the provincial gas tax, with the goal hopefully keeping more cash in Albertans’ wallets – but some experts say it’s complicated.

The federal carbon tax has risen annually since April 2019, with gas prices expected to rise an extra two cents per liter and 50 cents per gigajoule for household heating.

The annual increase is not sitting well with some drivers.

“Making things more expensive, not a good time for that. Right now, its actually shocking the federal government is raising the tax when inflation is out of control right now. (I’m) not happy,” said Keith Muyres while fueling up on Macleod Trail SW

Other drivers say they want the federal government to pursue alternative incentives.

“It would just be better if they cut taxes therefore we get the tax break every time we fill up at the pumps,” said motorist Phil Vorvis.

GOVERNMENT INCENTIVE

The federal government says the carbon tax is designed to discourage or disincentivize burning fossil fuels while raising funds for green energy programs.

“When you make something more expensive, people tend to demand less of it. That’s the underlying logic. If you make emitting greenhouse gas emissions more costly, then this provides an incentive for people to think about ways of avoiding doing so,” said Trevor Tombe, economic professor at the University of Calgary.

The carbon tax is also designed to provide some financial relief for households upon filing their taxes.

“If you have multiple vehicles a larger home, then you may be in a situation where the amount of carbon taxes that you pay exceeds the rebate. Now most households, the average household will see more back in the rebate than they pay in carbon taxes But that’s not true for all individuals,” said Tombe.

Trevor Tombe, University of Calgary economist

“Now most households, the average household will see more back in the rebate than they pay in carbon taxes. But that’s not true for all individuals.”

The United Conservative Party scrapped the provincial carbon tax upon taking office, resulting in the federal government later imposing its own carbon tax on Alberta.

Premier Jason Kenney then mounted a legal challenge against Ottawa, ultimately losing in the Supreme Court.

On Wednesday, Kenney continued to declare his opposition to the federal carbon tax.

“We’ve got to watch out for the ‘Liberal-NDP-carbon tax’ because they’re not just hiking it by 25 per cent. On April Fool’s Day, they want to increase it by another 400 per cent over the next eight years.”

The federal carbon tax is expected to reach $170 per ton by 2030.

Political watchers say Kenney supports a different kind of carbon tax.

“Kenney himself brought in a carbon tax for industry in the oil sands that is much more stringent than what we had in the past,” Duane Bratt, political analyst from Mount Royal University.

He later added, “Privately (the Alberta government) is using carbon taxes, and then publicly fighting the federal government and the difference is one is industry-based and one is consumer-based.”

Bratt adds that the carbon tax has become a partisan issue.

GAS TAX TEMPORARILY REMOVED

The province is using the high price of oil to offset savings at the gas station by temporarily pausing the provincial gas tax.

West Texas Intermediate (WTI) the benchmark price for oil, closed Thursday at $100 a barrel which is flowing revenue into the Alberta Treasury.

As of 12:01 am on April 1, the province will temporarily stop collecting 13 cents per liter.

Accounting for the carbon tax increase of just over two cents, gasoline prices should decrease about ten cents a liter on Friday — however experts say it’s not so simple.

“Basically, you get a relief of 10.8 cents at the pumps. Let’s say the price is $1.70 per litre. You’re supposed to get 13 cents off because of the provincial government policy, but the federal government has countered with a 2.21 cents increase . So net, you might just see just over 10 cents break from a pump pricing.” Vijay Muralidharan, a lead fuel and alternative fuel consultant with Kalibrate.

He adds there are still several other factors that can affect fuel prices, including the ongoing energy crisis, the start of the North American summer driving season, and prices set by refineries.

“We might still see higher pricing at the pump. That’s not because the tax has not been passed through. That’s because the crude pricing and the refinery margins are still sky high,” said Muralidharan.

The provincial gas tax break will be re-evaluated in three months as long as oil is above $90 per barrel, the province can afford to cancel the gas tax — otherwise it will be reinstated if oil dips below $80 per barrel.

On Friday Kenney and the finance and transportation ministers will be in Calgary to announce more details about the tax relief program.

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