Notley govt not selling carbon tax as well as Kenney is opposing it

New Alberta government carbon tax message: Asia is the future, China and India price carbon, the customer is always right

Alberta’s carbon tax rose from $20 to $30 a tonne Jan. 1, setting off another political clash between the ruling NDP and Jason Kenney, one that will dominate political discourse until the provincial election in 2019. This fight is Kenney’s to lose. Does the Rachel Notley government have a message that might resonate with voters? Judging by Sarah Hoffman’s performance yesterday, not really.

Angus Reid polling from this summer shows that Albertans don’t like the carbon tax by a wide margin (68% to 33%) and the United Conservative Party leader harps on that message every time he gets a chance.

Kenney couldn’t be more clear in his messaging: the Alberta carbon tax hurts your family’s pocketbook, does nothing to protect the environment, and repealing the levy will be his first act in the legislature.

“The carbon tax is all economic pain with no environmental gain,” Kenney said Monday in a statement.

Kenney released a video of him filling up his Dodge Ram pickup New Year’s Eve, just as he did last year.

“This is the carbon tax they (the Alberta NDP) claimed they had no intention of imposing in the last provincial election, but it’s made the cost of everything higher, filling up our gas tanks, heating our homes, buying our groceries,” he said in the video.

Hoffman counters that Alberta’s Climate Leadership Plan, which includes the carbon tax, was cited by Prime Minister Justin Trudeau as a significant factor when the Canadian government approved three pipelines in the fall of 2016.

“Let me say this definitively, we could not have approved this project without the leadership of Premier (Rachel) Notley and Alberta’s climate leadership plan,” Trudeau told reporters on Nov. 29 when he announced the pipelines. “Alberta’s climate plan is a vital contributor to our national strategy. It has been rightly celebrated as a major step forward, both by industry and the environmental community.”

Even though Hoffman is correct, Kenney cut her off at the knees by responding in a statement where he pointed out that Trudeau also denied Enbridge’s Northern Gateway pipeline proposal, former American president Barack Obama vetoed Keystone XL, the National Energy Board effectively killed Energy East, and completion of the Trans Mountain Expansion project is far from certain because of fierce BC opposition.

Cynicism about Trudeau and skepticism about pipelines ever being built under his watch play well in Alberta, especially to conservative voters.

The rest of Hoffman’s message doesn’t seem to be selling very well, either.

“I don’t think it has been as shocking to Albertans on the cost side as many would want you to believe it would be. It hasn’t necessarily been easy. Any time you’re paying a bit more, it’s a challenge,” Hoffman said yesterday, as reported by CTV. “But we’ve done it in a way that protects ordinary Albertans and gets us that very important environmental leadership profile that we need to ensure we have a strong economy for future generations.”

Why does the Deputy Premier simply assume that Albertans understand why “environmental leadership” is necessary for a strong future economy? Based on my conversations with Alberta voters, most aren’t making the connection.

This is the missing piece of the government’s carbon tax communications message: the connection between paying a tax and economic self-interest.

The naked truth is that countries where Alberta wants to sell its oil and gas – and perhaps one day its petrochemical products – are adopting carbon pricing.

Take China, which on Dec. 18 launched the world’s largest carbon market, covering the power generation sector for now and other industries in the near future. India already prices carbon for its coal market; there is no formal carbon tax for oil and gas, but high excise duties amount to de facto carbon pricing, according to a 2015 economic survey.

The International Energy Agency, the US Energy Information Administration, and energy company forecasters (e.g. BP) all expect petroleum demand to remain flat in developed countries like the United States, Alberta’s only export market, and to rise from the current 96MM b/d (million barrels a day) to anywhere from 103MM to 115MM b/d, driven almost entirely by China and India.

The same China and India Alberta producers are so eager to tap with pipelines to tidewater, like Kinder Morgan’s 525,000 b/d Trans Mountain Expansion.

This is why oil sands companies, which produce crude oil with a high carbon intensity, are so eager to reduce greenhouse gas emissions and become both “carbon-competitive.” If they don’t lower carbon intensity, they will take a price discount in the very markets they are trying to reach because they don’t like the price discount that currently comes with shipping to just one customer.

Carbon pricing, coupled with provincial programs like the Carbon Competitiveness and fugitive methane emissions regulations, could provide Alberta with a major competitive advantage over other heavy crude oil producing nations, like Venezuela, Nigeria, and Mexico.

So, never mind the importance of Alberta carbon pricing to federal pipeline approvals or political support in provinces that new pipelines will traverse. Also never mind the domestic emission impacts of an Alberta carbon levy.

The focus should be on how carbon pricing can make Alberta hydrocarbons more competitive in an increasingly carbon-constrained world.

It’s all about the customer.

If Asia is the future for Alberta’s economy, and if Asia is going to price carbon, well, then Alberta has to price carbon, too.