IPCC Report Drives Home Need to Spend Carbon Tax Dollars Wisely
By: Nick Clark
The world’s most authoritative voice on climate science, the Intergovernmental Panel on Climate Change (IPCC), released a report on October 8 on what it means to limit global climate change to 1.5 ⁰C, and the consequences of missing this target, a target that Canada not only endorsed, but fought for at the 2015 Paris Climate Summit.
The report states risks associated with global warming of more than 1.5⁰C as a rise in sea level, increased impacts on biodiversity and ecosystems, including species loss and extinction, as well as increased risks to health, livelihoods, food security, water supply, and economic growth.
The bottom line is that any hope for a safe climate hinges on using trillions of dollars around the globe to invest wisely in carbon reduction, clean energy, and energy efficiency programs. This includes wisely investing the billions of dollars being collected here in Alberta through the Carbon Tax.
Is Alberta doing its part?
The argument can be made that some of our carbon tax dollars have been put towards worthwhile programs that will help move us towards a low carbon future. But, there are some allocations of funds that we believe need to be re-evaluated.
Let’s be clear, although it is referred to as a “cap”, this is really a subsidy. It is important to call a spade a spade and stop hiding the truth from consumers. The money was used to subsidize the retail price at 6.8 cents/kWh ONLY for customers on the Regulated Rate Option (RRO). The subsidy protects the margins of the regulated utilities.
This is $35 million that could have been more effectively used to further invest in carbon reduction programs.
This subsidy was mismanaged in that each regulated utility was paid a different amount. The more inefficient or lax the utility was in buying energy to meet their load requirements in retailing to RRO customers, then the higher the subsidy paid was to ensure that the utilities’ historical margins were kept whole. On average here are the numbers for what was paid to each provider:
A few pennies, doesn’t sound like much, does it? When you consider that EPCOR received $17 million, ENMAX, which has a smaller customer base, added $9 million to their balance sheet, and Direct Energy took in almost $5 million, it really starts to add up. The payment formula gets even more wonky, in that for farming cooperatives and other smaller communities offering a regulated rate were paid a premium of 10% on top of the average of what the big incumbents received. Just because they were smaller? Why should they get more?
Everyone has the same option of buying off of the power pool at the same price. Paying a 10% premium to the rural farming community sounds like political pandering for votes in the next election rather than solid economics.
These numbers were for just four months of subsidies. The current legislation is scheduled to last until 2021. Another 40 months to go and an estimated $700 million that will be paid out. Just think what you could do with a few hundred million dollars. Would you choose to invest this money in cancer research, education, or environmental initiatives? All of the above? The utilities do not need to be subsidized and this was not the original intent of imposing a tax on carbon.
It is time to get serious, because the risk of not investing in carbon reduction programs is too high. It is time to stop supporting the profit margins of the big regulated utilities and use our carbon tax dollars to address climate change head on.
What we are risking if world leaders do not do something tangible, is the possibility of even stronger storms devastating coastal communities, rising seas threatening small island nations, an increased number of fires blazing through the forests of Western Canada, heatwaves, and much more. The recent storm in Florida is just one small example of what is happening, and when these disasters come, indigenous peoples and vulnerable communities in the global south will be hit the hardest.
If we are going to take billions in taxes out of the pockets of Albertans, then please, lets spend it wisely to ensure the future health of our one and only home.
It is time to get serious. Our government is artificially picking winners and losers, spending our tax dollars on things that are not important. Spending our money to try to buy votes. Artificially trying to mask problems caused by closing generation plants and shorting the supply market and trying to marginalize the competitive and private sector retailers in the market by subsidizing the big utilities.
Consider this, consumers can buy electricity from unregulated retail energy marketers for less than 6.8 cents per kWh (without the subsidy) and we all buy our energy off of the same source. So, why should the government subsidize the utilities that they regulate? Why subsidize any utility that shipped jobs offshore? This is another story you may find of interest.
More to the point, maybe consumers should simply switch off the government’s RRO providers and save some money by shopping locally. The best part? The local Energy Marketers in the People’s Utility offer the option for customers to green all or part of their electricity consumption through a partnership with Green Alberta Energy. It is simple and affordable. For an average home that uses 800 kWh/month, greening 30% of their electricity consumption would only cost about $0.13 a day. That’s less than $4 a month.
Albertans can do their part of the environment and shop locally. It’s a win-win.
The report states risks associated with global warming of more than 1.5⁰C as a rise in sea level, increased impacts on biodiversity and ecosystems, including species loss and extinction, as well as increased risks to health, livelihoods, food security, water supply, and economic growth.
The bottom line is that any hope for a safe climate hinges on using trillions of dollars around the globe to invest wisely in carbon reduction, clean energy, and energy efficiency programs. This includes wisely investing the billions of dollars being collected here in Alberta through the Carbon Tax.
Is Alberta doing its part?
The argument can be made that some of our carbon tax dollars have been put towards worthwhile programs that will help move us towards a low carbon future. But, there are some allocations of funds that we believe need to be re-evaluated.
Alberta’s Cap on Regulated Electricity Prices
During a short four-month period this year, the government has taken $35 million out of the Carbon Tax and gifted it to the Regulated Rate providers in Alberta, under Bill 16: An Act to Cap Regulated Electricity Rates.Let’s be clear, although it is referred to as a “cap”, this is really a subsidy. It is important to call a spade a spade and stop hiding the truth from consumers. The money was used to subsidize the retail price at 6.8 cents/kWh ONLY for customers on the Regulated Rate Option (RRO). The subsidy protects the margins of the regulated utilities.
This is $35 million that could have been more effectively used to further invest in carbon reduction programs.
This subsidy was mismanaged in that each regulated utility was paid a different amount. The more inefficient or lax the utility was in buying energy to meet their load requirements in retailing to RRO customers, then the higher the subsidy paid was to ensure that the utilities’ historical margins were kept whole. On average here are the numbers for what was paid to each provider:
- EPCOR was subsidized 1.1 cents/kWh
- Direct Energy received 1.3 cents/kWh
- ENMAX was paid 2.1 cents/kWh
A few pennies, doesn’t sound like much, does it? When you consider that EPCOR received $17 million, ENMAX, which has a smaller customer base, added $9 million to their balance sheet, and Direct Energy took in almost $5 million, it really starts to add up. The payment formula gets even more wonky, in that for farming cooperatives and other smaller communities offering a regulated rate were paid a premium of 10% on top of the average of what the big incumbents received. Just because they were smaller? Why should they get more?
Everyone has the same option of buying off of the power pool at the same price. Paying a 10% premium to the rural farming community sounds like political pandering for votes in the next election rather than solid economics.
These numbers were for just four months of subsidies. The current legislation is scheduled to last until 2021. Another 40 months to go and an estimated $700 million that will be paid out. Just think what you could do with a few hundred million dollars. Would you choose to invest this money in cancer research, education, or environmental initiatives? All of the above? The utilities do not need to be subsidized and this was not the original intent of imposing a tax on carbon.
It is time to get serious, because the risk of not investing in carbon reduction programs is too high. It is time to stop supporting the profit margins of the big regulated utilities and use our carbon tax dollars to address climate change head on.
What we are risking if world leaders do not do something tangible, is the possibility of even stronger storms devastating coastal communities, rising seas threatening small island nations, an increased number of fires blazing through the forests of Western Canada, heatwaves, and much more. The recent storm in Florida is just one small example of what is happening, and when these disasters come, indigenous peoples and vulnerable communities in the global south will be hit the hardest.
If we are going to take billions in taxes out of the pockets of Albertans, then please, lets spend it wisely to ensure the future health of our one and only home.
It is time to get serious. Our government is artificially picking winners and losers, spending our tax dollars on things that are not important. Spending our money to try to buy votes. Artificially trying to mask problems caused by closing generation plants and shorting the supply market and trying to marginalize the competitive and private sector retailers in the market by subsidizing the big utilities.
Consider this, consumers can buy electricity from unregulated retail energy marketers for less than 6.8 cents per kWh (without the subsidy) and we all buy our energy off of the same source. So, why should the government subsidize the utilities that they regulate? Why subsidize any utility that shipped jobs offshore? This is another story you may find of interest.
More to the point, maybe consumers should simply switch off the government’s RRO providers and save some money by shopping locally. The best part? The local Energy Marketers in the People’s Utility offer the option for customers to green all or part of their electricity consumption through a partnership with Green Alberta Energy. It is simple and affordable. For an average home that uses 800 kWh/month, greening 30% of their electricity consumption would only cost about $0.13 a day. That’s less than $4 a month.
Albertans can do their part of the environment and shop locally. It’s a win-win.