Staying the Course on the Carbon Leadership Plan

Alberta Budget 2017

In its 2017 Budget, the Government of Alberta showed a commitment to staying the course with respect to its previously announced strategic priorities, including its Climate Leadership Plan (CLP).

Update on CLP initiatives

In alignment with the CLP, the government announced plans to spend $5.4 billion over 3 years on energy efficiency activities, economic diversification initiatives and programs focused on helping businesses, communities and households adjust to carbon pricing. These activities will be fully funded through gross carbon pricing revenues. Specific programs and initiatives mentioned in Budget 2017 included:

• Household Rebates and Carbon Costs: Funding of $1.5 billion over 3 years to offset carbon levy costs for low and middle income households. The first rebate installment was issued in January 2017 and valued at $138 million.
• Green Infrastructure: Funding of $1.3 billion over 3 years to support grants and capital investments related to green infrastructure initiatives (e.g. upgrading hospitals and schools).

         Read more: Infrastructure Spending Meant to Stimulate Economic Growth – Alberta Budget 2017

• Energy Efficiency:  Funding of $566 million over 3 years to programs that support energy efficiency and small scale renewable energy generation projects. 
• Community Supports: Funding of $151 million over 3 years to help indigenous communities reduce energy costs, lower emissions and create jobs related to renewable energy. 
• Small Business Tax Rate Reduction: In January 2017, the small business tax rate decreased to 2% from 3% to help businesses mitigate the impact of the carbon levy. This is expected to save small business owners $565 million over 3 years. 
• Coal Pollution Phase-Out:  The budget outlined the first payment against a $1.1 billion liability booked in 2016-2017 for transition payments to owners of coal-power generating stations to encourage them to transition to electricity generation sources with fewer carbon emissions. 
• Energy Generation: The budget highlighted that in March 2017, the government will initiate the first phase of its Renewable Electricity Program with an auction to provide 400 megawatts of renewable energy capacity to help meet its target of 30% renewable energy sources by 2030.

New energy infrastructure projects expected to help offset carbon pricing impacts

The 2017 budget highlighted federal approval of two energy infrastructure projects – The Trans Mountain Expansion (TMX) and Enbridge’s Line 3 Pipelines – which are expected to increase the province’s GDP to 1.5% by 2022. The government believes these initiatives and CLP programs should mitigate the impact of carbon pricing – resulting in a positive net GDP impact of 1%. 

Update on Carbon Levy Revenue

Budget 2017 provided an update on the Carbon Levy which took effect on January 1, 2017, stating that the Levy should generate $3.9 billion in gross revenue over the next 3 years, including $1.04 billion this year. Half of this revenue has been allocated to cover the small business tax rate cut and specific rebates programs. The remainder will be allocated to emissions reduction and economic diversification programs.  

Caution Despite Government Optimism

While the Alberta 2017 Budget suggests the government is optimistic that the impacts associated with the CLP will be net positive, there is a high degree of uncertainty and caution within the market that could affect the province long-term. If you have any questions about how Alberta’s 2017 Budget or Alberta’s Climate Leadership Plan might impact your business, please contact your local BDO office.