# Backgrounder: Proposed Application of the Federal Carbon Pollution Pricing System in Alberta

In 2016, the federal government worked with provinces, territories, and with input from Indigenous Peoples, on Canada's first comprehensive climate action plan, which includes a stringent, fair and efficient price on carbon pollution.

As part of Canada's plan, provinces and territories have the flexibility to maintain or develop a carbon pollution pricing system that works for their circumstances and meets the federal standard for stringency.

As a result of Alberta's May 30, 2019 repeal of its carbon levy, Alberta now only partially meets federal benchmark stringency requirements and will join the provinces of Ontario, New Brunswick, Manitoba and Saskatchewan in being covered by the federal fuel charge for jurisdictions that have not met the Canada-wide federal standard for stringency. A charge applied to fossil fuels, generally paid by registered distributors (fuel producers and distributors), as set out in the Greenhouse Gas Pollution Pricing Act, Part 1, would start applying as of January 1, 2020, reflecting a carbon pollution price of $20 per tonne of carbon dioxide equivalent (CO2e). The charge would be raised to$30 per tonne as of April 1, 2020 (as in other provinces where the federal backstop applies). For details about fuel charge rates that will apply in Alberta, see the table at the end of this backgrounder.

The Government of Canada will monitor any proposed changes to Alberta's large industrial emitter system, and will undertake another benchmark assessment once sufficient details about the new system for large emitters are available. The Government is also open to working with the Government of Alberta to determine the most appropriate treatment of small oil and gas facilities under the carbon-pricing regime.

## Returning Direct Proceeds from the Federal Fuel Charge to Albertans

The Government of Canada has committed to return all direct proceeds from the federal carbon pollution pricing backstop system in Alberta, through direct payments to families and investments to reduce emissions, save money, and create jobs. In Alberta, it will return the direct proceeds as follows:

• Climate Action Incentive payments: The bulk of the direct proceeds from the federal fuel charge will be returned directly to eligible individuals and families residing in Alberta through Climate Action Incentive payments, starting in early 2020, through 2019 personal income tax returns. Most households in Alberta will receive more in Climate Action Incentive payments than they incur in increased costs resulting from pollution pricing.
• Support for other sectors: The remainder of those proceeds will be used to provide support to the province's schools, hospitals, small and medium-sized businesses (SMEs), colleges and universities, municipalities, not-for-profit organizations, and Indigenous communities, which will help save money and create good jobs. In Alberta, this amount is estimated at $610 million over the next four fiscal years.[1] ## How Climate Action Incentive Payments Will Benefit Albertans Exceptionally, the first Climate Action Incentive payment claimed by eligible Albertans will reflect fuel charge proceeds generated over a 15-month period. This consists of three months (January-March 2020) with a carbon price of$20, plus 12 months (April 2020-March 2021) with a carbon price of $30. For residents of Alberta, the proposed Climate Action Incentive payment amounts for 2020 are as follows: •$444 for a single adult or the first adult in a couple.
• $222 for the second adult in a couple. Single parents will receive this amount for their first child. •$111 for each child in the family (starting with the second child for single parents).

Less: Proceeds Returned ($million) Projected Total Climate Action Incentive Payments (in Respect of This Year) 205 1,220 1,610 1,995 Support for SMEs 15 100 130 165 Support for Municipalities, Universities, Schools, Colleges, Hospitals, Non-Profit Organizations, and Indigenous Communities 10 50 65 80 Total Net Fuel Charge Proceeds Returned 230 1,365 1,805 2,240 Projected Fuel Charge Proceeds Less Total Proceeds Returned 0 0 0 0 Notes: Due to rounding, totals may not add and numbers in the table may not match numbers in the text. Numbers over$5 million are rounded to the nearest $5 million. This table excludes the costs of administering the fuel charge in Alberta, and the costs of delivering Climate Action Incentive payments and relief to certain sectors, which will be borne by the Government of Canada. Estimates are illustrative and subject to adjustments as more information becomes available. ## Transparency and Annual Reporting As announced in October 2018, the Government of Canada will provide annual updates on the direct proceeds and disbursements realized from the federal carbon pollution pricing system in respect of each province and territory where it applies. Any actual variance between the proceeds originating in a given jurisdiction and the amount of proceeds returned to that jurisdiction would be addressed through changes in future payment amounts to that jurisdiction. This process will ensure that direct proceeds are fully returned to the jurisdiction of origin over time. ## Fuel Charge Rates for Alberta The following table presents fuel charge rates that will apply in Alberta. The rates will become effective as of January 2020, with future increases effective as of April of the year specified in the table. Fuel Charge Rates for Alberta Type Unit ($ per) January 2020 ($20/tonne) April 2020 ($30/tonne) April 2021 ($40/tonne) April 2022 ($50/tonne)
Aviation gasoline litre 0.0498 0.0747 0.0995 0.1244
Aviation turbo fuel litre 0.0516 0.0775 0.1033 0.1291
Butane litre 0.0356 0.0534 0.0712 0.0890
Ethane litre 0.0204 0.0306 0.0408 0.0509
Gas liquids litre 0.0333 0.0499 0.0666 0.0832
Gasoline litre 0.0442 0.0663 0.0884 0.1105
Heavy fuel oil litre 0.0637 0.0956 0.1275 0.1593
Kerosene litre 0.0516 0.0775 0.1033 0.1291
Light fuel oil litre 0.0537 0.0805 0.1073 0.1341
Methanol litre 0.0220 0.0329 0.0439 0.0549
Naphtha litre 0.0451 0.0676 0.0902 0.1127
Petroleum coke litre 0.0767 0.1151 0.1535 0.1919
Pentanes plus litre 0.0356 0.0534 0.0712 0.0890
Propane litre 0.0310 0.0464 0.0619 0.0774
Coke oven gas cubic metre 0.0140 0.0210 0.0280 0.0350
Marketable natural gas cubic metre 0.0391 0.0587 0.0783 0.0979
Non-marketable natural gas cubic metre 0.0517 0.0776 0.1034 0.1293
Still gas cubic metre 0.0540 0.0810 0.1080 0.1350
Coke tonne 63.59 95.39 127.19 158.99
High heat value coal tonne 45.03 67.55 90.07 112.58
Low heat value coal tonne 35.45 53.17 70.90 88.62
Combustible waste tonne 39.95 59.92 79.89 99.87

[1] The support for SMEs and for municipalities, universities, schools, colleges, hospitals, non-profit organizations, and Indigenous communities in the table below ("Projected Proceeds and Returns for Alberta, 2019-20 to 2022-23") does not add up to the total of \$610 million due to rounding.

[2] Individuals will indicate on their tax return whether they reside in a small community or rural area. Alberta has three CMAs: Calgary, Edmonton and Lethbridge.