Why Alberta's Carbon Tax Matters

Cause to celebrate.

Photographer: Mario Tama/Getty Images

Canada's biggest oil-producing province has announced an aggressive carbon tax. As world leaders gather in Paris this week to discuss how to combat climate change, they might want to ask: If a carbon tax can make it there, can it make it anywhere?

QuickTake The Cost of Carbon

Technically, Alberta has had a carbon tax since 2007, though one so low that its effect on emissions has been close to zero. The new tax starts at $20 a ton in 2017, increasing to $30 by 2018 and then rising with inflation. It will cover as much as 90 percent of the province's emissions, with the money going toward lower-carbon technology and infrastructure as well as household rebates. The tax is to be revenue-neutral.

The province also said that, by 2030, it will stop emitting carbon from coal-fired power plants, which currently provide more than half of Alberta's electricity. It pledged to get 30 percent of its power from renewable sources. And it will impose a cap on greenhouse-gas emissions from the oil sands.

Alberta is not the first Canadian province to address climate change. But it's by far the most significant: Its energy sector makes up a quarter of its economy (more than any U.S. state save Wyoming and Alaska).

The province's new approach is a product not of woolly-minded idealism, but hard economic reality. The controversy around Keystone XL demonstrated that the failure to address climate change can upset relations with trading partners. And the opportunities to benefit from new energy technologies are at least as great as the cost of disrupting traditional ways of doing business. Finally, change only gets harder the longer it's delayed.

Canada's experience shows that views on fighting climate change can evolve, and quickly. British Columbia introduced a similar carbon tax in 2008, while Quebec's 2012 cap-and-trade program is about to be joined by Ontario. A country that until recently was a climate pariah has become a model. Now, which state or nation wants to be the next Alberta?

To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net.