What The New Carbon Levy Will Mean For Construction
On January 1, 2017 the carbon levy will go into effect across the province putting a price on carbon output initially at $20 per tonne (approximately 4.5 cents per litre of for gasoline and 5.4 cents a litre for diesel) eventually scheduled to rise to $30 by 2018 (an additional 2.2 cents per litre of for gasoline and 2.7 cents a litre for diesel) with the new Canadian mandate set to rise to $50 per tonne by 2022.
The Construction industry might be overly punished by this by paying the tax for all vehicle emissions, local supply chains may become more expensive and consultants may be needed to help deal with finding cost savings across the market.
Costs of replacement vehicles to meet new emission standards could be in question. Another cost may be the construction impact on renewables due to the capital costs of generating equipment.
Virtually every material will see an increase in price. It is reasonable to assume that, depending on the competitiveness of markets, each layer of the supply chain will attempt to pass these higher costs and possibly a mark-up, to their customers.
Alberta Infrastructure has confirmed that it will not absorb the cost of the levy on projects where prices were bid prior to the imposition of the tax. Unlike a tariff, the carbon levy will instead be treated as a general tax increase, for example, similar to a change in corporate tax rates. As well, Alberta does not have the authority to levy tariffs on goods imported from outside the province. Contractors should include an estimated cost increase for 2017 projects that they are bidding now.
Locations in Northern Alberta that are remote will not receive special consideration. As the cost of the tax will be born the same regardless of geography.
Alberta’s move away from carbon-based fuels to renewable energy, and to greater energy efficiency, creates market opportunities for Alberta’s construction industry.
The Alberta government recently announced a new Renewable Electricity Program which will add 5,000 megawatts of renewable electricity capacity by 2030 using a competitive process. The Government predicts that successful projects will be privately funded and will result in new investment of at least $10.5 billion into the Alberta economy by 2030, with at least 7,200 jobs created for Albertans.
The Alberta Government is forecasting the carbon levy to raise approximately $10 billion in its first 5 years of implementation staring in 2017. Approximately one-third of the forecast revenue, $3.4 billion, is expected to be spent on helping households, businesses and communities adjust to the carbon tax.
It is expected that many municipal governments across the country will attempt to introduce regulation and legislation on carbon neutrality. Should Alberta municipalities follow suit, additional opportunities may arise.