Alberta non-profit 'quite appalled' that federal government redirected carbon tax proceeds 

A non-profit society that advocates for solar energy in Alberta is questioning why a promised chunk of federal carbon tax revenue hasn't flowed to municipalities, schools, hospitals and non-profits in Alberta. 

After Alberta repealed its own carbon tax in 2019, Ottawa announced its intent to start applying the federal charge on fossil fuels like gasoline and natural gas in 2020. 

In a news release at the time, the federal government said proceeds from the fuel charge would be returned — mostly directly to individuals, but also "to support other sectors, including small and medium-sized businesses, schools, hospitals, non-profits and Indigenous communities in the province."

A background document said an estimated $610 million would go to these groups in Alberta over four fiscal years.

Ottawa reiterated the formula in a December 2020 document, including Alberta in the list of provinces that would see 10 per cent of carbon tax funds used to support "small businesses, schools, universities, municipalities and Indigenous groups." (Provincial governments with their own carbon pricing programs, like B.C., receive all the proceeds back.)

According to Solar Alberta executive director Heather MacKenzie, many municipalities, schools and non-profits were anticipating access to that funding stream.

In a 2020 report to Edmonton public school trustees, for example, administrators said the school board's infrastructure department planned to "investigate any funds made available to the division" through the Climate Action Incentive Fund (CAIF).

But the money never came, MacKenzie said.

"I'm actually quite appalled at the lack of transparency," she told CBC News.

MacKenzie said Environment and Climate Change Canada told the non-profit in a meeting this spring that, as per the 2022 federal budget, that portion of the carbon tax proceeds would instead be distributed to Indigenous groups, farmers and emission-intensive trade-exposed businesses.

"New programming to deliver this funding for recent years will be announced by the minister of finance in due course," an ECCC spokesperson told CBC News in an email this week.

The budget says small and medium-sized businesses in jurisdictions that don't meet federal carbon policy requirements will receive an estimated $1.5 billion in fuel charge proceeds collected between 2020-21 and 2022-23. As well, roughly $120 million of outstanding carbon tax proceeds from 2019-20 would be returned through the same program. 

MacKenzie said Solar Alberta supports distributing funds to Indigenous communities but is concerned that the carbon tax revenue is being redirected from energy efficiency projects in hospitals and schools to high-emitting businesses.

The ECCC spokesperson said municipalities, universities, schools and hospitals may apply for the Low Carbon Economy Fund, which the federal budget earmarked $2.2 billion for over seven years.

Other concerned groups

Solar Alberta isn't the only organization frustrated about the distribution of this chunk of federal carbon tax proceeds.

Earlier this month, delegates at the Canadian Chamber of Commerce's annual general meeting overwhelmingly supported a resolution calling on the federal government to return remaining carbon tax proceeds and allow businesses to easily access them.

The federal price on carbon started at $20 per tonne of emissions in 2019, increasing at $10 per tonne each year to reach $50 per tonne in 2022. Starting next year, the price will increase by $15 per tonne each year, reaching $170 by 2030.

Prabha Ramaswamy, CEO of the Saskatchewan Chamber of Commerce, said the rising carbon tax has burdened businesses, leaving them less able to invest in emission-reductions projects.

She is also concerned that the funding is now only for emission-intensive trade-exposed businesses — those that pay a lot of carbon tax and compete with businesses in jurisdictions without carbon pricing.

"Fewer of our businesses are actually going to be eligible for this money," Ramaswamy said.

Steven Woodhead, senior director of communications for the Federation of Canadian Municipalities, said the FCM also recently urged the federal government to provide greater clarity to municipalities about the outcome of CAIF funding. 

Report finds some money not spent

A report this year from the Office of the Auditor General of Canada found that ECCC had not delivered all of the allocated funds for the CAIF program because of "delivery challenges, such as low program uptake due to the pandemic, and failed partnerships."

The report also said Indigenous groups and small and medium-sized businesses remained disproportionately affected by carbon pricing.

Scott MacDougall, a senior adviser with the clean energy non-profit Pembina Institute, said he wasn't surprised to learn that the federal government is focusing more on Indigenous groups and small businesses because they were mentioned in the auditor general's report.

He said while Canada's carbon tax system is admired as an elegant economic solution to reducing carbon emissions, the government could do a better job communicating how the tax revenue is distributed.

"I think there's an appropriate level of questioning and maybe frustration that's due around that 10 per cent," he said.