The official repeal of carbon tax as of May 30 eliminates the original funding source for Alberta energy efficiency programs. However, by the new provincial government’s own election campaign calculations, there should still be about $630 million in the pot for the fiscal year 2019-20 and $570 million thereafter to support greenhouse gas (GHG) reducing initiatives.
Conservation advocates are making the case for an ongoing share of it, citing economic projections for a resulting $5.1 billion average annual contribution to the provincial GDP. They argue that Energy Efficiency Alberta — the provincial agency established just two years ago to spearhead energy conservation — is still in the very early stage of building public awareness and energy-saving momentum.
“Energy efficiency makes fiscal sense,” a coalition of 20 non-governmental environmental organizations wrote in a recent open letter to Alberta Premier Jason Kenney and the Ministers of Energy and Environment. “We urge you to implement meaningful energy efficiency policies and programs to ensure continuity for businesses, non-profits and Albertans.”
What’s certain for commercial and residential landlords is that the $1.517 per gigajoule (GJ) surcharge on natural gas no longer applies, at least until the federal government might impose a replacement levy. Lifting of this tax, and those attached to more than 20 other types of fuel, will leave only designated large emitters, producing more than 100,000 tonnes of carbon dioxide equivalent (CO2e) annually, to pay a per-tonne fee for output in excess of an incrementally declining threshold. That’s currently $30 per tonne, but the new United Conservative Party (UCP) government pledged to lower it to $20 during this spring’s election campaign.
Two incentive programs from the existing slate of offerings — subsidies for solar installations and free replacements of unduly energy-intensive household items — appear targeted for shutdown, while the status of product rebates and custom retrofit programs for the manufacturing, health care and post-secondary education sectors is still unknown. Taking questions in an online forum last month, Environment Minister Jason Nixon passed sentence on the former, but left the door open for the latter.
“If you’re asking if we’ll still be subsidizing solar projects or showerheads and light bulbs, the answer is no,” he said. “But we’re working with the department right now to understand the other parts of Energy Efficiency Alberta before we make a final decision.”
Carbon tax applied in period of low natural gas prices
The 29 months of carbon tax collection — pegged at $1.011/GJ for 2017 before increasing to $1.517 in 2018 — coincided with a period of low natural gas prices. Natural Resources Canada reports an average Alberta wholesale price of $4.18 per million British thermal units (MMBTU), equating to $4.43/GJ in the years from 2007 to 2016, while Alberta Utilities Commission data shows regulated rates rarely surpassed $3/GJ in the coldest months of 2017, 2018 and 2019 and more often remained below $2/GJ.
Although the carbon tax supplanted operational savings that owners/managers might otherwise have enjoyed from a falling commodity price, it didn’t push costs above levels of preceding years. Still, that’s little solace for rental housing landlords dealing with other aspects of Alberta’s prolonged economic downturn.
“The carbon levy has cost our members an average of 30 to 50 per cent more on natural gas billings since implementation,” advises Donna Monkhouse, executive director of the Alberta Residential Landlord Association (ARLA). “With high vacancies and large incentives (to attract renters) in the market, owner/operators were unable to pass any of this cost increase through to tenants. The carbon tax directly reduced their bottom line.”
Commercial real estate players are less definitive.
“NAIOP Calgary does not have a formal position on the provincial carbon tax or its repeal,” says Robert Homersham, president elect of the association geared to development, asset management and other disciplines related to office, industrial and mixed-use properties. “Amongst our landlord and tenant members there is likely not a consensus position that would guide our organization’s views.”
Looking at Ontario’s somewhat comparative experience — albeit with a lower carbon levy of about 3.3 cents per cubic metre, equating to $0.886/GJ — energy management specialists hypothesize that low natural gas prices effectively muted real estate industry discontent with the province’s short-lived cap-and-trade system, which a new provincial government dismantled in the summer of 2018.
“In Ontario, the impact that the price on carbon had on natural gas prices was almost irrelevant in the grand scheme of things. I don’t think anyone really noticed when it got added (in 2017) or really noticed when it was removed,” suggests Eric Chisholm, an engineer and principal/co-founder of Purpose Building Inc., specializing in the green building services.
Savings momentum builds over time
Industry experience with energy efficiency incentives differs more markedly in the two provinces. The Ontario government has recently cut funding and realigned administrative oversight of conservation and demand management (CDM) initiatives, but the legacy of more than a dozen years of programming remains. That’s reflected in a deep pool of resources like service providers and in-house energy managers, and in measurable achieved savings that have won industry confidence and buy-in.
In contrast, Alberta energy efficiency programs have had little time to capture public or capital planners’ attention. “Not all of our members were even aware of any rebates,” Monkhouse says.
“Generally, it can take six months to adequately engage customers and 12 to 18 months to transact due to most organizations’ budget and procurement cycles,” observes Andrew Pride, speaking from his experience as the former vice president, conservation, with the Ontario Power Authority and a key contributor to the design of Ontario’s CDM programs.
“It takes probably a year just for the market to start to understand what’s available, let alone react to it,” Chisholm concurs. “In the real estate realm, it’s not at all shocking to have a two- to four-year budget timeline for what seems like fairly simple projects.”
Energy Efficiency Alberta’s commercial program rollout was arguably a good match for that reality, beginning with product rebates and an emphasis on lighting to align with simpler upgrades and quicker paybacks. Geoff Bouckley, president of the Calgary section of the Illuminating Engineering Society and a lighting designer with SMP Engineering, cites examples of both commercial and municipal building operators factoring the rebates for lamps and sensors into their business cases for lighting retrofits and/or installing higher-performance products.
“I can tell you, for sure, when the program was introduced there was a tremendous amount of interest in it,” Bouckley reports. “I was involved in a number of projects in which our clients were able to secure some pretty nice rebates.”
Energy management specialists caution that, in scrutinizing Energy Efficiency Alberta’s achievements thus far, the Alberta government won’t yet see the best proof of energy-saving outcomes. Drawing from Ontario’s annual progress reports, first released in 2009, Chisholm tracks a steady upward trajectory.
“In 2017, we conserved 300 per cent of what we conserved in 2009,” he notes. “But in every single year, the cost to conserve energy was lower than the cost to produce it. Ontario’s conservation programs have saved money for end-users and saved money for provincial power grids. Without them, our high cost of electricity would be even higher.”
Staking a claim on TIER funds
Energy efficiency advocates urge the new Alberta government to consider the Ontario evidence as it contemplates allocation of revenue from its proposed Technology Innovation and Emissions Reduction (TIER) fund. As outlined during the recent election campaign, the TIER fund is envisioned as a replacement for the $30/tonne levy that the Carbon Competitiveness Incentive Regulation (CCIR) exacts from large emitters.
For now, the CCIR, instigated by the previous government, is still in place and is projected to collect more than $487 million this year. The TIER Fund is projected to garner an additional $142 million once it’s invoked, and about $570 million in 2020-21.
“The first $100 million in revenues and 50 per cent of remaining revenues paid into the TIER Fund will be used for new and cleaner Alberta-based technologies that reduce carbon emissions even further, including new and improved oil sands extraction technology and supporting research and investment in carbon capture and storage,” the UCP election platform states.
Groups like Efficiency Canada — a non-governmental organization promoting the dual economic and environmental benefits of energy and water conservation — argue Alberta could reap even more spinoff benefits investing in energy efficiency. That’s in line with findings in the recently released study, Energy Efficiency Employment in Canada, that the sector employs 436,000 workers in 51,000 businesses nationwide.
“We know energy efficiency workers help families save money, enable small businesses to create jobs and even improve learning environments at schools,” adds Corey Diamond, Efficiency Canada’s executive director.
Alberta landlords and tenants could likewise see benefits.
“Our members are always in favour of well-thought-out and balanced programs that make it economically feasible to improve energy efficiency and reduce consumption of resources in our buildings,” Monkhouse says. “Incentive or rebate programs should be easy to access, fairly distributed and financially viable.”
Barbara Carss is editor-in-chief of Canadian Property Management.
