Liberals release carbon-tax plan, brace for legal battle with Saskatchewan
OTTAWA — The Globe and Mail
Published Thursday, May 18, 2017 12:37PM EDT
Last updated Thursday, May 18, 2017 12:43PM EDT
Preparing for a promised legal battle with Saskatchewan, federal Environment Minister Catherine McKenna says she’s confident Ottawa has the authority to impose a carbon price across the country, even when that levy would apply to provincially owned utilities.
The minister on Thursday released a technical paper on Ottawa’s proposed carbon tax, which will apply in provinces where premiers refused to adopt their own plan, or add to provincial levies where provincial governments adopt carbon-pricing programs that do not meet minimum federal standards.
In an interview, Ms. McKenna said the federal government is on “very strong ground” constitutionally, despite Saskatchewan Premier Brad Wall’s argument that its carbon-pricing plan would intrude on provincial jurisdiction, especially as it relates to government-owned SaskPower, which relies heavily on coal for its electricity generation.
“If they are imposing this tax, our response is ‘see you in court,’” a spokeswoman for Mr. Wall said in an e-mail. Saskatchewan is the only province that refuses to consider a carbon price – whether a tax or cap-and-trade approach – but several others have not committed to meeting Ottawa’s minimum pricing standards.
Ms. McKenna said the federal government has clear authority to regulate on cross-border environmental matters in order to reduce pollution. She said all revenue would be returned to the province in which it is collected, and added the government is considering providing direct rebates to households and business to offset the impact of rising energy costs.
“This is not a tax; this is a levy and the revenue is going back into the province,” the federal minister said. “As the federal government, we need to be taking action to protect the environment and it is well within our jurisdiction to do so. But we hope Saskatchewan will design a system that works best for them.”
Under the federal plan, either Ottawa or provincial governments that have no pricing system would introduce the carbon levy next year, beginning at $10 per tonne and rising to $50 per tonne by 2022. A $50 per tonne carbon price would add 11.6-cents per litre of gasoline, and would also hit natural gas, and electricity generated from coal or natural gas.
Provinces can also opt to adopt a cap-and-trade plan, which keeps prices lower because companies can purchase cheaper “allowances” from California. Alberta and British Columbia have carbon taxes, while Ontario and Quebec have cap-and-trade systems that require fuel distribution companies to purchase permits, the cost of which get passed along in the price of gasoline and home heating fuel.
The paper released Tuesday proposes a hybrid carbon levy, similar to one adopted in Alberta.
Fuel distributors would have to collect the tax from consumers. Farmers would be exempt from paying the tax on fuel used in farm operations, while Ottawa is still considering how to cover fuel used on interprovincial flights within Canada. International flights are covered by an industry-wide cap-and-trade plan.
In order to protect competitiveness, Ottawa would only tax a small portion of emissions from large industrial plants that consume a lot of fossil fuels and face global competition. As in Alberta, the amount of the levy would depend on how emissions-intensive a company is compared to others in its sector, with more-efficient operators getting a bigger break.
Conservative politicians have attacked the Liberal carbon-price plan as an unwelcome burden that will make the country less competitive, particularly as President Donald Trump and the Republican-led Congress promise deregulation and tax cuts in the United States.
Ms. McKenna said carbon pricing is the most economically efficient way to reduce emissions that cause climate change, a view that has been endorsed by some prominent business leaders, including executives from Canada’s biggest oil sands producers. She noted many major economies – including the European Union, Mexico, China and California – are moving forward on carbon levies.
“Everyone realizes you want to put a price on pollution because pollution isn’t free,” Ms. McKenna said. “We know it’s causing droughts, fires and floods, and that our Arctic is melting in our country, and across the world. And also pollution has a very significant impacts on our health.
“And if you’re going to have a serious climate plan, you need to put prices on pollution because it also creates the incentive for companies to innovate and provide clean solutions, and provides certainty to business that we’re serious about moving to a cleaner economy.”