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Carbon levy backstop receives Royal Assent but challenges remain

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The Federal Carbon Pricing Backstop is now law in Canada. On June 21, 2018, Royal Assent was given to the Federal Budget Bill (C-74).  An important element of the budget legislation was the establishment of a carbon pollution pricing “backstop” which is part of the Pan-Canadian Framework on Clean Growth and Climate Change. Provinces were to have their plans revealed to the federal government by September.
 
For its part, the federal government has maintained that the backstop would be applied to all provincial/territorial jurisdictions that do not have a carbon pricing system in place that meets the carbon pricing benchmark by 2018.
 
The federal government was hoping that the backstop would only be needed in a very limited number of provinces or territories with most jurisdictions designing models that both fit their individual circumstance while meeting the pricing benchmarks outlined by the federal government.
 
In reality, some provinces are either opposing a carbon tax altogether or are designing models that will not upset consumers by increasing the tax burden but may not meet the targets set out by the federal government.
 
Québec, Nova Scotia, Manitoba and BC have either a cap and trade (Québec and Nova Scotia) or an explicit price system (BC and Manitoba). Alberta has a hybrid system comprised of a carbon levy on fuels and a performance-based emissions trading system.
 
As noted, other provinces are working on models that may not meet the federal government’s expectations.
 
For example, New Brunswick has an emissions reduction plan whereby a 2.23 cents per litre carbon tax is extracted from the existing 15.5 cents per litre gas tax. In Prince Edward Island, Premier Wade MacLaughlin said that it intends to keep its end of the bargain regarding the federal government’s plan by lowering the price of renewable energy.
 
The new government in Ontario has scrapped the cap and trade system brought in by the previous Liberal government and has vowed to oppose any carbon tax. In Saskatchewan, the government has long held that it is opposed to participating in the federal pricing scheme and is going to court to challenge the federal government’s right to impose a carbon tax. On July 19, Ontario Premier Doug Ford announced that Ontario will intervene in support of Saskatchewan’s court action.
 
With plenty of details yet to be worked out in some cases, below is the status of each province and territory.
  • BC: Carbon tax
  • Alberta: Hybrid system comprised of a carbon levy on fuels and performance-based emissions trading system
  • Saskatchewan: In court opposing Federal Backstop
  • Manitoba: Carbon tax that will not meet federal target of $50/tonne
  • Ontario: Will join Saskatchewan in court opposing Federal Backstop
  • Québec: Cap and trade
  • New Brunswick: Levy extracted from existing gas tax
  • Prince Edward Island: Will lower the price of renewable energy
  • Nova Scotia: Internal cap and trade
  • NL: No plan yet
  • Nunavut: No plan, wants to be excluded from Backstop levy (May 24, 2108)
  • NWT: Carbon tax along federal guidelines but with rebates at purchase for home heating
  • Yukon: Carbon tax along federal guidelines but with rebates to individuals and businesses
As for the carbon levy component of the backstop itself, the following tables from Environment and Climate Change Canada's Technical Paper on the Federal Carbon Pricing Backstop shows a comparison between the fuels for the price in 2018 and the rising levy in 2022.
 
 
 

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