CPA Public Affairs
November 2018

Carbon tax coming in 2019 - reactions across the provinces

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On October 23, Prime Minister Trudeau formally announced that the Federal Pollution Pricing System will come into force in 2019.
According to the federal government, putting a price on pollution, otherwise known as a carbon tax, is a central pillar of its Pan-Canadian Framework on Clean Growth and Climate Change.
The framework, as described by the government, has been, “developed with the provinces and territories and in consultation with Indigenous peoples – to meet our emissions reduction targets, grow the economy, and build resilience to a changing climate.” Included in that plan is a pan-Canadian approach to pricing carbon revealed by the prime minister last month.
The government has maintained that it believes a carbon tax creates incentives for individuals, households and businesses to build on investments they have already made to lower their emissions. And according to the government, provinces and territories with their own carbon pollution pricing systems that comply with federal benchmarks can use the proceeds to support their residents, grow the economy and protect the environment.
However, in Saskatchewan, Manitoba, Ontario and New Brunswick where there are no federally approved plans in place, the federal carbon tax “backstop” will apply based on fuel charge proceeds in each province.
It is estimated that at $20-per-tonne, in 2019 the carbon tax will result in a cost increase of 4.42 cents a litre for gasoline, 3.91 cents per cubic metre for natural gas and 3.10 cents a litre for propane in each of the non-compliant provinces.
The federal carbon tax will be offset through Climate Action Incentive payments, about 90 per cent of which the government says will be returned to residents in these provinces. The incentive payments will be claimed in tax returns. Individuals and families will receive the payment itself as part of the tax assessment. The amounts of the payments will vary based on fuel charges in each of the affected provinces and family size. Residents of small and rural communities will receive a 10 per cent supplement.
Farmers get relief from the fuel charge for fuels used in tractors, trucks and other farm machinery. For fishers, relief of the fuel charge for gasoline and light fuel oil (e.g., diesel) will be that which is delivered to a fisher, if the fuel is for use exclusively in an eligible fishing vessel and all or substantially all of the fuel is for use in the course of eligible fishing activities.
Partial relief of the fuel charge (i.e., 80 per cent) will be applied to natural gas and propane that is exclusively for use in the operation of a commercial greenhouse for growing plants, including vegetables, fruits, bedding plants, cut flowers, ornamental plants, tree seedlings and medicinal plants. In order for relief to be available, all or substantially all of the greenhouse building must be used for the growing of plants.
Exemptions will also be extended, with conditions, to users of aviation fuels in the territories and power plants that generate electricity for remote communities.
Carbon tax reactions across the provinces
In 2008, British Columbia implemented North America’s first broad-based carbon tax as part of their Greenhouse Gas Reduction Act. Between 2007 and 2015, provincial net emissions declined by 4.7 per cent. The B.C. carbon tax applies to the purchase and use of fossil fuels and covers approximately 70 per cent of provincial greenhouse gas emissions.
As of April 1, 2018, B.C.'s carbon tax rate is $35 per tonne of CO2 equivalent emissions. The tax rate will increase each year by $5 per tonne until it reaches $50 per tonne in 2021. Revenues generated from the carbon tax are used to provide carbon tax relief, maintain industrial competitiveness and encourage new green initiatives.
To improve affordability, the government has increased the Climate Action Tax Credit to $135 per adult and $40 per child for 2018 for lower income individuals and families – approximately 1.3 million British Columbians benefit from this credit. The B.C. Government also offers several carbon tax incentive programs for individuals, businesses and local governments such as the Clean Growth Incentive program and the Clean Electric Vehicle program.
The NDP-Green Party minority recently replaced the Liberal's Greenhouse Gas Reduction Act with their own Climate Change Accountability Act (CCAA) with new targets to reach reduction levels by 2030. The Act re-establishes the provinces’ GHG reduction targets, and broadens the regulatory authority of the Minister of the Environment to set industry specific targets and other amendments to meet emissions targets.
With the introduction of the CCAA, the government scrapped the previous 2020 GHG emissions target, calling it unattainable. The new Act sets objectives of a 40 per cent reduction in GHG emissions by 2030 (from a 2007 benchmark) and a 60 per cent reduction by 2040 in addition to bi-annual climate change reporting.
The CCAA also provides greater authority for the Environment Minister to implement industry-specific GHG reduction targets for 2030, with recommendations including a 30 per cent reduction in each of the transportation and industrial sectors. The B.C. Government is also considering expanding their carbon tax to apply to all GHG sources, developing a low carbon transportation strategy to emit 30 per cent less GHGs by 2030, and introducing measures to reduce fugitive and vented methane emissions.
The Alberta government was one of the first, along with B.C., to institute a carbon levy. The carbon levy is applied on all fossil fuels – diesel, gasoline, natural gas and propane at the filling station and on heating bills. Carbon prices started at $20/tonne and raised to $30/tonne (post January 2018). The funds collected from the carbon levy invest in Energy Efficient Alberta that offers Albertans the opportunity to change household lightbulbs to lower energy versions and showerheads and faucets to low flow models as well as rebates for lower income Albertans and various clean/green energy projects.
In August, in response to the Federal Court of Appeal overturning the approval of the Trans-Mountain pipeline, Premier Notley backed Alberta out of the Pan-Canadian Framework on Climate Change. She stated the province will wait to determine their position when construction on the pipeline gets started; Alberta will still keep the existing carbon tax but will not increase it each year to meet the Federal schedule.
Saskatchewan is staunchly opposed to carbon pricing in the province with Premier Scott Moe calling the federal carbon pricing program a “national energy program 2.0”. Premier Moe has challenged Ottawa's constitutional right to impose a carbon tax in the Saskatchewan Provincial Court of Appeals – the case is based on the natural resource rights of the provinces and the ability under federal taxation law to impose carbon taxing.
In December 2017, the Saskatchewan Government introduced the Prairie Resilience: A Made-in-Saskatchewan Climate Change Strategy that aims to reduce power generation emissions by 40 per cent by 2030 and methane emissions associated with oil and gas production by 40 to 45 per cent in 2030. Under this plan, SaskPower will produce 50 per cent of its power through renewable sources by 2030. The plan adopts the 2015 National Building Codes to achieve building efficiencies and will develop sections for agriculture and freight transport to improve delivery times and reduce fuel use over 2018.
Saskatchewan is the only province that does not have a carbon tax or levy in their climate plan. The Prairie Resilience climate strategy does include a performance standard for large emitters who will pay into a technology fund and purchase carbon offsets and best-performance credits – an approach the government states is a specific market-driven approach. This will be included in a bill to be introduced this session, The Management and Reduction of Greenhouse Gases Amendment.
Premier Moe calls the Federal carbon tax a “blatant vote buying scheme” and will continue to challenge the ability of the federal government to institute this tax.
Manitoba had a carbon tax in their Climate and Green Plan that used to include a carbon tax at $25/tonne. Unlike the carbon pricing programs in Alberta, B.C. and Ontario at the time, Manitoba’s plan included several exemptions for economically affected sectors such as agriculture, which is a primary industry in the province. Following Saskatchewan’s court challenge, Premier Pallister recently announced that the carbon tax segment of the plan would be revoked and Manitoba would join the provinces without carbon pricing.
The federal carbon tax will be applied in the province; Premier Pallister is considering joining the Saskatchewan court challenge, at the very least, monitoring it closely. By revoking Manitoba’s carbon tax, all sectors exempted in the Climate and Green Plan such as agriculture, mining, and forestry will now have the tax applied on the fuels they use daily. Premier Pallister has publicly asked the federal government to provide an exemption in a release three days after revoking his carbon tax, with no answer to that plea as of yet.
The PC government of Ontario has taken several actions through new legislation to reform policies and programs since its election in June 2018. The three priorities are to reduce the burden on Ontarians by making life more affordable, increase Ontario’s competitiveness through opening the province for business and restoring balance between environmental protection and economic development.
As the Ontario government takes steps through proposed legislation to cancel the cap and trade program, Premier Ford reacted by saying, “It’s just another Trudeau tax grab, punishing families and small businesses,” and that the federal government “should be ready for a fight on the carbon tax.”
Minister Rod Philips called the liberal move, “a cynical play on the eve of an (federal) election,” and questioned the timing of federal carbon rebate cheques expected shortly before the 2019 Federal Election.
The Ontario government’s position is to fight any form of carbon taxation system on Ontario, referring to the liberals’ carbon tax approach as ‘dogmatic’ and punishes working everyday Ontario families. Minister Philips will be meeting with provincial environment ministers and Canadian Environment Minister McKenna in Ottawa on November 24, 2018.
The details of Ontario’s new provincial Climate Change plan are expected to be released in November and the Ministry continues to seek public comments and suggestions at
Quebec's 2013-2020 Climate Change Action Plan (French only), whose budget is derived from the Green Fund, is Québec’s main tool for fighting climate change. The Plan includes 30 priorities and more than 150 actions led by 14 Government of Québec ministries and other bodies. 
Through the Green Fund, whose revenue comes mainly from the carbon market, the government supports companies, municipalities and private citizens in transitioning to a low carbon world. Up to now, more than 15 programs and a variety of initiatives have been launched to address the following challenges: 
  • Reduce fossil fuel consumption and improve the energy efficiency of buildings, industrial processes and vehicle fleets
  • Provide greater support for the development of mass and active transit
  • Accelerate the electrification of transport and the creation of new companies in this field
  • Broaden the use of renewable energy sources in all activity sectors
  • Encourage research and development in the field of clean technology
  • Have a proactive approach with respect to climate change adaptation.
For the Atlantic provinces, Prime Minister Trudeau accepted climate change plans from Nova Scotia and Newfoundland and Labrador but is imposing federal pricing to New Brunswick. Prince Edward Island will work with a hybrid plan.
The province of Nova Scotia was successful in convincing the federal government that their Cap and trade system meets federal requirements. The plan will keep gasoline increases to only one cent as well as keep electricity increase to a strict minimum.
New Brunswick will be received a federal-imposed carbon tax after they failed to comply to the minimum required. The province will see an increase of 4.42 cent per litre tax on gasoline, a 5.37 cent on oil, 3.91 cent per cubic metre on natural gas and a 3.10 cent per litre on propane.
Prince Edward Island will be implementing a hybrid system that consist of the federal system on the industrial polluters but developing their own system on fuel pricing. Home heating fuel is exempted but there will be a four cent per litre tax on gasoline and diesel. The provincial government is also considering offsetting the price of fuel by adjusting their plan so that its’ citizens are not affected by the new carbon tax on fuel.
The Made-in-Newfoundland and Labrador Approach to Carbon Pricing excludes agriculture, fishing, forestry, offshore and mineral exploration as well as off-gassing in the oil and gas industries.
The initial rate will be $20 per tonne for large industry who emit more than 25,000 tonnes. Companies will choose how their emissions are measured by either opting for a reduction target based on their own historical data beginning at 6 per cent less than 2016 and 2017 pollution levels or use a sector benchmark. For the consumers, heating oil is completely exempted and the province is replacing the 4 cent per litre temporary gas tax and replacing it with a 4.42 cent per litre tax.

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