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Canada To Push Ahead With Carbon Tax Plans

by Mike Godfrey,, Washington

29 October 2018

Canada's federal Government has announced that it will impose a carbon price in Ontario, New Brunswick, Manitoba, and Saskatchewan in 2019.

The federal Government will push ahead with its plan to ensure that there is a price on carbon pollution across Canada and will implement a fuel charge in jurisdictions that do not have systems in place that meet the required federal standard.

A Pan-Canadian Framework on Clean Growth and Climate Change was agreed – with the exception of Manitoba and Saskatchewan – by the federal, provincial and territorial governments in December 2016. It stipulates that the federal Government will impose a carbon floor price in provinces that do not have their own pricing system in place from this year. The Greenhouse Gas Pollution Pricing Act to implement this agreement was passed in June 2018.

Alberta, British Columbia, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island, Quebec, and Yukon have either developed their own compliant pricing systems or chosen to adopt the federal option. Several provinces have however resisted the federal Government's proposals and challenged their constitutionality.

On October 23, the federal Government confirmed that federal fuel charge rates will apply in Ontario, New Brunswick, Manitoba, and Saskatchewan from April 2019. The carbon price will apply at a rate of CAD20 (USD15.28) per tonne of carbon dioxide equivalent in 2019, rising by CAD10 a year to reach CAD50 per tonne in 2022.

The federal carbon pricing system has two components: the fuel charge and an output-based pricing system (OBPS) for emissions-intensive trade-exposed industries. The OBPS will take effect on January 1, 2019.

The Government said that it is committed to returning direct proceeds from the federal pricing system to the province or territory of origin. Among the initiatives will be Climate Action Incentive payments to those in affected provinces. The Government will also announce plans to help SMEs deal with the additional costs associated with carbon pricing in early 2019.

In April 2018, the Saskatchewan Government launched a constitutional reference case in the provincial Court of Appeal to challenge the federal Government's ability to impose a carbon tax on the province. Ontario was signed up to the Framework but in July the new Government scrapped the province's cap-and-trade system and announced that it would support Saskatchewan in its court case. In August, Ontario launched its own constitutional reference case.

In August, the Manitoba Government said that it would implement an OBPS that would meet the federal administration's required minimum pricing level in 2019 but not after that point. However, earlier this month, the Manitoban Government said that it would no longer implement a carbon tax after the federal Government confirmed that it would impose its higher carbon tax on Manitoba after one year.

Federal Finance Minister Bill Morneau said: "The case is clear: Canada needs to cut greenhouse gas emissions that cause climate change, and the best way to do that is to put a price on carbon pollution. Pollution pricing encourages Canadians and businesses to innovate, invest in clean technologies, and take advantage of long-term growth opportunities. Our plan will cut pollution and grow the economy, for the benefit of all Canadians."

Saskatchewan Premier Scott Moe called the plans "a sham" and said that the province would continue to fight the tax. He argued that "the entire federal carbon tax scheme is unconstitutional" and that the federal Government has no constitutional right to impose a pricing system on the province "as one level of government cannot tax another level of government."

Ontario Premier Doug Ford said that the federal tax "will force our seniors to pay more for home heating in cold winters, make parents pay more to fill up their car when they drive their children to and from soccer practice, and force small business owners to think twice before hiring additional staff."

TAGS: court | environment | tax | small business | business | environmental tax | tax rates | carbon tax | Canada | tax reform | trade

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