Canadian Provinces Fighting Back Against Trudeau’s Carbon Tax

Saskatchewan was first to oppose Canada’s federal carbon tax plan. Recently, Ontario joined the western province in opposition. The provinces are challenging the federal government’s authority to impose a carbon tax on provinces that do not comply with Canada’s climate change plan. To meet Canada’s international commitments, the Canadian government threatened to institute a carbon tax in any province that does not implement an effective form of carbon pricing to reduce its emissions. Provinces and territories have been given the option to come up with their own carbon tax or cap-and-trade system. If they fail to do so, the Canadian government will impose its own plan.

The Canadian government announced last year it was giving the provinces and territories until the beginning of September to outline how they are implementing carbon pricing systems that meet the federal standard. Those standards originally required a carbon price of $10 a metric ton be implemented this year, increasing to $20 on January 1, 2019 and to $50 in 2022.​ Trudeau’s government, however, has pushed back the imposition of the tax by one year. It is set to, take effect in January.

So far, British Columbia and Alberta have implemented carbon taxes and Quebec and Ontario have implemented a cap-and-trade system, in which the province sets a limit on emissions and lets companies buy and sell credits. Newly-elected Ontario premier Doug Ford, however, intends to end the province’s cap-and-trade program.

The impact of carbon pricing on the Canadian provinces is not expected to be uniform. Alberta, Saskatchewan, and Nova Scotia are expected to see a greater impact from a carbon tax because most of their electricity is produced by coal-fired plants. British Columbia, Manitoba, and Quebec would receive a lower impact from a carbon pricing plan because electricity in these provinces is generated mostly from large-scale hydroelectric facilities.

Canada emits more greenhouse gas per person than almost any other country because of its geography and its energy-intensive oil and gas industry. Canada’s cold climate requires energy to heat homes and its vast expanses need fuel for cars and trucks. Its oil and gas industry, centered in Western Canada, is a key part of Canada’s economy.

Ontario Cancels Renewable Projects

Ontario’s new Progressive Conservative government is cancelling 758 renewable energy contracts due to increasing electricity bills. Ontario’s government believes the cancelled renewable projects will reduce electricity bills, saving ratepayers $790 million. The cancellations are part of a commitment by the new government to reduce rates by 12 percent for families, farmers, and small businesses. One of the contracts is for a massive wind farm that area residents voted overwhelmingly against but was imposed anyway by the former government. The wind farm is located in Dutton Dunwich, Elgin County, and was awarded to a Chicago-based company in 2016.

Cost of a Carbon Tax to Saskatchewan’s Economy

A study from the University of Regina’s Institute for Energy, Environment, and Sustainable Communities predicts that Saskatchewan’s GDP would be reduced by $16 billion between 2019 and 2030 due to a $50 per metric ton carbon tax. The annual household cost is projected to be around $1,000.

Due to the impact of a carbon tax, the province has asked the Saskatchewan Court of Appeal to adjudicate on the constitutionality of the federal government’s carbon tax legislation. Saskatchewan believes The Greenhouse Gas Pollution Pricing Act goes against the constitution because it imposes a tax on some jurisdictions and not others based on what each province has chosen to do in its own jurisdiction. That is, it fails to respect the sovereignty and autonomy of the provinces with respect to matters under their jurisdiction. In other words the issue is whether the Canadian government has the authority to impose a tax on one province but not others because it does not like the province’s climate change plan. Saskatchewan recognizes the Canadian government’s ability to add a new tax when all jurisdictions are treated equally.

Impact of Canada’s Climate Plan

An Environment and Climate Change Canada analysis says the federal government’s carbon-pricing plan could eliminate up to 90 million metric tons of carbon dioxide by 2022, depending on what the provinces do. That is equivalent to taking every car off the road in Canada or closing 20 to 23 coal plants in a year. The study found that the carbon price would cut about $2 billion from the Canadian economy, or 0.1 percent of GDP. The parliamentary budget office, however, estimated the GDP impact to be closer to $10 billion, but it did not take into account what provinces will do with the revenues, noting cuts to corporate and personal income taxes could lower the $10 billion figure.

However, even with carbon pricing and other measures to cut emissions, including eliminating coal-fired power plants, cutting methane emissions from the oil industry and making cleaner fuels, Canada is expected to be 90 million metric tons shy of its international emissions targets set under the Paris climate agreement.

Conclusion

Canada’s provinces are not all equal in the impact of a carbon pricing scheme that the Canadian government would impose upon them if they do not implement their own strategy in complying with Canada’s climate action plan. Saskatchewan believes this to be unconstitutional under Canadian law and is fighting the issue in court. Ontario recently came to Saskatchewan’s aide in opposing the carbon tax. Even with the tax, Canada is not expected to meet its commitment under the Paris Agreement.

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