Quebec will introduce Canada's first carbon tax this fall, forcing energy producers, distributors and refiners to pay about $200-million a year in taxes as one part of an ambitious plan to fight global warming.
Premier Jean Charest's cabinet approved the plan Wednesday. As of Oct. 1, all energy companies will be required to pay a special tax based on the greenhouse gas emissions they produce. The money will fund the province's efforts to meet emission targets set for 2012 in the Kyoto Protocol calling for a 6-per-cent reduction below 1990 levels.
Quebec is the only province to seriously consider a tax on carbon emissions. Other provincial governments have explored caps on emissions, but not additional taxes.
About 50 energy companies will be required to pay the new tax, including Ultramar Ltd., Petro-Canada and Shell Canada Ltd., which operate refineries in the province as well as distributors Imperial Oil Ltd., Irving Oil Ltd. and independent retailers.
Oil companies will be required to pay 0.8 cents for each litre of gasoline distributed in Quebec and 0.938 cents for each litre of diesel fuel. The tax is expected to generate $69-million a year from gasoline sales, $36-million from diesel fuel and $43-million from heating oil.
Natural gas producers will be required to pay approximately $39-million. Hydro-Québec, which operates a power-generating plant in Tracy, just east of Montreal will pay $4.5-million into the province's Green Fund.
The government has no guarantees that the oil companies won't pass the carbon tax along to consumers.
Natural Resources Minister Claude Béchard called on the oil companies to be good corporate citizens and do their share to protect the environment by absorbing the cost of the new tax.
"We call on their good faith and social responsibility," Mr. Béchard said Wednesday. "Everybody has to do their share. Each citizen wants to do their share and I think oil companies must also do their share."
The province's Green Plan was announced a year ago in June, 2006, and has been applauded by environmentalists as a model for other jurisdictions to follow.
"Because of the lack of production in the province, refineries will pass the costs on distributors, who will pass them on to consumers," said Andrew Neff, a Washington-based analyst at consultancy Global Insight. "But you can't say you're opposed to global warming, and then when the time comes, refuse to pay something like a carbon tax. To attempt to address climate change, the costs have to be passed on to the consumer at some point."
The plan aims at reducing greenhouse gases by 10 million tonnes that would set Quebec's level to 80.2 million tonnes a year by 2012. The province relies heavily on clean hydroelectricity for much of its energy needs, making it the province that currently produces the lowest level of greenhouse gases per capita in the country.
By imposing a carbon tax on oil companies, the government says it was enforcing the principle that polluters should pay for the environmental cleanup.
The Quebec Energy Board has spent the last year determining a sliding scale, where the more a company contributes to producing greenhouse gases the more it will be required to pay into the Green Fund.
When the plan was originally introduced, oil and gas companies were reluctant to absorb the cost, suggesting that they would have to pass the cost on to consumers.
Wednesday, Mr. Béchard said the government has produced a transparent mechanism that responds to the oil and gas companies' demands.
"I am telling you that I am convinced we met their demands for a transparent and equitable mechanism," Mr. Béchard said.
Rhéal Séguin