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Environment Minister Catherine McKenna insists Canada is on pace to meet its emissions target.

Sean Kilpatrick/The Canadian Press

Major business groups are warning that Ottawa’s plans to impose additional carbon costs on industry will hurt the country’s economy and drive up consumer energy costs, even as the Liberals face criticism that they are not meeting their international commitments to confront climate change.

As part of their effort to reduce Canada’s greenhouse gas (GHG) emissions, the Liberals have released plans to adopt a Clean Fuel Standard (CFS), which would go into effect in 2022 and require fuel suppliers to reduce the carbon content of their products by as much as 15 per cent by 2030.

Industry leaders say that the CFS − which will be layered on top of federal and provincial carbon levies − will undermine the competitiveness of manufacturers and other industries and force high-carbon production to move to jurisdictions that have virtually no climate-change regulations.

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“An uncompetitive business environment will drive investment out of the country,” the Canadian Manufacturers & Exporters (CME) association said in a submission to Environment Canada this week. “The result: a loss of manufacturing jobs, a weaker economy and/or a net increase in global GHG emissions.”

With a federal election campaign due to kick off next month, the Liberals are defending their climate-change policies against those who say the government is doing too much. Conservative Party MPs − backed by premiers including Ontario’s Doug Ford − have been arguing that Ottawa is imposing too great a burden on households and businesses with its carbon tax and other regulatory measures.

However, NDP and Green Party MPs say Canada is not on track to meet its commitment to reduce GHGs by 30 per cent from 2005 levels by 2030, and that the country needs to set and meet even more strenuous targets.

Environment Minister Catherine McKenna insists Canada is on pace to meet its target. While her department has identified a 79-megatonne shortfall in its forecast of emission reductions by 2030, the minister says major investments in public transit and low-carbon technology were not included in that forecast and that other measures are being developed.

Environment and Climate Change Canada says the Clean Fuel Standard emissions reductions would be equivalent to removing seven million cars from the road and is an important element in the country’s international commitment. Environment Canada expects the CFS to cut emissions by 30 megatonnes over the next decade.

CME president Dennis Darby said his members have largely accepted the federal carbon tax, which will climb to $50 a tonne by 2022 in the five provinces − Ontario, Alberta, Saskatchewan, Manitoba and New Brunswick − that do not have their own carbon tax or do not meet federal standards. The carbon tax has two elements: a fuel charge for consumers who get income-tax rebates to lessen the burden; and an Output Based Pricing System (OBPS) for industry that effectively levies the tax on a small portion − ranging from 5 per cent to 20 per cent − of its emissions.

Business lobby groups say their members are worried about possible post-2022 increases in the federal levy as well as the imposition of additional cost burdens such as the CFS. Ms. McKenna said that, if re-elected, the Liberal government would consult with provinces, territories and other interest group to determine whether the carbon tax would increase from $50 a tonne after 2022.

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“Industry is going to have to live with the OBPS − it’s the law and people will adjust,” Mr. Darby said in an interview Thursday. “The Clean Fuel Standard for us is another headwind for manufacturers in Canada to be competitive. I don’t think it strikes the right balance. This is an additional tax that should be reconsidered.”

He urged Ottawa to exempt manufacturers from the CFS, at least until competitors in the United States and elsewhere face similar rules. The regulations will require fuel providers to lower the carbon intensity of their product by using a number of different options including increasing the use of renewable sources such as biofuels.

The Canadian Chamber of Commerce and the Canadian Association of Petroleum Producers (CAPP) also made submissions to Environment Canada on Thursday, urging the government to revisit its plan in order to reduce the cost burden.

A spokeswomen for Ms. McKenna, Sabrina Kim, said the the Liberal government is determined to move forward with policies that cut pollution while contributing to economic growth. The European Union, California and British Columbia all have introduced carbon pricing along with a version of the CFS.

“We know we need to get this right, and that is why we are working with industry to design an approach that gives companies flexibility to make the investments that work for them, which keeps costs down,” Ms. Kim said.

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