A federal government move to slash the scope of its planned carbon tax is drawing fire from conservatives and critics who say the cuts to the proposed levy don’t go far enough.
Under its new plan, Environment and Climate Change Canada will tax most industries for roughly 20 per cent of their industry’s average carbon emissions, and tax industries at high risk of foreign competition at roughly 10 per cent of their industry’s emissions, The Globe first reported on Wednesday. The first iteration of the federal carbon tax would have taxed all industries for around 30 per cent of their emissions, with the benchmark being set at 70 per cent of each industry’s average emissions.
The Liberal government said the changed guidelines were aimed at addressing concerns among industries that are at a high risk of suffering from foreign competition. The federal system goes into effect in January and will affect provinces, such as Ontario and Saskatchewan, that don’t meet its standards for carbon pricing.
But those reductions weren’t enough to sway opponents.
“A watered down poison is still poison,” Saskatchewan Premier Scott Moe said in an interview on Wednesday.
“For two years now the federal government has been saying that this made-in-Ottawa carbon-tax scheme does not have nay effect on the economy, and it turns out it does, and there’s an admission of that today with the watering down of this flawed policy of carbon taxation.”
Saskatchewan’s government filed its latest court challenge against the federal carbon tax on Monday, before reports of the carbon tax scale back first surfaced. The provincial government says it’s not opposed to reducing emissions, but argues that the tax is unconstitutional.
Saskatchewan opposes the federal pricing plan, while new Ontario Premier Doug Ford scrapped the province’s cap-and-trade system in one his first moves after taking office.
Canada’s Environment Minister, Catherine McKenna, said the decision to soften the proposed plan was made after discussions with experts who pointed out that competitiveness could be hurt.
“Let’s be clear – we can’t afford to let big polluters off the hook,” Ms. McKenna said in a statement.
“We’ve been clear since the beginning that we would be consulting with industry and environmental experts to find the best ways to reduce emissions, improve energy efficiency, and stay competitive – and that’s exactly what we’ve done.”
The Ford government greeted Ottawa’s move to scale back a federally mandated carbon tax as a victory for the Premier.
“This climb-down by the federal government is a signal that we have been right all along,” Ontario Environment Minister Rod Phillips said during Question Period on Wednesday. “If the federal government continues to pursue a carbon tax to punish Ontario families and make Ontario businesses uncompetitive, we will oppose it.”
In late July, Mr. Ford’s Progressive Conservatives tabled legislation to kill the cap-and-trade program introduced by the previous Liberal government. While Mr. Ford has said he is committed to reducing greenhouse gas emissions, the Premier and his environment minister have ruled out any use of taxes to do so. Mr. Ford has said that ending cap-and-trade will reduce electrical bills and gasoline prices.
Speaking at Queen’s Park, Mr. Phillips said that a carbon tax was only a “cash grab. That’s why we are committed to use all available tools, including the courts, to oppose the federal government’s carbon tax.”
Stewart Elgie, director of the University of Ottawa’s Institute of the Environment, said the move to ease carbon taxes is necessary to give incentive for businesses to stay in Canada while they develop solutions to lower their carbon footprint.
“This is a sensible approach for both the environment and the economy,” Mr. Elgie said.
“You want a carbon-pricing system to do two things, first spur emission reductions and second, to have firms remain in Canada while they do that.”
Mr. Elgie said that it’s unlikely that any firm would be able to drop their emissions by 30 per cent in the next few years, as was originally demanded in the original carbon-tax plan. He says taxing 10 or 20 per cent of carbon emissions will likely lower emissions at the same rate while lowering the costs for businesses.
Industry response on Wednesday to Ottawa’s move was muted. Companies that stand to benefit, such as producers of steel, fertilizer, and cement, had no comment. “Right now, it’s too early,” said Mathieu Bouchard, president of the Canadian Lime Institute, which represents another sector that may receive special treatment under the shifting plans. “There’s still so many things to be determined. We are encouraged that the government is consulting with us.”
The oil and gas business was not included on the special treatment list. The industry feels “a certain amount of frustration,” said Tim McMillan, president of the Canadian Association of Petroleum Producers. He said that while industries like lime and steel could benefit from the changes, the energy industry is Canada’s key exporter and investment has declined domestically over the past several years, while it has risen recently in the United States, Canada’s main customer and competitor.
“It seems to be politics driving the policy rather than economics or the environmental outcome,” Mr. McMillan said.
With files from Justin Giovannetti