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carbon tax

Manitoba Premier Brian Pallister speaks to reporters before a Council of the Federation meeting in Ottawa, on Oct. 3, 2017.Justin Tang

Manitoba Premier Brian Pallister is set to unveil a $25-per-tonne carbon tax, defying the federal Liberal government's demand for a $50 levy.

At an event scheduled for Friday morning, the Premier will announce that his government will impose the $25 levy on emissions from fossil fuels in 2018 – equivalent to 5 cents per litre on gasoline – and keep it at that level for the next five years.

The carbon tax is part of a "made-in-Manitoba" climate plan that was promised by Mr. Pallister, who last year joined Saskatchewan Premier Brad Wall in refusing to sign Ottawa's pan-Canadian climate plan.

Manitoba argues that its $25 levy will be as effective in reducing greenhouse-gas emissions as the federal plan, which calls for a $10 carbon tax to be implemented next year, climbing to $50 by 2022.

The province expects its carbon tax will reduce emissions by 1.07 megatonnes between 2018 and the end of 2022, while adopting the federal plan would result in a reduction of 0.99 megatonnes, a highly placed provincial source said Thursday.

Manitoba's tax will be accompanied by a more flexible levy that will be imposed on a handful of large industrial emitters, including U.S.-based Koch Industries Inc.'s fertilizer plant in Brandon. Details of that industrial levy have yet to be worked out.

Prime Minister Justin Trudeau has vowed to impose a federal carbon tax on provinces that do not adopt their own, or meet the federal minimum of either $50 per tonne by 2022 or a cap-and-trade system that accomplishes equivalent GHG reductions.

The Manitoba carbon tax is expected to generate $260-million a year, with a portion of the revenue returned directly to taxpayers and a portion being used to fund GHG-reduction programs. By way of comparison, a one-point increase in the provincial sales tax would generate $320-million.

Mr. Pallister is also refusing to accept a federal target of reducing GHG emissions by 30 per cent below 2005 levels by 2030, a target Ottawa committed to under the Paris climate accord. Instead, the province will set a five-year GHG target.

Ontario and Quebec have opted to cap emissions from fossil-fuel users, but created a system of "allowance trading" with California that will reduce the cost of meeting their GHG targets. That market is expected to have a minimum price of $22 per tonne in 2022.

Mr. Pallister's government recently obtained a legal opinion that concluded Ottawa has the right to impose a carbon tax on provinces that do not adopt their own. However, the province would likely win a legal contest if Ottawa tried to impose an additional levy on a provincial one, the legal opinion said.