Canada is at the bottom of the pack when it comes to putting a price on pollution through taxes but will move up the ranks as Ottawa and the provinces move to impose carbon levies or increase existing ones, the Organization for Economic Development and Co-operation (OECD) said Tuesday.
In a sweeping report on the country's environmental performance, the Paris-based organization said rising carbon levies and other regulations are needed to reverse the growth in greenhouse gas emissions from the oil industry and transportation sector over the past 15 years.
To meet its international climate commitments, Canada must "reduce drastically the carbon intensity of its energy production, particularly in the oil-sands industry," said the OECD, an advisory group for developed countries.
Among its 35 member countries, only the United States and Mexico had lower environmental taxes than did Canada in 2014. Such levies include gasoline taxes, water charges, tipping fees at landfills and carbon pricing. Some provinces have increased their carbon levies since then, but not enough to affect Canada's ranking.
The Liberal government is planning to pass legislation next year that would impose a carbon tax on provinces that either do not adopt their own pricing plan or do not meet the federal standards under which the tax rate would climb to $50 a tonne by 2022.
British Columbia, Alberta, Ontario and Quebec have carbon-pricing plans – either direct levies or cap-and-trade systems – that would meet Ottawa's criteria, while provinces such as Manitoba and New Brunswick pledge to introduce plans that would not meet the federal minimum.
Despite vocal opposition from the United Conservative Party, Alberta's carbon tax is set to climb from $20 a tonne to $30 on Jan. 1, with each $10 increment representing roughly 2.7 cents a litre of gasoline.
In its review of Canadian policies, the OECD said Canada lagged in climate regulations between 2006 and 2015, when the Conservative government of Stephen Harper failed to enact broadly based measures. The country will struggle to meet its pledge to reduce emissions by 30 per cent below 2005 levels by 2030, it added.
"We applaud Canada's renewed determination under the current government to tackle climate change, and its leadership in international climate diplomacy at a crucial time," OECD environment director Anthony Cox said as he released the report in Ottawa.
"That said, Canada must act swiftly to implement its new policies if it is to achieve its emissions-cutting objectives for 2030."
The Liberal government has forged a federal-provincial-territorial plan to reduce greenhouse gas emissions, which includes carbon pricing, a series of regulations and major spending on green infrastructure and development of clean technology.
"This plan will have to be implemented rigorously; a better use of environmental taxation would help," the OECD said in its report. It suggested the federal government will have to lead an effort to simplify and even harmonize the system across the various provincial and territorial jurisdictions in order to improve its performance and reduce its impact on businesses.
Canada is the fourth-largest emitter of greenhouse gases in the OECD and second most carbon-intensive for the size of its economy.
However, rising emissions from the oil industry remain a challenge for Canada as it works to meet its international commitment.
The oil sector accounts for a quarter of the country's greenhouse gas emissions, and GHGs from the industry rose rapidly as oil-sands production boomed over the past 15 years.
The industry insists it is investing heavily to reduce the emissions a barrel of the oil it produces, while the Alberta government recently allocated $440-million from its anticipated carbon-tax levies to help the industry innovate and cut its GHG intensity.
The OECD analysts visited Alberta recently and commended the governing New Democratic Party for its climate plan, which will put a cap on future emissions from the oil sands and imposes a levy that provides price breaks to industry leaders in emissions intensity.
"It gives emitters an incentive to reduce emissions irrespective of their current intensity levels," analyst Britta Labuhn told the Ottawa briefing.
The OECD urged Canadian federal and provincial governments to move forward on their plans to reduce methane emissions from the oil and gas sector. Methane is a powerful greenhouse gas and emissions during the production and transmission of oil and gas is a major source of GHGs.
Ottawa has published draft regulations that would kick in after 2020 – with the delay aimed at giving industry time to implement voluntary measures – while Alberta is consulting with industry and environmental groups on its approach.
The OECD noted the industry's methane emissions may be far higher than reported, and urged the two governments not to delay the regulations needed to reduce them.