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Ottawa seeks to set national minimum on carbon pricing

Ottawa is looking to set the carbon price floor at least at the level that exists in Quebec and will soon be adopted by Ontario under the cap-and-trade plan.

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Ottawa is aiming to work out a deal with the provinces over the next six months to set a national minimum carbon price of at least $15 per tonne.

The government is looking to establish working groups, including one on carbon pricing, and wants agreement on a national strategy by September in its bid to curb greenhouse-gas emissions.

The national plan would set a floor price for provinces that don't have their own levy, with the expectation they would establish one in order to collect the revenue. The minimum price would increase each year.

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Ottawa is looking to set the carbon price floor at least at the level that exists in Quebec and will soon be adopted by Ontario under the cap-and-trade plan. By setting a floor at the existing level in Quebec and Ontario, the government would help level the climate playing field among provinces, while ensuring those who want to do more would reap the revenue.

The two provinces are members of the Western Climate Initiative with California. Greenhouse-gas emission allowances auctioned off last year had a minimum price of $15.84 a tonne, and will rise above $20 by 2020.

Federal sources stressed that no decision has been made on the carbon tax, meaning it is unlikely to appear in the forthcoming budget. "There has been no specific price and no specific mechanism identified," one senior source said Wednesday. "Our core commitment is to work with the provinces."

Prime Minister Justin Trudeau will meet premiers in Vancouver on March 3 to discuss Canada's climate challenge, fulfilling his promise to do so within 90 days of the Paris climate summit. However, Environment Minister Catherine McKenna made it clear last week that the government does not intend to finalize an agreement at that meeting.

Instead, Ottawa and the provinces are looking to set up working groups that will assess specific sources of emissions – including buildings, the energy sector and transportation – to come up with the policies that would ultimately form a new plan and potentially more ambitious targets. Sources say the federal government wants to reach a deal within six months of that March summit.

In the absence of a federal effort under the former Conservative government, provinces led the way on carbon pricing.

British Columbia leads the country with a $30-a-tonne carbon tax, and Premier Christy Clark is considering a recommendation from a government-appointed panel to increase it dramatically – though this week's provincial budget was silent on the issue. Alberta's NDP government has announced it will introduce a $20-a-tonne carbon levy and then raise it to $30 in 2018, while also setting a cap on emissions from the oil sands.

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Ontario will join Quebec and California in the cap-and-trade plan, which currently adds about 3.5 cents a litre to the price of gasoline.

Once Ontario and Alberta implement their respective plans, the country's four most populous provinces – representing 80 per cent of Canada's GHG emissions – will levy some form of broad-based carbon price.

Saskatchewan – which was the country's fourth-largest GHG emitter in 2013, just behind Quebec and ahead of B.C. – has no carbon levy. Officials said recently they are waiting for Ottawa to signal its intention. The federal proposal under review would allow provinces to replace the federal levy with an equivalent one of their own, thereby ensuring they keep the revenue.

The Atlantic provinces represented just 6 per cent of Canadian emissions in 2013, and are in various stages of rolling out carbon policies. Newfoundland and Labrador is weighing its options and will introduce some form of carbon pricing, Environment Minister Perry Trimper said earlier this month.

A debate is raging within the federal government over whether Ottawa should significantly increase current excise taxes on gasoline and diesel to help pay for climate policies, including the transfer of billions of dollars to provinces and municipalities for public transit, green infrastructure and energy-efficient buildings. But there appears to be little appetite for such a dramatic gesture, particularly given the government's keen desire to work with the provinces.

The $15-a-tonne levy is seen as a modest effort by environmentalists and economists, who argue it will take a much higher carbon price to meet Canada's commitment to reduce greenhouse gases by 30 per cent from 2005 levels by 2030.

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"It's a good first move, but I would hope, given the targets, that they will set it higher," said Dave Sawyer, an environmental economist. He has calculated that achieving the 2030 targets would require a carbon levy rising to $180 in 15 years, imposing indirect carbon costs through regulations and funding climate policies through the tax system.

In an appearance before the House of Commons finance committee this week, the Green Budget Coalition, a group representing leading environmental organizations, urged the government to introduce a "national carbon pricing standard" in the budget that would reach a minimum price of $50 a tonne by 2020 in all Canadian provinces and territories.

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About the Author
Global Energy Reporter

Shawn McCarthy is an Ottawa-based, national business correspondent for The Globe and Mail, covering a global energy beat. He writes on various aspects of the international energy industry, from oil and gas production and refining, to the development of new technologies, to the business implications of climate-change regulations. More


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