The federal Liberals are asking provinces to choose between two approaches for Carbon Pricing.  A carbon tax, much like the system used in British Columbia, or a Cap & Trade system used in Quebec, and about to be implemented in Ontario.  If they don’t then Environment Minister Catherine McKenna says she’ll do it for them.  According to the Globe& Mail this would take the form of higher taxes on fuel.

There are lot of issues here.  The first is timing.  Is now the right time to do this? There arguably is no good time to introduce a new tax or increase because there will always be grumbling from somewhere.  But according to Stats Canada, the economy contracted by 1.6% in the second quarter.  This is largely due to the Fort McMurray wildfires which took energy exports down by 7.5%.  The oil industry is still a significant part of Canada’s economy, there should be some recovery time before adding another tax.

Another is the “piecemeal” approach.  Four jurisdictions have some kind of carbon pricing already in place.  Alberta, and British Columbia have a tax on greenhouse gas emissions.  In Alberta the levy is mainly applied to fossil fuels such as gas, propane, diesel, and natural gas.  The cost is offset by rebates tied to income.  According to the Government of Alberta’s website up to 6 in 10 households are eligible for some kind of rebate.  B.C.’s is revenue neutral where the fees are offset by tax breaks.

Quebec and Ontario have Cap & Trade systems in place.  It’s where the government caps big polluters at a certain amount of greenhouse gases, and they have to trade amongst themselves if they produce more.  In Ontario, this will add $5/month to heating oil, and 4.3 cents/ litre to fuel at the gas pumps.  The big questions here are: Could the feds interfere with jurisdictions that already have  a carbon pricing system in place forcing them to be more aggressive? Or could they just go ahead and impose this higher tax on everyone including the provinces who have carbon taxes in place?  If the answer to either is yes, it could push Ontario over the edge.

It makes more sense to either impose a federal tax,  in which case the provinces should do nothing.  Or leave the provinces to themselves.

 

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