Trudeau Unveils Carbon Price as Canada Acts on Paris Pledge

  • Base rate of C$10 per ton in 2018 will rise to C$50 by 2022
  • Energy-producing provinces threaten to oppose federal move

Canada will set a minimum price for carbon pollution in a bid to meet its Paris climate agreement targets, setting Prime Minister Justin Trudeau’s government up for a legal battle with the country’s energy-producing provinces.

A minimum federal price of C$10 ($8) per metric ton will be set in 2018, rising by C$10 each year to C$50 per ton in 2022 when it will be reviewed, Trudeau announced Monday in a speech to Parliament.

Canada’s 10 provinces will need to meet that minimum, or exceed it, by using either a carbon tax or achieving a comparable emissions reduction through a cap-and-trade system. Canada’s four most populous provinces already have or are introducing some kind of carbon price, and the federal government had vowed to introduce a national price this fall.

“Businesses will have to find new ways to reduce emissions and pollute less,” Trudeau told lawmakers Monday, announcing a new policy as environment ministers met to discuss a national plan. “That will also make our companies more competitive. The global economy is increasingly clean and Canada cannot allow itself to fall behind.”

All revenue from carbon taxes or cap-and-trade regimes will remain with provincial governments, Trudeau said, and will be revenue-neutral for the federal government. The move nonetheless riled the provinces.

‘Stunning’ Disrespect

Brad Wall, premier of oil-producing Saskatchewan, called Trudeau’s announcement a “betrayal” of ongoing talks and said he’ll consider legal action. “The level of disrespect shown by the Prime Minister and his government today is stunning,” Wall said in a statement. The new price will drive investment to oil-producing U.S. states, he said.

Canada’s westernmost province of British Columbia already prices carbon at C$30 per metric ton. Trudeau views that policy as a model, saying in a statement Monday that other provincial carbon prices should “apply to substantively the same sources” as the B.C. tax, as opposed to excluding certain sectors.

Alberta -- the heart of Canada’s oil patch -- will price certain carbon emissions at C$20 a ton starting next year. Alberta Premier Rachel Notley threatened to oppose the prime minister’s measures unless he’s able to advance “energy infrastructure,” which could include pipelines. The province nevertheless supports in principle a common carbon price, Notley said in a press release.

Alternate Mechanism

Canada’s two most populous provinces, Ontario and Quebec, are instead pursuing cap-and-trade systems, which Trudeau said will be deemed adequate if they achieve the same emissions reductions as the federal minimum price would achieve. Neither the provinces nor the federal government have yet announced what level of emissions reduction is equivalent to Trudeau’s new floor, making it impossible to determine whether Ontario and Quebec are already on track to meet the federal standard.

Monday’s announcement comes a week after Trudeau made his first decision on a major energy project, approving Petroliam Nasional Bhd’s Pacific Northwest liquefied natural gas plant. The move earned him condemnation from environmental advocates, while Trudeau’s government argued the project was an example of balancing toughened environment standards and a need to drive economic growth.

In response to Trudeau’s speech, lawmaker Ed Fast of the opposition Conservative Party -- which governed from 2006 to 2015 -- said Trudeau was using a “sledgehammer” to ram forward the plan and ignoring provincial jurisdiction.

Climate change threatens the entire planet and carbon pricing is an effective way to use markets to reduce emissions and pollution, Trudeau said. “The consequences for human health are major and devastating,” he said. “There is no hiding from climate change. It is real, and it is everywhere.”

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