Canada on track for one of the world's highest carbon price
The federal government dropped a bombshell this week, announcing a minimum carbon price of $10 per tonne CO₂e in 2018, rising $10 a year up to $50/tonne in 2022. Prime Minister Trudeau made the announcement in Ottawa while provincial and territorial environment ministers were in Montreal discussing carbon pricing with the federal environment minister.
Provinces and territories who do not already have something in place will have to choose between cap-and-trade and carbon pricing by 2018. Provinces would get to keep the revenues and decide how they will spend the carbon dollars.
Alberta and BC have already capped their carbon prices at $30/tonne, expressing concerns over impacts to the economy.
The $50/tonne carbon price, if implemented, would be the highest outside of select Scandinavian countries (namely Sweden, Switzerland and Finland). However, most of those countries have generous exemptions and loopholes for polluting industries or a hybrid carbon-trading system for big emitters.
The US does not have a federally-mandated minimum carbon price, leaving it up to individual states. Even left-leaning candidate Hillary Clinton has refused to endorse a carbon-pricing strategy, which is politically very unpopular.
Canada is one of the most emissions-intensive countries in the world per capita due its extreme weather variations and vast geography. Rural and remote residents in particular have a higher carbon footprint due to higher transportation distances and lack of public transit infrastructure. Land-locked prairie provinces also do not have access to hydroelectric power.
A carbon price of $50/tonne works out to about 11¢/litre of gasoline. Note that GST is levied on top of the carbon tax and all existing federal, provincial and municipal excise taxes. Natural gas prices will increase by about $2.5/GJ, effectively double the currently spot price. Coal-fired power plants will be hit the hardest, making them economically unfeasible.
Nova Scotia is the only province to meet the federal government's goal of reducing GHGs to 30% below 2005 levels, thanks in part to an aging population, a slowing economy and legally mandated use of wind-power. The province already has contracts in place with coal-fired power plants, guaranteeing no further closures. Nova Scotia already has the highest electricity prices in the country.
Federal Environment Minister Catherine McKenna insists Canadians are united in their view that "climate change is one of the defining issues of this century and they expect their governments to lead the way and take action." The provinces remain hopeful that the Trudeau Liberals will remain open to negotiations.
Trudeau's speech in Parliament is available for viewing on the PM's YouTube channel. The government has officially tabled a motion to ratify the Paris Agreement, which will take effect sometime in November.
Federal Conservative candidate Maxime Bernier has denounced the new tax, insisting it will hurt the economy. The next federal election is in 2019.