OTTAWA — Environment Canada has clarified how it intends to implement a federal carbon tax on Manitoba, which will allow the Liberals choose whether revenues will be put into provincial treasuries or given directly to taxpayers.
Meanwhile, Manitoba’s carbon-intense industries say they’re working to understand how federal and provincial carbon plans will impact their business.
Last week’s 556-page budget bill details Ottawa’s plan for imposing a carbon tax on the provinces, which escalates over time and will rise above Manitoba’s flat $25-per-tonne levy.
The federal plan calls for a $10-per-tonne levy starting this fall, which escalates to $20 at the start of 2019, and another $10 for each of the following three years, ending with a $50 levy for all of 2022.
That means Manitoba’s $25 levy will fall short of the federal $30 target on Jan. 1, 2020. Earlier this week, the government did not clarify whether Ottawa will collect a separate $5 on top of the provincial tax or take over the entire $30 carbon levy, prompting criticism from Conservative MP Robert Sopuck.
On Thursday, Environment Canada spokesman Mark Johnson said Ottawa would have a parallel process for collecting the top-up carbon tax, beyond Manitoba’s $25 levy.
The department also said the legislation will let the federal government choose whether to remit those revenues into provincial coffers, or put it directly in Manitobans’ pockets through tax credits.
"They could be distributed directly to the provincial/territorial government, to persons or businesses specified in regulations, or to a combination of both," wrote department spokeswoman Gabrielle Lamontagne.
Provincial taxes that do meet the benchmark are controlled by the provinces, meaning that Manitoba gets to decide how its $25 levy is allocated (current legislation suggests reducing the provincial sales tax) but not how the federal top-up is used.
Johnson explained the bill outlines two ways of collecting carbon tax: a fuel charge paid by producers and distributors, and an industrial a cap-and-trade system. The latter gives companies carbon credits when they fall below prescribed emissions caps; they can then sell those credits to other companies who exceed the caps.
The bill only prescribes the rising $10 per year over five years for industrial outputs, but not for the consumer fuel charge — suggesting that whoever’s in government could raise or lower the levy without needing to pass a bill. The federal Liberals say they intend to stick with the five-year escalating tax while they’re in office.
Manitoba Sustainable Development Minister Rochelle Squires did not say whether she was concerned Ottawa will control how the federal top-up will flow back to Manitoba.
She reiterated in a statement the province’s position that its plan will be more effective than the federal targets, in part because a higher starting rate may reduce emissions faster. "The focus of the carbon levy should be on outcomes," Squires wrote.
"Manitoba has done its homework in designing a carbon pricing system that strikes a careful balance" with the economy.
Meanwhile, the Senate energy committee released a report Tuesday calling on Ottawa to lower the carbon-tax burden on heavy industry. The committee argued that across-the-board levies could kill Canadian businesses, sending business to competitors abroad whose emissions aren’t taxed.
The committee started its hearings in March 2016, and did not say whether the cap-and-trade system will reduce emissions without killing businesses.
The environmental manager of a company that operates across Canada said he’s not sure either.
"We don't have all the nooks and crannies figured out yet," said Rob Beleutz of the limestone company Graymont Ltd., which owns a plant in Faulkner, 230 kilometres north of Winnipeg. "It's happening fast, and that's the path we're on."
Since 2004, high-emitting Canadian companies have had to report to the Greenhouse Gas Reporting Program, which lists how many gasses, such as carbon dioxide and methane, they release into the atmosphere.
The online database lists 11 Manitoba entities — although three are Winnipeg landfills which fall outside most carbon-tax regulations.
The third-largest emitting company Graymont’s Faulkner plant, which Beleutz said is due to how limestone is harvested, by burning carbon dioxide off the rock.
The plant has reduced its carbon emissions over a decade by eight per cent, according to federal filings, but Beleutz said there’s not much more the company can do to reduce emissions. He said natural gas is inaccessible for the plant, so it instead relies on coal and petroleum coke.
He said a carbon tax would leave the company with a much costlier product than what comes out the United States, where there isn’t a levy — a key point in the Senate report.
"Lime itself is one of the most trade-exposed commodities in Canada," said Beleutz, the only manager of the eight companies that provided an interview.
Manitoba’s top emitter in 2016 was the Koch Fertilizer plant in Brandon, accounting for one-third of heavy-industry emissions. Koch forwarded questions to the industry group Fertilizer Canada.
Spokeswoman Kelly McCarthy praised the Senate committee for addressing "carbon leakages and competitiveness risks," where carbon levies shift business production abroad without ultimately reducing global carbon emissions. But she did not say whether the federal plan hit the right balance.
"Third-party benchmarking studies have already concluded that Canadian fertilizer manufacturers perform in the top quartile globally, for energy efficiency and greenhouse gas emissions," she wrote.
Manitoba's second-largest emitting firm is TransCanada, which the company spans all operations within the province: natural gas compressor stations, pipelines and associated facilities.
"We recognize our responsibility in the larger energy system, including the ongoing management of our own greenhouse gas emissions," spokesman Mark Cooper wrote, noting carbon restrictions "are becoming commonplace where TransCanada operates."
Manitoba makes up a fraction of Canada’s heavy-industry emissions.
Agriculture produces more emissions in Manitoba, but is largely exempt from the provincial carbon tax, with the government pledging other measures to reduce those emissions.