Canada carbon tax set to take effect in industrial heartland

Bloomberg

Canadians will start paying a carbon tax in what is set to be a key political battleground of the 2019 election.
From January 1, Justin Trudeau’s government will start rolling out a “backstop” price on provinces that don’t have their own levies on emissions. That includes Ontario, an industrial heavyweight whose populist premier scrapped an existing plan, setting up a standoff with the Canadian prime minister.
Under Trudeau’s backstop, certain major industries in five provinces will see emissions tracked beginning from Tuesday and subject to a yet-to-be-finalised tax; sectors such as cement and steel face easier targets than others. A wide-ranging tax on nearly all fuels is set to take effect in April in four provinces. The price on carbon will be C$20 ($15) per metric tonne — about 4.4 Canadian cents per liter of gas, or 12 US cents per gallon — rising to C$50 per tonne by 2022.
Consumers in the holdout provinces will receive federal payments that will exceed their carbon tax bill in a bid to cushion the blow, according to government projections, as businesses essentially subsidise rebates to consumers. A court challenge is already underway, but the bigger fight may be political as voters will decide in October whether Trudeau deserves a second mandate.
“Carbon pricing will be an important issue as it connects to the economy — and to Canadians who are increasingly worried about the economy,” pollster Nik Nanos of Nanos Research said.

BUSINESS DIVIDED
Canadian business groups are divided in their response. The Business Council of Canada, representing chief executives of nearly all Canada’s biggest companies, backs Trudeau’s plan. “It provides the economic incentive for consumers to change their behaviour and for businesses to invest in technologies that progressively reduce their emissions over time,” Goldy Hyder, the council’s president and CEO, said in a statement.
The Canadian Chamber of Commerce said it supports carbon pricing, but called on Trudeau to reduce the overall regulatory burden and return more revenues to businesses. The Canadian Federation of Independent Business, representing smaller firms, wants rebates to be expanded beyond just consumers.
Trudeau’s government is working to finalise industrial emissions standards, relative to current average emissions in each sector. It proposed a 95 percent standard for two industries considered at high competitive risk — cement and lime, now facing more lenient standards than first proposed — and 90 percent for production of petrochemicals, steel, certain types of iron, nitric acid and ammonia. All other sectors have a proposed 80 percent threshold. Companies exceeding those levels can pay a tax, or buy credits from more efficient firms.

‘MASSIVE EXEMPTION’
“Carbon pricing poses significant challenges for energy intensive, trade exposed sectors like cement, especially given our significant exports to US markets that don’t face similar costs,” the Cement Association of Canada, which represents producers such as LafargeHolcim Ltd.’s Canadian unit, said in a statement. That sector has essentially the highest exemption level under a plan it says will “will help reduce emissions, accelerate low carbon technology investments into Canada, while protecting local jobs.”
Conservative Leader Andrew Scheer, Trudeau’s main rival, has pledged to kill the carbon plan and replace it with one that doesn’t tax consumers. He hasn’t unveiled details but signaled it might shift more of the burden to big firms.
“I’m opposed to when the government increases the cost for commuters, for homeowners, people who have to heat their home,” Scheer told CTV’s Question Period in an interview this month, dismissing business groups who back the plan.