Canada to hike carbon tax to C$170/tonne in bid to reach Paris target

Author: Stefan Baumgarten

2020/12/15

TORONTO (ICIS)--Under Prime Minister Justin Trudeau’s plan, the Canadian government plans to increase the country’s carbon tax to Canadian dollar (C$) 170/tonne ($134/tonne) to achieve its greenhouse gas emissions reduction targets.

The existing tax, which is currently C$30/tonne, rising to C$50/tonne in 2022, is to increase by C$15/tonne each year from 2023. It will reach C$170/tonne in 2030, under the government's latest emissions reduction plan, issued last Friday, 11 December.

Capping the tax at C$50/tonne in 2022, as originally planned, would not enable Canada to reach its target under the 2015 Paris Agreement to cut emissions to 30% below 2005 levels by 2030, according to a study last year.

With the new plan, the government expects to exceed the 30% target, achieving between 32% and 40% below 2005 levels in 2030, it said.

CHEMICAL INDUSTRY
Importantly for the chemical industry, with the new plan, the government intends to eliminate industrial solid and gaseous fuels from its proposed Clean Fuel Standard (CFS).

The CFS, which is intended to incentivise clean fuels and make conventional fuels more costly, is a key part of the government’s climate plans.

Canada’s chemical industry relies on natural gas and liquids to produce chemicals.

The Chemistry Industry Association of Canada (CIAC) signalled support "in principle" for the new plan, and said that it was particularly pleased with the change to the CFS.

As originally proposed, the CFS would have effectively doubled the cost of natural gas for the industry, thus threatening its global competitiveness, the group said.

Canada’s chemical industry sees climate change both as an urgent issue, and an opportunity, as achieving emissions goals will require chemistry-based solutions and products.

ENVIRONMENTALISTS
Greenpeace Canada said that the new plan was “serious and well-thought out” in terms of achieving a 30% emissions reduction.

However, Canada needed to do more, it said.

“Canada can’t keep pretending that we can solve the climate crisis while expanding oil and gas production and building new pipelines,” Greenpeace strategist Keith Stewart said with reference to the expansion of the government-owned Trans Mountain pipeline and Trudeau's support for the controversial Keystone XL pipeline project.

The Liberals will not put forward legislation to implement the plan immediately.

Rather, the plan will a key plank in their next election campaign. The party lost its majority in parliament in the 2019 election, with a new election expected to be called in 2021.

Also noteworthy is that the federal carbon tax is still subject to a Supreme Court ruling.

In a case currently before the highest court, several provinces - Alberta, Ontario and Saskatchewan - are arguing that a federal carbon tax is not in line with the country’s separation of jurisdiction between the federal and provincial governments.

The base year for Canada’s emission reduction is 2005, and not 1990 as used by the EU.

Under Canada’s new plan, emissions would fall just 15% from 1990 by 2030, compared with the EU’s much more ambitious new target of a 55% reduction.

($1 = C$1.27)

Thumbnail image shows the Canadian flag. Source: Shutterstock

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