Ottawa is offering a tax rebate for provinces where it has employed a federal backstop carbon pricing system. Toronto Star/Rene Johnston
Environment Minister Catherine McKenna said Ottawa does not plan to increase the price on carbon after 2022, despite a report released today by the Parliamentary Budget Officer (PBO) saying the tax would have to double by 2030 on top of existing policies to meet Canada’s Paris targets.
For the first time, McKenna said the Liberals don’t intend to raise the federal carbon tax after it goes up to $50 per tonne in 2022, pointing to the existing climate plan created in 2016.
“The plan is not to increase the price post-2022,” she said. “We are doing exactly what we said we’d do, what we negotiated with provinces and territories in 2016.”
While McKenna said the Liberals remain committed to meeting its 2030 targets, today’s PBO report highlighted that her department’s own figures show Ottawa’s plan would not be enough to reduce emissions to 513 megatonnes of carbon dioxide equivalent (CO2) by that year, as it pledged when signing the Paris climate agreement in 2016.
The fiscal watchdog’s analysis concluded that a carbon price of $102 per tonne — across Canada — could close the gap of 79 megatonnes of CO2 between what Ottawa anticipates Canada will achieve under current policies by 2030, compared to the Paris target.
The PBO found that Canada can close the gap by gradually increasing the federal fuel charge, adding on $6 per tonne in 2023, and an additional $52 per tonne compared to the 2022 $50 price by 2030.
Currently, the federal benchmark carbon pricing system applies to two territories and four provinces, with Alberta to be the fifth province starting next year. The other provinces either have their own pricing systems or have reached an agreement with Ottawa to stave off the imposition of the federal charge.
The federal backstop fuel charge is currently at $20 per tonne but will rise to $50 per tonne in less than four years.
The PBO’s report also found that carbon emissions would be reduced across all applied industries with additional carbon pricing. For example, Canada’s oil and gas sector would see a 16 megatonne reduction between 2016 levels and 2030.
Under current policies, emissions in the oil and gas sector was set to increase by 12 megatonnes by 2030 from 183 megatonnes in 2016. MORE