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Providing coverage of Alaska and northern Canada's oil and gas industry
June 2007

Vol. 12, No. 24 Week of June 17, 2007

Quebec imposes continent’s first carbon tax

Gary Park

For Petroleum News

Quebec will lead the way as the first North American jurisdiction to impose a carbon tax on hydrocarbon producers, raising C$200 million a year to support measures to reduce greenhouse gas emissions.

The Liberal government in the province of 7.5 million people has delivered on a year-long promise to introduce the tax that will affect 50 companies that use or retail oil, natural gas and coal.

Natural Resources Minister Claude Bechard said the taxes will affect all hydrocarbons used in Quebec, which accounts for 22 percent of all refined products consumed in Canada.

“Everyone wants to play their part (in cleaning up the environment,” he said. “Well, the oil companies have to play their part.”

He said the measures are based on a “polluter pays” principle and is “not negotiable.”

Bechard expressed the hope that the industry will not pass the cost on to consumers, but admitted he has received no assurances.

Companies such as Petro-Canada, Shell Canada and Imperial Oil would not immediately say whether they will absorb the tax. The Canadian Petroleum Products Institute, representing all of Canada’s major refiners, said it will be a year before the impact on refiners will be known.

The tax on a per liter basis will be: 0.5 cents for propane, 0.8 cents for gasoline, 0.9 cents for diesel fuel, 0.96 cents for light heating oil, 1 cent for heavy heating oil, 1.3 cents for coke used in steel making and C$8 per metric ton for coal.

Gasoline retailers are expected to pay C$69 million a year, with C$43 million coming from heating oil firms, C$39 million from natural gas producers and C$36 million from diesel fuel firms.

Bechard said the tax is modest when compared with refinery profit margins, which have climbed this year from 8 cents per liter to 19-22 cents.

The revenues will be channeled into a government “green fund” to spend on the development of commuter rail networks and other forms of mass transit.

Quebec Premier Jean Charest has set a goal of ethanol accounting for 5 percent of all transportation fuel consumed in Quebec by 2012.

To achieve that level, the province must produce an extra 300 million liters annually — 180 million liters more than Quebec’s sole ethanol plant.

Quebecers have consistently been the strongest supporters among all 10 Canadian provinces of the Kyoto Protocol.

Their province already has a head start over the rest of Canada because the vast bulk of its power comes from hydroelectricity, rather than gas-, oil- or coal-fired plants.

Other provinces are pondering caps on greenhouse gas emissions, but none have made any moves towards a carbon tax.






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