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Quebec to impose carbon tax Province sets the pace in Canada for implementing Kyoto Protocol; on collision course with industry over who should absorb tax Gary Park For Petroleum News
The first full-scale showdown between government and industry over greenhouse gas emissions looms in Canada now that the Quebec government has declared its intention to impose a carbon tax.
Quebec Premier Jean Charest said the tax will be applied over the 2006-12 period on hydrocarbon products such as heavy oil, natural gas and propane that are sold in bulk to retailers, regardless of whether it comes from domestic or overseas sources.
The tax is expected to raise C$200 million a year over six years to establish a C$1.2 billion Green Fund to help achieve reductions in greenhouse gas emissions and attain the targets set out in the Kyoto Protocol.
The Canadian Petroleum Products Institute estimates the tax will translate into an increase in gasoline prices at the pumps of 1.5 cents per liter.
Charest and his Environment Minister Claude Bechard said they expect the industry to absorb the cost and not pass it on to consumers — a hope that was quickly scuttled by the industry.
CPPI Vice President Carol Montreuil told reporters that Quebec’s major utilities — Hydro-Quebec and Gaz Metro — incorporate their energy efficiency costs in with their rate hikes “so why should it be different for oil companies?”
She said it was not reasonable to expect the industry to swallow C$200 million a year in additional costs.
Charest said passing the tax on “would be totally on the wrong side of this issue” while Bechard described the industry threat as “odious.”
“It’s high time they played by the rules, like every one else,” Charest said.
Beyond that it was not clear whether the provincial government would take more stringent measures.
The final terms won’t be known until the Quebec Energy Board develops a sliding scale of rates to ensure that heavy oil used for home heating will face a higher tax than less polluting natural gas.
The Green Fund is being earmarked to finance projects such as improvements in public transportation and energy efficiency in major buildings.
Quebec leading Canada’s provinces It is part of a policy that has moved the Quebec government, with solid backing from its residents, to the leading edge among Canada’s 10 provinces in demanding full implementation of the Kyoto terms.
Quebec has pledged to adopt Kyoto regardless of what course is taken by the new federal government.
Prime Minister Stephen Harper has warned that the Kyoto goal of reducing 1990 greenhouse gas emissions by 6 percent over the treaty’s first phase of 2008-12 is impossible to achieve without seriously damaging the economy and has argued for a made-in-Canada solution.
But Quebec has opted for an ambitious plan to tackle climate change and has some support from the provinces of Manitoba and Newfoundland.
It estimates that spending C$1.53 billion over six years, including C$328 million of federal money, would lower its total greenhouse gas emissions to 80.2 million metric tons, 5.1 million tons less than its 1990 emissions, thus complying with Kyoto.
“This is one of the biggest issues facing mankind,” said Charest. “It is not an exaggeration to say that.”
But Stephan Tremblay, environment spokesman for Quebec’s opposition Parti Quebecois said he does not necessarily believe the Charest government will deliver on its goal.
However, Greenpeace spokesman Steven Guilbeault applauded the Quebec government, saying the time has come for oil companies to “pay for the pollution they cause related to climate change. It would be outrageous for oil companies who make billions of dollars in profits to have the consumers pay the bill.”
Move seen as threat to refineries Canadian Petroleum Products Institute President Alain Perez told the Globe and Mail that the Charest government could end up discriminating between companies that produce and refine oil and those that are simply part of the supply chain.
He said that could wipe out two-thirds of the refining sector’s operating margins and ensure that there is no further refinery investment in the province.
Currently, Petro-Canada is considering a C$600 million expansion of its Montreal refinery complex, but it won’t discuss that proposal in the context of a possible carbon tax.
The Canadian Association of Petroleum Producers has consistently opposed a carbon tax that targets its member companies and has noted that even the previous federal government ruled out such a measure.
The Quebec plan also calls for the introduction of California-style standards to reduce greenhouse gas emissions from new vehicles.
Manufacturers of vehicles sold in Quebec after 2010 will have to install equipment to ensure they meet tougher emissions controls. California has adopted standards it expects will lower emissions by 25-30 percent between 2009 and 2016.
Bechard said Quebec wants to be the “leader in Canada. Kyoto is not a dream. It is possible to achieve.”
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