Providing coverage of Alaska and northern Canada's oil and gas industry
July 2018

Vol. 23, No.26 Week of July 01, 2018

Carbon tax setback

New Ontario government to pull out of carbon-trading with Quebec, California

Gary Park

for Petroleum News

Canadian Prime Minister Justin Trudeau’s plans for a national carbon tax that would bolster his hopes of a role as the Prince of Climate Change was dealt a severe blow in the Ontario provincial election on June 7.

Since crushing the Liberal government of Kathleen Wynne (Trudeau’s strongest ally among provincial premiers), newly installed Conservative Premier Doug Ford has moved quickly to serve a one-year notice that Ontario (with 13.5 million of Canada’s 37 million population) will withdraw from a carbon-trading allowance trading partnership with Quebec and California.

Ford’s administration is now working on legislation to dismantle the climate-change strategy that imposes an indirect levy on carbon dioxide emissions from the consumption of gasoline (which currently adds 4.3 cents per liter at the pumps), diesel and natural gas, although he offered no indication how his government will deal with companies that have purchased about C$2.8 billion in credits to comply with existing regulations.

Conflict with Trudeau

That puts Ford in conflict with Trudeau’s plan for a national carbon tax, which is scheduled for introduction on Jan. 1, 2019, at C$20 per metric ton, rising to C$50 by 2022, aiming to reduce carbon emissions by 30 percent from 2005 levels by 2030.

“In Ontario, the carbon tax’s days are numbered ... they’re gone, they’re done,” Ford said, arguing the tax would do nothing for the environment except punish small businesses and families.

That aligns with Saskatchewan Premier Scott Moe, who is pursuing a court challenge against the federal tax. Those two provinces could be joined over the next year if current polling trends hold up, ending in the overthrow of Quebec’s Liberal Premier Philippe Couillard on Oct. 1 and Alberta’s New Democratic Party Premier Rachel Notley on May 31, 2019.

However, Canada’s Environment Minister Catherine McKenna is emphatic that the Trudeau government will likely impose a carbon tax even if Ford ends cap-and-trade.

Climate change is real and its impacts do not disappear with a change in provincial governments, she said.

Faced with the prospect that Ford will withdraw from the federal-provincial-territorial agreement signed in December 2016, McKenna said “our government is considering all the options” under in federal legislation that would set a price on carbon pollution.

WCI future in tatters

While this wrangling continues, the future of the Western Climate Initiative has been left in tatters.

The WCI, formed by Ontario, Quebec and California, is a non-profit corporation that provides administrative and technical services to support the implementation of greenhouse gas emissions trading programs in the three jurisdictions.

The next WCI auction is scheduled for August, but Ford said Ontario will not participate, creating an uncertain landscape for some of Canada’s largest corporations that have participated in allowance auctions, including Suncor Energy, Imperial Oil (69.6 percent owned by ExxonMobil), Enbridge, Ontario Power Generation and the Royal Bank of Canada (Canada’s largest bank).

A spokeswoman for Suncor said her company now looks forward to “working with the Ontario government to help develop a framework that achieves what’s needed for the climate, provides regulatory and investment certainty and considers the impact for people and businesses.”

Barring a sudden change of direction by the Ford government, that now looks like a forlorn prospect.

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