Business leaders are asking the federal government for emissions caps –not because they care about the climate crisis, but because it provides certainty for long-term investments, financing for such investments, and improved profitability. It also effectively reduces emissions. Is this an opportunity to have a national cap and trade program?
When Canada signed the Paris Accord, the federal government allowed each province to come up with its own plan to reduce emissions if the plan met its approval, otherwise the federal government would impose a consumer carbon tax that is 90% reimbursed back to Canadians filing a tax return by direct bank deposit, and the balance going back to the provinces for green investments.
At that time, B.C. had a carbon tax, and Ontario and Quebec had operating cap-and-trade (C&T) programs linked with each other and with California, but this changed in 2018 when newly elected Premier Ford dismantled Ontario’s program that he incorrectly informed voters was a tax. He has replaced it with nothing, so Ontario is subject to the federal carbon tax.
Quebec continued to operate its program that has generated about $7.7 billion revenue since inception from the allowance auctions, plus an unspecified amount from the charge on fossil fuels and fossil/natural gas. The program enjoys a high level of support from businesses. Quebec also has had many years with with a surplus budget because of its C&T program.
The C&T program is a comprehensive framework that covers fossil fuels combustion, and all the emitters in its jurisdiction since it includes all the facilities and consumers that emit the emissions. It is also transparent and accountable in its sole purpose to reduce emissions, and provides data to governments and businesses to make informed decisions to reduce emissions. It has been also effective at meeting, and often exceeding its emissions reductions targets.
Participating capped facilities are either mandatory or voluntary and are subject to a gradually reducing emissions cap. If the cap is exceeded, the facility must purchase allowances to cover the excess, and if it is below its cap, it can sell its unused allowances to other participants.
When Ontario’s C&T program was dismantled, immediately the leaders of Ontario’s large industrial emitters requested the federal government to step in to fill the gap, This they did quickly with the implementation of the Output-Based Pricing System (OBPS), which is similar to a C&T program, and they added the implementation of the Fuel Charge Relief (FCR) that provides exemption of the federal charges on fuels to the qualified users listed below.
The OBPS is administered by Environment and Climate Change Canada (ECCC). Participating provinces are Manitoba, New Brunswick, Manitoba, and Ontario. It includes one of the two highest emitters, Ontario, but not Alberta, which is the other.
Participating capped facilities in the OBPS program is 50,000 metric tonnes for mandatory participants, and 10,000 metric tonnes for voluntary participants, which is a low participation threshold with a high level of participation. The business community asked for the lower voluntary threshold as it was more beneficial for them than the 25,000 level that Ontario had.
The OBPS proceeds are returned to the province/jurisdiction in which they were collected to be used to invest in cleaner technologies to reduce emissions.
The FCR is administered by Canada Revenue Agency (CRA). All provinces and territories participate in the FCR with the exception of British Columbia, Quebec, and the Northwest Territories. They have their own arrangement with the federal government, but they do not have accurate numbers from their programs.
The OBPS and the FCR programs are not linked.
The FCR program exempts the government fuel charges, including the carbon tax, for these registered qualified businesses:
- Farmers, including greenhouse operators;
- Fishers;
- Fuel distributors;
Air, marine, and rail carriers that are carrying aviation gasoline; aviation turbo fuel; heavy fuel oil; light fuel oil; and marketable natural gasoline;
- Registered users for facilities in the OBPS program; and
- Power plants in remote communities.
What are the problems with the federal government’s existing climate actions?
With the generous list of exemptions to the fuel charges, it is hard to believe how the opposition parties wanted to exempt farmers from the carbon tax when they were already exempted! Or, when they wanted the federal carbon tax removed from natural/fossil gas home heating when in fact the tax is already 90% reimbursement back to taxpayers’ bank accounts on a quarterly basis by CRA.
In addition to the political problems, Jerry DeMarco, commissioner of the Environment and Sustainable Development, stated in his latest audit report that Canada is set to miss its 2030 greenhouse gas reduction target (at least 40% below 2005 levels by 2030) because their research found that the measures most critical for reducing emissions had not been identified or prioritized by the Trudeau government. This would certainly apply to the questionable merits of carbon sequestration.
The commissioner’s audit also found that the only significant reduction in emissions was achieved during the pandemic when economic activity was severely curtailed.
Although 10% of the carbon tax revenue is being spent on federal green initiatives, the commissioner found there is no cohesive national plan to effectively reduce emissions quickly. There is no credible accountability for the carbon tax revenue that is collected, reimbursed, and spent. Neither is there an evaluation of the value from the money spent to achieve those emissions reduction goals.
The commissioner could have also added that there is no cradle to grave assessment of new technologies since there is no more clean-up capacity left to burden future taxpayers as they already have to deal with the cost of orphaned oil wells, huge tailing ponds, and radioactive nuclear waste.
In other words, the federal government’s current climate action plan is a dog’s breakfast sprinkled with good intentions that is vulnerable to political misinterpretation and misinformation that will hurt all of us if the climate reduction targets are not met.
How can the federal government meet our climate reduction goals and reduce political attacks?
It’s time for the federal government to implement a national C&T program with the existing carbon tax plan. Why?
A national C&T program would provide a framework to achieve the following:
- Controlled emissions reductions;
- Full transparency and accountability of emissions;
- Funding for implementing emissions reduction measures such as energy conservation for residential and commercial buildings;
- Funding for public transit, cycling, and walking;
- Funding to protect existing trees and plant new ones; and
- Monitoring the effectiveness of emissions reducing measures.
The carbon tax should be continued with a national C&T program because it captures consumers of fossil fuel that is used for transportation and heating, which are the second and third biggest sources of emissions in Canada. Consumers need a price signal to change their purchasing behaviour.
The carbon tax also should be extended to all provinces and territories, including British Columbia, Quebec, and the Northwest Territories because CRA has the best capability to
- carbon tax consumers buying fossil fuels;
- provide the government with accurate information on transportation and heating emissions; and
- make quarterly direct deposits to taxpayers filing a return to receive the 90% reimbursement of the carbon tax.
Canada is already suffering from the effects of extreme weather events, especially in the north with massive forest fires, and melting permafrost that is causing the collapse of the boreal forests from slumping, and eroding shorelines from the loss of ice.
Since the Paris Accord in 2015, Canada’s progress in meeting its emissions reductions target has not been enough. Now, is the time to ratchet it up.
Sharolyn Mathieu Vettese
President
SMV Energy Solutions
www.smvholdings.com
SMV Energy Solutions provides simple smart solutions that conserve energy.