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Proposed Federal Carbon Levy Gains Momentum


​​​​The Federal government has unveiled its long-awaited carbon tax plan, proposing to introduce a $10 per tonne carbon levy next year on provinces without an active carbon pricing program in place.

The levy, outlined in a technical paper made public May 18, would increase to $50 per tonne by 2022, adding approximately 11.6 cents per litre of gasoline from 2.3 cents per litre in 2018. It would be imposed on provinces without a carbon price system or programs that don’t meet government standards.

Transportation costs as well as power and heat bills are expected to rise substantially under the program, fuelling concerns it will make Canadian industries less competitive in North America. Saskatchewan, home to a thriving oil and gas sector as well as several giant potash and uranium mines, has vehemently opposed a carbon tax and has threatened to take Ottawa to court on constitutional grounds if it goes ahead with the tax.

For Canada’s beleaguered oilfield services companies, any additional cost would compound an extended downturn and already paper-thin margins.  However, others argue commodity prices and access to markets have more of an impact on the energy sector.

The federal plan, released by Federal Environment Minister Catherine McKenna, offers a mix of carbon tax for consumer and a cap-and-trade plan for major industries, similar to the Alberta carbon program. Consumers will be taxed directly by fuel distributors, although there are certain exemptions, including farm operations, hospitals and commercial buildings.

Revenues raised by the levy would remain in the provinces they were raised, with provinces which enact their own carbon price plan choosing how to spend the revenues. Ottawa is “evaluating” whether or not to refund individuals and companies directly in provinces without a carbon tax system.

Alberta and British Columbia have carbon taxes, while Ontario and Quebec have cap-and-trade systems. Nova Scotia plans to launch a cap-and-trade system next year, with other Atlantic provinces contemplating the same.

Jeremy Rondeau is the Vice President of Oilfield Services. He can be reached at 306.770.3679 or​ [email protected]