NEWS
10/27/2017 10:16 EDT | Updated 10/27/2017 12:03 EDT

Manitoba plan sets up potential fight with Ottawa over carbon tax rate

WINNIPEG — Manitoba Premier Brian Pallister says he will introduce a carbon tax of $25 a tonne next year and keep it at that rate in defiance of the federal government.

Pallister says his Progressive Conservative government is rejecting Ottawa's demand that provinces implement a tax that would start at $10 a tonne in 2018 and ramp up to $50 a tonne by 2022. The federal Liberals have said that if a province refuses to do so, they will enact the tax itself and give the money back to the province.

"There's some element here, of course, of intimidation. Ottawa has told us that they're going to invoke a plan," Pallister said Friday. "If we just say 'no,' we get (Prime Minister Justin) Trudeau's plan, so clearly we want Manitobans to back a made-in-Manitoba plan.

"If Manitobans are favourable to our plan, I think it will be difficult for Ottawa to invoke theirs on our province."

Most other provinces have already agreed to follow Ottawa's proposal. Saskatchewan is the only one threatening not to impose a tax at all.

Federal Environment Minister Catherine McKenna said the proposal is "a big step forward" because Canadians know that pollution isn't free. Paying for pollution will spur innovation and force markets to come up with cleaner solutions, she said.

"I'm looking forward to seeing the details of Manitoba's plan," she said in a statement on her Facebook page. "But I also want to be very clear: we've laid out the price schedule we need to see, which reaches $50/tonne by 2022 — well beyond the $25/tonne carbon price Manitoba is proposing."

Manitoba will be in good shape for the first few years of the carbon pricing plan, she said.

"After that, they’ll need to up their game. The details matter."

Pallister released a legal opinion from a constitutional law expert earlier this month that said Ottawa has the right to demand or impose a carbon tax. But the expert also said Manitoba might be able to defend a lower price in court if its tax were as effective as the federal plan in reducing emissions.

The $25 avoids hitting people too hard in the pocketbook, Pallister said, and gives Manitoba credit for the billions of dollars it has spent building its clean-energy hydro-electric grid.

The tax will add about five cents a litre to the price of gasoline and also apply to items such as natural gas and coal. A couple with two kids will pay about $356 a year more than they do now, government officials said.

Vehicle fuel for farm operations will be exempt and agricultural emissions will not be targeted for specific sector reductions.

The tax will raise about $260 million a year and there will be public consultations on how the province should spend the money.

Possibilities include income-tax reductions, energy rebates, investments in green-energy technology and flood-prevention infrastructure to mitigate the effects of climate change.

The green-energy technology could include financial aid for municipal transit services to switch to electric buses. The government is also eyeing a rebate for retrofitting heavy trucks to make them more fuel efficient.

A handful of large industrial emitters, such as the Koch Fertilizer plant in Brandon, will pay an output-based carbon price similar to the plans proposed by the federal and Alberta governments. They will be given a target for emissions and pay the $25-per-tonne levy only on the amounts above that level.

Business and municipal leaders at Friday's announcement said they recognize the need for a carbon tax and are anxious to see where the province will spend its new money.

They also said they should not bear the entire cost of any new clean-energy requirements — such as new restrictions on landfill materials — which is one idea being explored under the government's plan.

"We do not want to see any of these costs downloaded to municipalities," said Chris Goertzen, head of the Association of Manitoba Municipalities.

"The biggest concern we have is what is this going to do from a business-competitiveness standpoint in Manitoba," said Chuck Davidson, president of the Manitoba Chamber of Commerce.