The federal government will drastically reduce the scope of its planned carbon tax to address competitiveness concerns as it prepares to replace Ontario’s cap-and-trade system with its own levy.
After a closed-door meeting with industry officials last week, Environment and Climate Change Canada issued new guidelines that lower the percentage of emissions on which large polluters will have to pay the carbon tax and offer bigger breaks for energy-intensive companies that face tough international competition. The guidelines will be imposed on every province that doesn’t meet the federal standard for carbon pricing.
Companies will try to pass along any costs of the carbon tax to consumers, but industry leaders say they may have to absorb it in competitive markets. The reduced tax means businesses will have fewer costs to pass along, face less competitive pressure and likely produce higher emissions.
Ottawa issued draft regulations in January indicating companies would have to pay the carbon tax on roughly 30 per cent of their emissions, with a benchmark set at 70 per cent of their industry’s average emissions performance.
The new rules to start in January will lower that requirement to pay tax on 20 per cent of emissions, and some particularly vulnerable industries – including cement and steel making – will pay tax on roughly 10 per cent of their greenhouse gas emissions.