Manitoba sets carbon tax at $25 a tonne as Trudeau warns feds will impose price

The federal and Manitoba governments moved closer to a clash over carbon pricing Friday, as Prime Minister Justin Trudeau said his government will impose a carbon tax in Manitoba if need be.

“There will be a federal backstop and if any province doesn’t move forward in an appropriate way, the federal government will ensure that the equivalent price on carbon is applied to the specific jurisdiction,’’ Trudeau said in Saint-Bruno-de-Montarville, just east of Montreal. “We will respect what Canadians asked us to do and show the leadership on protecting the environment and growing the economy that all Canadians expect of us.’’

Any carbon-tax money collected by Ottawa in Manitoba would be spent in the province, he added.

Trudeau’s words came hours after Manitoba Premier Brian Pallister announced he will defy federal demands by introducing a carbon tax of $25 a tonne next year and keeping it at that rate. Ottawa has demanded provinces implement either a cap-and-trade system or a tax that would start at $10 a tonne in 2018 and ramp up to $50 a tonne by 2022.

Pallister indicated he is ready for a battle with the federal government, which he suggested is using intimidation.

“If Manitobans are favourable to our plan, I think it will be difficult for Ottawa to invoke theirs on our province,’’ Pallister said. Most provinces have already agreed to follow Ottawa’s proposal. Saskatchewan is the only one threatening not to impose a carbon tax at all. Federal Environment Minister Catherine McKenna said Manitoba will be in good shape for the first few years of the carbon pricing plan.

“After that, they’ll need to up their game,’’ she said in a statement on her Facebook page.

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 cuts, home energy subsidies and spending to help municipal transit systems switch to electric buses.

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.

The province estimates its carbon tax will cut emissions by about one million megatonnes over the next five years, largely by encouraging people to cut their consumption.

But Climate Change Connection, a coalition of non-profit groups in Manitoba, said an extra five cents on a litre of gas is unlikely to convince people to change their driving habits. “Nobody is going really to downsize their vehicle at that rate,’’ spokesman Curt Hull said.