Carbon pricing scheme for heavy industry eased
OTTAWA — The federal government is scaling back its carbon pricing plan for heavy industrial emitters in a bid to cut greenhouse gas production without creating an incentive for companies to simply up and leave Canada altogether.
Last week, Environment Minister Catherine McKenna quietly set out a new plan for industrial emitters which produce more than 50,000 tonnes of greenhouse gases each year, reducing the amount of emissions on which they will have to pay a carbon price.
McKenna said Wednesday the government heard from companies that the initial plan as announced last winter was too onerous. She said any plan has to be done looking at the environment and the economy together.
“We don’t want to drive industry out of our country,” McKenna said.
The initial proposal was to cap emissions for heavy emitters at 70 per cent of the average emissions intensity in any particular industry. Emissions intensity measures greenhouse gases per unit of production.
The system would have companies whose emissions place them below the cap earn credits they could trade with companies that come in above it. Companies above the cap can innovate to reduce their emissions, buy credits to offset their emissions, pay the carbon price on emissions over the cap, or some combination of the three.
But after consulting with industry and reviewing the competitiveness factor for industries that have to go toe to toe with companies in jurisdictions like the United States, where there is no national carbon price, Ottawa is now proposing raising the cap to 90 per cent for lime, cement, nitrogen fertilizer, iron and steel producers and 80 per cent for most others.
This federal plan will only be used in provinces that don’t have their own federally approved carbon pricing system in place by Jan. 1.
Stewart Elgie, director of the Environment Institute at the University of Ottawa, said the government is making a smart change because it reflects the reality that very few industries will be able to cut emissions more than 10 to 20 per cent over the next five years.
Taxing above 10 to 20 per cent would hurt a company’s ability to innovate and find a viable solution, Elgie said.
Anything beyond that raises the cost to business without changing behaviour, and that’s where companies start looking to move to jurisdictions with lower taxes.