Manitoba carbon tax smart politics but trouble for feds, observers say

Manitoba’s plan for a carbon tax priced well below the federal standard is a smart political move, and the latest sign that there’s trouble brewing for the federal government over the centrepiece of its national climate change strategy, analysts say.

On Friday, Environment Minister Catherine McKenna had a message for Manitoba Premier Brian Pallister, who announced Friday morning that his province will impose a $25-a-tonne carbon tax next year that won’t increase over time. The federal government has said all provinces and territories will need a $10 levy in place in 2018 that will rise by $10 annually to $50 per tonne in 2022.

“When Manitoba moves forward with this proposal, they’ll be in good shape for the first year and the second year,” McKenna said in a statement on Facebook. “After that, they’ll need to up their game.”

McKenna was reluctant to say whether or how the federal government will enforce its own standard.

“We’ll be assessing each province and territory each year on their approach,” she told reporters in a conference call. McKenna said provinces will have to meet the federal benchmark price by the end of each year, but declined to say what will happen if they don’t.

Manitoba’s announcement is clever politics, said Mel Cappe, a commissioner of Canada’s Ecofiscal Commission, in that it may force the federal government to try to impose its own tax on top of the provincial levy to meet the federal standard. “What Pallister’s done is made it look like he’s done something and forced the feds to do the right thing,” he said. “The province won’t bear the political cost. It sounds smart to me.”

By insisting it will impose a federal benchmark, Cappe said, Ottawa has actually taken responsibility for meeting that target out of reluctant provinces’ hands.

Pallister faces his next election in 2020, just as his proposed carbon tax is set to dip below the federal price. Now he’ll be thinking, “’When I run to get re-elected, I’m going to run against the federal government,’” Cappe said.

Manitoba’s move is the latest indication that Ottawa has a fight on its hands over its carbon pricing plan, said Erin Flanagan, federal policy director at the Pembina Institute.

Flanagan pointed to Nova Scotia, which announced it will create a cap-and-trade system last month that will apply to 20 large companies but failed to set an emissions cap, and said it plans to give away credits instead of selling them. “It’s unlikely to result in emissions reductions below business as usual,” she said.

Saskatchewan, the only province other than Manitoba that refused to sign the pan-Canadian climate change framework last year, has said it will fight a federal carbon tax in court. Others argue that Manitoba’s carbon tax will achieve the same reduction in emissions as the federal plan over the next five years, and that should be good enough.

Pallister said Friday his plan is cheaper and “works better” than the federal benchmark. “The environment and the economy aren’t separate entities,” he said. “They go together and you cannot focus on one while ignoring the other.”

Dave Sawyer, an environmental economist with consulting firm EnviroEconomics, said the plan is “probably not as offside as most people think.” Sawyer recently completed a carbon price analysis for the Manitoba government to compare its plan to the federal government’s. “The analytics showed that the two price schedules delivered very similar cumulative emission reductions over the period,” he said.