Canada increases carbon tax in attempt to tackle climate change

In an attempt to tackle climate change, Canada will double its carbon tax next year as the country moves toward an emissions-cutting approach to controlling pollution.

The proposed tax, which will target the oil and gas sector, will rise to C$50 ($37.14) per ton in 2019 from C$30 ($25.92) in 2018 and go to C$100 ($78.49) in 2022, under the national Greenhouse Gas Pollution Pricing Act.

The federal government, which this year unveiled its national plan to reduce carbon emissions, has said it is not interested in provincial plans that reduce emissions by relying on carbon pricing, which is a barometer for the environmental impact of industrial activity.

Supporters of carbon pricing argue it is essential to reduce overall emissions because it allows for some level of economic efficiency.

Of the 31 industrialized nations that have national carbon emission reduction targets, Canada is the only one without a price on carbon. This creates difficulties for companies, who often must estimate the cost of a carbon tax or carbon trading scheme, and business owners that find themselves being forced to pay more.

On the international level, the Organization for Economic Cooperation and Development (OECD) noted in a 2016 study that “the cost of oil and coal is already increasing, and the consequences are being felt across a broad spectrum of industrial sectors.”

“Diverting investment to other energy sources will also slow economic growth in Canada,” it warned.

For Canada’s steelmakers, a rising carbon tax could be a huge obstacle, especially if they are forced to convert to low-carbon production and the market is not yet ready to pay the costs.

Paul Brown, chief executive of Canadian Steel Producers Association, which represents nine steelmakers including ArcelorMittal, the world’s largest steelmaker, and CMC Steel, told The Wall Street Journal that “In our view, it would make much more sense to continue encouraging steelmaking in Canada while curbing emissions through improved energy efficiency.”

Brown acknowledged that local carbon-emission regulations in B.C. may lead to Canada implementing some form of “carbon price,” which is unlikely to be “particularly beneficial” for the industry.

Steelmakers appear to have long wanted to see Canada put an immediate price on carbon emissions, since production there releases an enormous amount of carbon dioxide.

The Federation of Canadian Municipalities estimates that a carbon tax would cost an additional C$1.25 billion in 2018 alone in Toronto and Vancouver. The federal government, though, has set no emissions goals for the federal government.

Under international agreements, Canada has committed to a 17 percent reduction from 2005 levels in 2030.

The Canadian steel industry has also had to deal with American tariffs imposed on steel this year, based on trade barriers that have put Canadian producers at a disadvantage. The two countries will see some informal talks in the coming weeks to try to resolve the dispute.

Canadian President Donald Trump has repeatedly targeted Canadian imports in an attempt to bring back manufacturing jobs to the United States. The national legislation included a directive from the Ministry of the Environment and Climate Change to decrease emissions intensity by 5 percent below 2005 levels by 2020.

The Canadian government has acknowledged that environmental rules, which have the aim of stabilizing and reducing emissions, can sometimes “disrupt [the] flow of an industry.”

Still, Canada’s government announced that it believes a carbon tax will help reduce national greenhouse gas emissions and move Canada forward as a climate leader.

“Our work toward the decarbonization of the economy will not and cannot be constrained to 2030,” Environment Minister Catherine McKenna told The Wall Street Journal in a written statement. “We’re committed to growing and diversifying our economy so that we can find the most cost-effective means to reduce emissions over the next half century.”

Correction: A previous version of this story incorrectly cited former federal environment minister Catherine McKenna as Minister of Environment and Climate Change.

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