Liberals pitch $15-billion in new spending, hike carbon tax to pass 2030 emissions goals

The federal government plans to triple its carbon tax and spend more than $15-billion to pass Canada’s 2030 greenhouse gas emissions reduction targets.

The long-awaited update to Ottawa’s climate change plan was released by Prime Minister Justin Trudeau on Friday. After a contentious five years locked in battles with provinces over measures to cut emissions, the plan marks a significant departure from how the Liberals craft their climate policy. Instead of relying on co-operation with the provinces, Mr. Trudeau revealed a suite of measures that his government controls.

But to be successful, the plan relies largely on the Supreme Court siding with Ottawa when it releases its decision on the constitutionality of the federal carbon tax.

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“This plan for a healthy environment and a healthy economy was developed for the federal government,” Mr. Trudeau told reporters Friday. “We know that Canadians understand that it can no longer be free to pollute anywhere in the country.”

After decades of Canada chronically missing its emissions reduction promises, the plan was celebrated by environmental groups as the first time a federal government has introduced a policy that will meet its stated ambition.

But it was slammed by conservatives, including Ontario Premier Doug Ford, who said plans to hike the carbon tax amount to “the Prime Minister versus the people,” and the federal Conservative Party, which criticized the decision to increase the price on carbon.

The NDP and Green Party, meanwhile, said the plan was not ambitious enough.

Officials at a technical briefing said modelling shows the plan released Friday would allow Canada to reduce emissions by more than 31 per cent below 2005 levels by 2030 – just surpassing Mr. Trudeau’s 2019 election promise to exceed the 30-per-cent reduction target.

The federal government projects that emissions could be reduced by as much as 40 per cent below 2005 levels by 2030, depending on the impact of investments in transportation, clean technology and actions by provinces and territories.

The plan stems from Canada’s participation in the Paris Agreement, where countries committed to limit the rise in global temperatures to 2 degrees Celsius above pre-industrial levels, with the goal of limiting warming to 1.5 degrees. According to a United Nations report, failing to do so will lead to significantly worse climate impact.

Following a federal election win where the Conservatives campaigned against the carbon tax, the Liberals put the policy at the centre of their plan, raising it to $170 per tonne by 2030. Currently the price goes up by $10 a year, hitting $50 per tonne in 2022. After that, the federal government proposes raising it by $15 per year until 2030.

Between 2022 and 2030, that will add more than 27 cents to the per-litre cost of gas, officials at the technical briefing told reporters.

People living in provinces and territories subject to the federal carbon price backstop will still get rebates as the price increases, though the federal government will move to quarterly rebates instead of once a year at tax season.

Environment Minister Jonathan Wilkinson described the $170 carbon price as a “proposal,” and said he has already started pitching the change to his provincial and territorial counterparts.

Officials said they are confident that the provinces will lose their bid to have the carbon price struck down by the courts, adding there is no backup plan if Ottawa loses in the courts.

Friday’s plan also narrows the scope of the federal Clean Fuel Standard (CFS) to liquid fossil fuels like gasoline, diesel and oil. It will no longer cover gas or solid fuels, as originally planned. Details of the CFS will be released next week, but business groups praised the move. The Canadian Association of Petroleum Producers, an oil lobby group, also supported removing gas and solid fuels from the CFS, but on Friday said it was analyzing the announcement to fully understand the implications for the oil and gas industry.

Mr. Trudeau said the government would spend $15-billion to implement the updated plan, bringing the total federal spending since 2015 to more than $75-billion.

That new spending will include a $1.5-billion fund to increase the production and use of low-carbon fuels like hydrogen, renewable natural gas and diesel; $6.1-billion for retrofits to residential, community and commercial buildings; $964-million to modernize the electrical grid; and $300-million to help remote Indigenous communities transition from diesel fuel.

The Liberals will also consider imposing a carbon adjustment at the border, which would effectively put a carbon tax on imports from jurisdictions that don’t have their own carbon price, and plan to increase the stringency of methane emissions standards by 2035.

Mr. Trudeau noted that Canadians will have their say on the carbon tax with a general election before the proposed increases kick in. He also took aim at the premiers challenging the pollution price in court, saying they “still don’t understand that the only way to build a strong economy for the future is to protect the environment at the same time.”

But Alberta Environment Minister Jason Nixon echoed Mr. Ford, slamming the plan and vowing to continue his province’s legal fight.

“The Prime Minister continues to impose his ‘Ottawa knows best’ attitude on Alberta at a time when Albertans can least afford it,” Mr. Nixon said.

While the Prime Minister acknowledged the political battles over the carbon tax, he said the business community has moved on. “The biggest companies in the world, the leading investors in the world, dozens of countries, hundreds of cities and many millions of consumer transactions are pushing us in the same direction,” he said.

This week the New York State Common Retirement Fund, which has an estimated valuation of about US$226-billion, announced it will evaluate its stake in oil sands companies, joining a growing list of investors re-examining their relationship with the Alberta oil sands over environmental concerns. Over the past two years, major economic players including Deutsche Bank, Zurich Insurance Group and Norway’s US$1-trillion sovereign wealth fund have all divested from the region.

Jennifer Winter, director of energy and environmental policy with the University of Calgary’s School of Public Policy, said the viability of Alberta’s oil and gas sector will hinge on what support it receives from provincial or federal governments, and how much the industry can innovate to reduce its greenhouse gas emissions.

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