Carbon tax hikes highlight the high costs of federal vs. Quebec pricing schemes

News analysis

The April 1 federal carbon tax hike to $ 40 per ton sets federal pricing compared to Kebecker’s cost under the state’s cap-and-trade policy, where current carbon prices are about half that. It shows that the cost of the scheme is high.

Trevor Tombe, a professor of economics at the University of Calgary, said federal allowances for Quebec’s approach would ease the burden on the state.

“Then you can set a cap on emissions that decrease at a constant rate, but the price indicated by that cap is lower than the current carbon tax. So, in a sense, they are other It does not have as strict climate policies as the jurisdiction. “

According to Tonbe, the effectiveness of Quebec’s cap-and-trade system is about $ 20 per ton of carbon emissions. However, the federal carbon tax will be raised from $ 30 to $ 40 on April 1, and the difference will be even greater.

“There is starting to be a pretty big gap between the prices here and the prices in Quebec,” he said.

“It’s a challenge to say that the federal government intends to consider and negotiate the state, but at some point Quebec will either put a lower limit on the price of a cap-and-trade system equal to the carbon tax, or the federal government will do so. You will need to impose a kind of additional tax on top. Cap and trade price. “

Less than that, according to Tonbe, defeats the purpose of national carbon pricing.

“The overall idea is to have a unified policy. That is the main motivation for federal policy. And this is the source of the real difference that is not sustainable. On the other hand, they punt this issue. You can appreciate the political convenience you just have, but it can’t last forever. “

A federal carbon tax rebate will reduce some of the inequality. Quebecs do not receive rebates under the state system, but the federal government applies carbon taxes and rebates in states that do not have their own system. In these four states, Baseline 2021 rebate For a family of four, it’s $ 600 in Ontario, $ 720 in Manitoba, $ 1,000 in Saskatchewan, and $ 981 in Alberta.

Carbon tax rebates do not rule out policy issues, Mr Tonbe said.

“For example, British Columbia has a carbon tax that exceeds the federal minimum tax amount. They also do not receive federal rebates. Therefore, whether or not to receive a rebate is what the price is. It depends on whether it is covered by the federal backstop. “

In addition to this, he said, taxes would be an economic stumbling block, whether or not it was rebated.

“Rebates do not rule out the impact of carbon taxes on GDP growth,” Tombe said. “Of course, actions to reduce emissions come with economic costs, and it argues,” How much are we willing to bear? ” It’s a fair enough argument to … Even the government’s own estimates say that policy will slow economic growth over time.

It may also be argued that cap-and-trade addresses emissions issues in a very different way than carbon taxes, so it is not possible to form a unified policy.

“Cap and trade works by fixing total permissible emissions and auctioning permits or creating markets where companies can buy and sell,” explains Tonbe.

“We are certain about emissions, but we don’t know what the price will be because it depends on the auction. We are confident in the price because the carbon tax is stipulated by law, but we do not know what the emissions will be. . “

In a 6–3 ruling, the Supreme Court of Canada upheld the constitutionality of the federal carbon pricing scheme.At a press conference on March 25, after the decision, Alberta Prime Minister Jason Kenny granted Quebec’s support, but the Supreme Court said. Label prefecture.

“Quebec was actually joining us as an intervener to support state jurisdiction in this reference in the Supreme Court …. Judge Wagner said a Quebec lawyer said: In other words, “Don’t worry. You already have a cap and trade skim. You have your own policy discretion.” The rest of this doesn’t affect you, “Kenny said.

“Because I’ve worked in Ottawa, it’s clear that the Ottawa elite is far more sensitive to federal state jurisdiction and tensions than when they leave Quebec and when they leave the west. It’s not a new observation. I think today’s decision emphasizes it. “

Former Alberta Cabinet Minister and Professor Emeritus of Political Science at the University of Calgary said Quebec may have been isolated from the effects of mandatory national carbon taxes, but the Supreme Court examined it. The ruling states that it threatens the jurisdiction of all states, including Quebec.

“They don’t [care] They’re cap-and-trade, so it’s about carbon taxes, right? As some people have pointed out, a $ 20 cap and trade per ton is much cheaper than a carbon tax, “Morton said in an interview.

“This decision at the policy level is a defeat for Saskatchewan, Alberta, and Ontario, but at the medium- to long-term constitutional level, of course, for advocates in all states, including Quebec.”

Section 92A of the Constitution states: “In each state, the legislature can exclusively enact legislation relating to the development, conservation and management of non-renewable natural resources. [and] Generation and generation of electrical energy. “

Alberta may want to impose carbon price importance on Quebec, but Morton says Quebec can help Alberta in the battle for state jurisdiction over Ottawa. ..

“I hope someone in Quebec or the Quebec team talks to the people in Quebec City and says,’Look, this is unacceptable to anyone who cares about Section 92A.'” Remember that Section 92A explicitly includes the use of hydropower. “