What we still don’t know about the federal carbon-pricing plan

The federal government has unveiled its new carbon pricing plan, and while it’s almost a carbon copy of Alberta’s plan, many questions remain.

The federal plan, announced Thursday by Environment Minister Catherine McKenna, is a hybrid system like Alberta’s, which will charge a levy on fuel and create an emissions credit trading system for large industrial polluters.

The levy will start at $10 per tonne of carbon dioxide in 2018, increasing to $50 per tonne in 2022.

The federal backstop system will only be imposed on jurisdictions that don’t create their own carbon tax or cap-and-trade system before the end of 2018. The government plans to table legislation in the fall, and to roll out the levy no earlier than the spring of 2018, followed by the trading system a year later.

But there are still unanswered questions about where the backstop price will apply, where the revenue will go, and what Saskatchewan Premier Brad Wall — the most vocal opponent of carbon pricing — will do next.

ALL FOR ONE?

It seems Saskatchewan is the major target of this federal carbon price.

Right now, McKenna told reporters, 97 per cent of Canadians are living in jurisdictions that either have a carbon price or are planning one. That remaining three per cent? It’s Saskatchewan.

Quebec, Ontario, Alberta and British Columbia already have some form of carbon price in place. Nova Scotia plans to launch a cap-and-trade program, and the other Atlantic provinces are considering their options, including joining Nova Scotia to build a regional cap-and-trade system.

In Manitoba, Premier Brian Pallister initially refused to sign on to the federal climate change framework in December, an attempt to negotiate a better health-care deal with Ottawa. But the province has since said it will develop its own climate plan.

And it’s unclear that the backstop carbon price will apply to the three territories, which have warned about the extra cost of a carbon price for remote northern populations.

“We have initiated a study in collaboration with each of the three territories,” an official from Environment and Climate Change Canada said during a briefing Thursday.

In short: that leaves Saskatchewan.

WHO GETS CONTROL?

McKenna insisted that all the money collected through the federal backstop will return to the provinces. But that doesn’t necessarily mean it will return to provincial governments. The government is considering sending rebates to individuals and businesses, she said, though details haven’t been worked out.

“Not a single dollar goes to Ottawa,” she told reporters Thursday. “We’re evaluating how best to return the revenue — for example, by giving it directly back to individuals and businesses in the province.”

That seems to contradict comments made by public safety minister Ralph Goodale in October, when he said “every single penny” from a carbon price imposed on Saskatchewan would remain “under Saskatchewan’s control.”

“I think the federal government’s being disingenuous,” said Aaron Wudrick, federal director of the Canadian Taxpayers Federation. “(The provinces) are essentially bystanders in this.”

TRAINS, PLANES AND BUSES

One part of the plan that seems destined to be a source of confusion is the bit that applies to trucks, buses and planes travelling between provinces.

Road and rail carriers will pay the federal levy on fuel bought and used in backstop provinces, but also on fuel they bring in from elsewhere. Conversely, they’re entitled to a rebate on fuel purchased in a backstop province but used outside.

To work that out, they’ll have to file a return with the Canada Revenue Agency detailing their fuel purchases and distances travelled.

To date, airlines haven’t been subject to carbon prices for flights between provinces, to keep them competitive. But now, since every province should have a carbon price, that could change. The federal government plans to discuss with provinces “to ensure that this emission source is properly covered.” The details haven’t been worked out.

WHAT’S NEXT FOR BRAD WALL?

Saskatchewan’s premier has threatened to take the federal government to court if Ottawa tries to impose a carbon price in his province.

But on Thursday, McKenna seemed ready for a fight.

“We certainly hope that Saskatchewan will develop a plan that makes sense for Saskatchewan,” she told reporters. “But let me be absolutely clear that it is well within the federal government’s right to take action to protect the environment.”

A department official said there’s a “strong legal basis” for the backstop system, as it’s not a revenue-raising tax.

Wall’s office did not respond to a request for comment Thursday.

• Email: mforrest@postmedia.com | Twitter: MauraForrest

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