Canadian Carbon Price Hits a Wall in Saskatchewan

If the province of Saskatchewan does not join Canada’s carbon pricing scheme, it will be unable to benefit from the nation’s recently announced Low Carbon Economy Fund. Saskatchewan Premier Brad Wall said the decision is “nothing short of extortion.”

The government of Canada announced in October 2016 the creation of a pan-Canadian carbon pricing plan, under which the national government will institute a minimum carbon price of $10 per metric ton in 2018. The price will increase $10 a year until it reaches $50 per metric ton in 2022, at which time it will be evaluated.

Provinces may adopt their own carbon-pricing mechanism, be it a carbon tax or carbon market, as long as it’s done by 2018 and meets the minimum requirements of the pan-Canadian pricing plan. If they fail to do so, the national government will implement one for them. The plan is meant to be revenue neutral for the federal government, with money brought in by the price going directly back to the province in which it was generated.

The plan should help Canada reach its commitment under the Paris Agreement to reduce its greenhouse gas emissions 30% below 2005 levels. Fossil fuel dependent provinces, such as Saskatchewan, have resisted carbon pricing and responded to the new plan with disapproval.

SaskPower, the province’s principal electric utility, operates three coal-fired power plants in the province as well as nine natural gas facilities. The province is also home to the world’s first commercial scale, full-chain, post-combustion carbon capture and storage (CCS) project on Unit 3 of the Boundary Dam plant (Figure 1).

Fig 2_CCS-facility
1. Innovation versus regulation. Saskatchewan Premier Brad Wall and the federal government are at odds concerning how best to lower Canada’s carbon emissions. While the federal government has begun the process of instituting a carbon price, Wall has resisted, saying that the answer lies in innovation. Wall points to SaskPower’s Boundary Dam carbon capture and storage project, shown here, as proof that action to address climate change can and should be taken without the institution of a carbon price. Source: POWER/Gail Reitenbach

Wall’s response to the carbon-pricing ultimatum was immediate and negative. “The level of disrespect shown by the Prime Minister and his government today is stunning,” Wall said in a release, going on to suggest that the adoption of a carbon price would push his province’s businesses over the border. “The carbon tax will siphon over $2.5 billion from Saskatchewan’s economy when fully implemented and make our province a less competitive place to do business. For example, we have no idea what the U.S. government will do when it comes to carbon pricing.”

Since then, a few things have changed. First, with the election of Donald Trump, it has become clearer that the U.S. will likely not be instituting a carbon tax. Second, the federal government has continued to press ahead with its progressive environmental agenda.

In mid-June 2017, Environment and Climate Change Canada announced the Low Carbon Economy Fund. The $2 billion fund will support the implementation of the Pan-Canadian Framework on Clean Growth and Climate Change “by leveraging investments in projects that will generate clean growth and reduce greenhouse gas emissions towards meeting or exceeding commitments under the Paris Agreement,” according to a factsheet. The fund is expected to be active for five years.

The majority of the funding will go to the Low Carbon Economy Leadership Fund. The $1.4 billion in this fund will be available only to provinces and territories that have adopted the Pan-Canadian Framework on Clean Growth and Climate Change “to help them deliver on leadership commitments to reduce greenhouse gas emissions, including those they outlined in this Framework,” according to the factsheet.

In December 2016, all Canadian territories and provinces, except Saskatchewan and Manitoba, signed the framework, which includes a commitment to the carbon pricing plan. Provinces allowed funding under the Low Carbon Economy Leadership Fund will be eligible for funding at a base amount of $30 million plus additional funding based on population. The remaining $600 million in funding is allocated to the Low Carbon Economy Challenge, which will “support ambitious projects that can be submitted by all provinces and territories, as well as municipalities, indigenous governments and organizations, businesses and both not-for-profit and for-profit organizations,” according to the factsheet.

Wall took to Facebook to decry the exclusion of Saskatchewan from the fund. “Withholding funds from provinces that don’t go along with the federal government’s policies represents a new low in Canadian federalism,” Wall wrote.

The premier went on to note the province’s advancements in CCS. “If this fund, which Saskatchewan taxpayers have helped create, is really about reducing carbon emissions, how does withholding those funds for green initiatives in Saskatchewan help that objective?” he wrote. “Moreover, through our initiatives in CCS, Saskatchewan has invested more per capita than any other province in Canada to address climate change.”

Wall continues to oppose the carbon-pricing plan, going so far as to say that he would be willing to take the government to court. However, no court documents have been filed as of mid-July.

Abby L. Harvey is a POWER reporter.

SHARE this article