***Original published in South Mountain Press, February 15, 2019***
Are Manitobans Ready for the New Federal Carbon Tax?
As Manitobans shiver during this February deep freeze, they probably will not be too keen on the imposition of the Federal Carbon Tax which is set to take effect on April 1st. In fact, although Federal Carbon Taxes are not being collected at present, as of January 1st the meter is running for Manitoba industrial emitters who will be subject to a Federal ‘backstop output-based pricing system’.
Premier Pallister is not buying the Trudeau government’s Carbon Tax scheme and put the brakes on the Province’s own Carbon Tax plan back in October. Hence, Manitoba was added to Trudeau’s ‘Naughty’ province list and will impose the new tax.
For the sake of this article, I will put aside the arguments of the advisability of government imposing a punitive, blanket ‘consumption’ tax which will result in dubious environmental benefits. Instead, the focus will be on how the new tax will affect Manitoban’s wallets.
Let’s start with the obvious taxes that will hit on April 1st. To begin, every combustible fossil fuel from Aviation gasoline through to Combustible waste will be charged a yearly escalating tax on a per unit basis. A Cessna passing through Erickson’s airport will be charged an extra 4.98 cents/litre. Natural gas to heat Shoal Lake homes and businesses will cost an extra 3.91 cents/cubic metre. Propane for the weekend summer BBQ at the park will set you back another 3.1 cents/litre. Of course, the big one will be gasoline which will hit every litre of fuel with an extra 4.42 cents.
Remember, these are the initial rates. As the Liberal’s plan stands for now, the $20/tonne tax on fossil fuels will increase to $50/tonne as of 2022. For example, for April 2022, the extra tax per litre of gasoline will be 11.05 cents. Who wants to take bets that the rate will stay static if the Liberals are given another mandate?
Years ago, the Rural Municipality of Yellowhead Council was proud to have brought natural gas to the Town of Shoal Lake. According to Manitoba Hydro, the new Federal ‘Carbon Charge’ related to natural gas use for an average household will be an annual increase of about 13% or $88. In three years, it will be an increase of over 30% as the price per cubic metre climbs to an extra 9.79 cents. It will be even worse for businesses whose 2019 natural gas costs will increase 15-30% depending on their customer class and consumption levels.
Those parts of Manitoba’s industry who rely on fossil fuels are going to get hit hard by this new Carbon Tax. Once their share has been figured out, the amount charged will be retroactive to January 1st.
Compared to the rest of Canada, Manitoba emits relatively little Green House Gases (GHGs) and has few Large Final Emitters (LFEs). But the province does have nine LFEs who account for about 10% of the Province’s GHG emissions. Some of the highest emitters on the list are the Brandon Koch Fertilizer Plant, the TransCanada Pipeline, the Graymont Faulkner lime plant, Vale Thompson Mining Operations, Husky Minnedosa Ethanol, Manitoba Kraft Papers, and three large Winnipeg landfill sites.
Each of these sites have been identified as facilities that emit at least 50,000 tonnes/year of carbon dioxide (CO2). By far and away, the Koch Fertilizer plant which uses enormous amounts of natural gas to create fertilizer, produces the greatest amount of GHGs at about half of the amount of all the other manufacturing facilities put together. The final cost to these facilities will be determined by complicated schemes, pricing systems, and/or cap and trade systems.
There will be a few Carbon Tax exceptions for farmers and commercial fishermen who will not pay extra tax on marked fuel. Other relevant proposed targeted Manitoba relief measures will be directed at rural residents, greenhouse operators, power plants generating electricity for remote communities, and Indigenous Peoples.
The preceding points are the obvious and direct costs associated with the new Federal Carbon tax. In fact, the government is claiming that the average taxpayer will receive more back in income tax than what they will pay in direct tax. As an example, an average Manitoba household should receive an extra $336 on this year’s tax return.
It is the insidious nature of the new tax that will make its true cost to the average Manitoban difficult to determine.
As an example, when the Koch Fertilizer plant gets their new bill for their natural gas use, the higher cost of producing fertilizer will in all likelihood be either wholly or partially passed on to farmers. Government and industry have been cagey about the final price of farmer input costs due to the new Carbon Tax. With regards to nitrogen fertilizer, one estimate from Dr. Mario Tenuta of the University of Manitoba puts the 2019 costs at an extra $7.63/acre for standard fertilizer application rates, climbing to $19.08/acre by 2022. Using 2016 Census data, the average Manitoba farmer with 1300 cropland acres would see a 2019 fertilizer bill increase of $10,000 growing to almost $25,000 by 2022.
On a smaller scale, this will be the same fate for every Manitoba company or consumer. Due to the nature of Manitoba’s economy just about every product, foodstuff, or service has a fossil fuel related component which is going to cost more to produce, manufacture, or deliver. It would almost be impossible to calculate the true costs of this escalating tax and you would have to be particularly naïve to believe that it will end up being revenue neutral.
Ostensibly, the Federal Carbon Tax is meant to wean Canadians away from fossil fuels, embrace ‘Green’ technology and energy sources, and to protect Canadians from the impacts of climate change. Soon enough with a Federal election this fall, we will see if Manitobans will embrace the Liberal’s vision of a CO2 free Canada despite the cost to the pocket book and the financial hits to our industries.
Blair is a personification of a ‘Jack of All Trades and Master of None’. He has held several careers and has all the T-shirts. Time to add the title Blogger to the list.