Cap-and-trade style carbon tax plan unveiled for Manitoba's biggest emitters

While nearly all Manitoban residents and companies will simply pay a flat tax $25 per tonne of carbon emissions, a select few large industrial emitters will pay taxes based on an entirely different framework.

On Monday, the province unveiled more details of its "Made-in-Manitoba" climate plan, including a cap-and-trade style carbon tax for the province's biggest greenhouse gas emitters.

Large emitters will be exempt from paying carbon taxes on their production volume up to a certain benchmark which will be individually established by the province's Climate and Energy Branch. The framework is known as an output-based pricing system.

Only companies that emit more than 50 thousand tonnes of carbon dioxide per year will qualify. 

"We're going to be working with our emitters to ensure they have a path forward for lowering their carbon footprint and we'll be setting benchmarks that will be reflective of our goals in Manitoba which is ultimately to reduce the amount of carbon we put into the atmosphere," Sustainable Development Minister Rochelle Squires told reporters on Monday.

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When a company exceeds its individually set benchmarks, they will have a choice to pay the $25 per tonne carbon tax or purchase carbon credits from other companies. 

If a company's emissions fall below their benchmark, they will not have to pay carbon taxes and can accumulate carbon credits which can be sold to other emitters on an open market or used in future years to offset taxes.

The plan is designed to protect energy-intensive industries — such as mining chemical and fertilizer producers — that are highly exposed to global competition. Since carbon taxes increase output costs, local companies might struggle to compete internationally against players from countries that are not subject to similar greenhouse gas restrictions, Squires said.

Governments in Alberta and Saskatchewan are both working on similar frameworks. The federal government has also devised a OBPS program.

Other companies could opt-in at later date

Currently, only six companies operating in Manitoba meet the criteria for the output-based pricing system. However the province says as of 2020, companies that emit 10,000-50,000 tonnes of carbon dioxide and experience competitive trade pressures may voluntarily apply to opt in. 

While the province has not yet determined how or at what level it will set the benchmark targets for qualifying companies, Minister Squires says the expectation will continually increase over time.

"We will look at having a declining cap on that performance standard so that we're reducing more carbon emissions every year," she said.

The draft discussion paper provided by the province suggests that the allowable carbon emission benchmarks could decrease by two percent for most sources of carbon.

According to the province, municipalities, universities, schools and hospitals, landfills, wastewater treatment facilities or natural gas distribution networks will not be eligible for the program since they do not compete in international markets.

The province expects the program to launch in January 2019.

Top large emitters in Manitoba:

• Koch Fertilizer Canada: 688,159 tonnes of CO2 (2016);
• TransCanada Pipelines: 258,559 tonnes of CO2 (2016);
• Graymont: 130,624 tonnes of CO2 (2016);
• Canadian Kraft Papers: 78,964 tonnes of CO2 (2016);
• Husky Oil: 75,252 tonnes of CO2 (2016);
• Vale: 60,641 tonnes of CO2 (2016)

Source: Government of Manitoba