Ownership of carbon tax up for grabs

Opinion

Hey there, time traveller!
This article was published 23/12/2021 (1099 days ago), so information in it may no longer be current.

A CENTURIES-OLD Christmas tradition involves giving lumps of coal to bad children. When it comes to coal, however, Manitoba is one of the good ones — it went off its last vestiges of coal-generated electricity a few years back.

In fact, Manitoba has the cleanest electricity grid in Canada, thanks to Hydro, which makes the future of a key step in its Climate and Green Plan fraught with consequences.

The Stefanson government rightly announced it would not appeal a federal court decision that ruled against the province’s stillborn carbon-pricing plan. Instead, it would be “pursuing collaborative negotiations based on results and recognition,” which amounts to the intergovernmental-speak equivalent of “thoughts and prayers” because, legally and constitutionally, it’s Ottawa, not Manitoba, that holds all the cards.

The province’s judicial-review request was based on a novel but legitimate argument: each province has a different greenhouse-gas emissions profile; applying the same carbon price across each imposes a higher level of stringency on Manitoba than others.

As well, the Liberals had cut deals with other provinces, exempting some emissions from the carbon tax. Why not Manitoba, the province asked?

For sure, the court challenge stemmed from the former premier’s deep policy and political frustration with the Trudeau government. As the sole Conservative premier in the country willing to accept a carbon tax, Brian Pallister felt uncomfortably exposed with his own party’s base and its federal-party cousins.

But the province’s own analysis showed a very high carbon tax was needed in Manitoba to meaningfully reduce emissions. Prime Minister Justin Trudeau was unwilling to compromise on this point, perhaps anticipating higher carbon prices in the future. In the legislature, Pallister withdrew his government’s bill creating a “made-in-Manitoba” flat carbon tax. Ottawa then made Manitoba a “backstop” province with its carbon taxes, which are now in effect.

Withdrawing the Manitoba bill was better politics than policy. It proved a tactical error, a mistake that ultimately gave the court no alternative basis to adjudge Manitoba’s own efforts. “At the time the (federal) decision was made,” the court ruled this fall, “there was no GHG mechanism in place in Manitoba to be assessed for stringency.”

This leaves Pallister’s successor with a dilemma. Between the Supreme Court’s ruling in favour of Ottawa’s approach and the federal court’s ruling on Manitoba’s approach, a rising carbon tax is coming to Manitoba. The only question that remains is whether it’s Ottawa’s tax, or Manitoba’s?

If it is Manitoba’s tax, then the province officially imposes it and gets control of the revenue to disburse as it sees fit. This is no small political or policy decision. Manitoba’s PC government would now “own” carbon taxes instead of Trudeau’s Liberal government.

In reality, Pallister was grudgingly headed this way. He announced in the 2020 budget that he would actually re-introduce his $25 per tonne “green levy” and use the revenues generated to reduce the PST by another point, to six per cent. That, too, was withdrawn when COVID-19 scrambled the province’s finances.

So, Stefanson could do the same thing and commit to ongoing tax relief as compensation for higher fuel charges. Or she could use the money to fund various climate-action initiatives, as her NDP and Liberal opposition and many green lobby groups would prefer.

Lowering taxes was never a question for Pallister; it might yet prove to be for Stefanson. She has mused about withholding next year’s property-tax cut and plowing that money into health care. Her first throne speech made only passing mention of lower taxes as a priority.

Signing onto the federal carbon-tax plan would actually allow her government to do both; keep lowering property taxes as promised, and create fiscal room to invest more in health care.

But to do so, she has to cross a political Rubicon her predecessor wouldn’t and accept a high (and rising) carbon tax that wasn’t “made-in-Manitoba.” The safest path, politically, is to let the status quo linger and avoid the choice. Let Ottawa wear it.

But having accepted the pathway of collaboration and negotiation, the government’s die has been cast. What remains to be seen is whether carbon pricing in Manitoba will wear the bison or the maple leaf.

David McLaughlin was Clerk of the Executive Council in the government of Manitoba in 2020-21. He was campaign manager for the PC Party of Manitoba in the 2016 and 2019 elections.