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Market News

 June 13, 2007
Quebec 'carbon tax' approved

 Quebec, Canada (GLOBE-Net) -- The Quebec government has approved a plan for a tax on oil and gas companies for the sale of hydrocarbon products in the province. The 'carbon tax' will be applied to oil, coal, natural gas and other fossil fuels to raise an estimated $200 million annually to support Quebec's plan to reduce greenhouse gas emissions and adapt to climate change.

As of October 1st this year, the tax on gasoline will be 0.8 cents per litre. The tax will also be applied at 0.9 cents per litre of diesel fuel; 0.96 cents per litre of light heating oil; 1 cent per litre of heavy heating oil; 1.3 cents per litre of coke used in making steel; 0.5 cents per litre of propane; and $8 per metric tonne of coal.

The proceeds will be paid into a Green Fund, which will provide the resources for the implementation of the provincial climate change plan. $120-million a year has been earmarked to develop public transportation, aimed increasing transit use by 8 percent by 2012.

It is uncertain what impact the tax will have on the province's three refinery operators - Petro-Canada, Ultramar and Shell -- and around 1,500 gasoline retailers. The tax is expected to be passed on to consumers. The charges are not substantial given current gasoline prices of around $1.09 to $1.16 per litre, but for industrial users the charge could prompt some fuel switching.

If the tax is not significant enough to impact demand, its primary function will be revenue generation rather than behaviour modification. As a major policy tool, carbon taxes are traditionally designed to raise the price of carbon-based fuels high enough so that consumption is reduced and alternative energy sources are sought.

However, Quebec's Natural Resources Minister Claude Bechard said he hoped oil companies would absorb the tax rather than pass it on to consumers. Although that is unlikely, it does indicate that the government is not seeking to apply a demand-curbing carbon tax.

The provincial climate change plan includes twenty-four specific actions, many of which will be introduced over the next year. By the end of this year, new greenhouse gas (GHG) emissions standards equivalent to those in California are expected for light-duty vehicles sold in Quebec. The government projects this will cut GHG emissions from new vehicles by 25-30 percent by 2016.

With the plan, the provincial government says it will be able to cut emissions by 10 Megatonnes of carbon dioxide equivalent, or 1.5% below 1990 levels. With further funding obtained from the federal government, Quebec says it will be able to cut emissions to 6% below 1990 levels.

Other specific measures in the plan include limiting the speed of heavy vehicles to 105 km/hr, raising Building Code standards to improve energy efficiency of new buildings, and an information campaign to promote public awareness of climate change actions.

Investments will also be made to promote the development of energy efficiency technology and clean energy solutions, and to encourage Canadian companies to bring such products to market. A complete list of measures and details can be found in the official plan: Quebec and Climate Change -- A Challenge for the Future (PDF).



For More Information: Government of Quebec