According to Radio-Canada, the Liberals are preparing to unveil a mechanism known internally as Poilievre Insurance, which would oblige the federal government to compensate companies if the carbon price were cut or abandoned.
The Trudeau government is working on developing carbon difference contracts. Minister Chrystia Freeland will announce this in her Household on Tuesday.
With these agreements, Ottawa would guarantee the carbon price development for a long period of time. It would commit to paying significant financial compensation to companies investing to reduce their emissions if the price of carbon is reduced or phased out.
This would put an end to political uncertainty about the future of carbon pricing. A long-term government guarantee could encourage more companies to invest in their decarbonization.
Poilievre insurance
Campaigning within his party, Pierre Poilievre promised that if he became prime minister he would abolish the carbon tax.
Photo: CBC/Matt Duguid
The Conservative leader’s pledge to end carbon pricing if elected is causing much hesitation in the business community when it comes to investing to reduce emissions.
The government wants to eliminate political risk for companies, a source said on condition of anonymity.
The Trudeau government has announced that tariffs will reach $170 per tonne of carbon in 2030, which should normally spur investment in green technologies.
Risks for companies include policies changing, the increase being less than expected, or carbon pricing being phased out altogether. Why would a company invest to reduce its emissions if the carbon price would be abandoned?
According to Caroline Brouillette, acting director of the Climate Action Network, the aim is to ensure market predictability.
With the imminent rise in carbon prices, a company may want to invest in electrifying its operations. However, if a future government removed this pricing, these investments would become less competitive, she explains.
These carbon difference contracts would also make it easier for companies to obtain financing from banks by offering them government guarantees in the event of a loss related to a carbon policy change.
For now, these contracts would target large-scale decarbonization projects that require large investments. We can think of the oil and cement sectors, our source gives as an example.
A study is underway to establish a similar mechanism for smaller projects.
political tool
This measure also fulfills a political objective. It would allow Justin Trudeau to secure his political legacy on carbon pricing. It’s also a way of pissing off conservatives.
The Conservatives’ promise to abolish the carbon price would then come at a significant cost.
In an interview on CBC’s Power & Politics program, the Federal Minister for Innovation, Science and Industry, François-Philippe Champagne, did not hide the political intentions of the Liberal government. Listen, we have to look ahead. If Mr. Poilievre wants to look back, that’s his business, he said. But the world is moving in one direction, that’s pretty clear. You’ve seen the Inflation Reduction Act [la loi anti-inflation], for example in the United States. This generates significant investments in North America.
“I would say Canadians trust us to say, ‘Look, we have to look to the future. We must invest and have the structure to guarantee these investments. »
— A quote from François-Philippe Champagne, Minister for Innovation, Science and Industry, in an interview with Power & Politics
If the mechanism is adopted, it would force Conservatives to quantify the cost of these corporate compensations in their next election manifestos, which could run into billions of dollars.
Shell Oil’s carbon capture facility in Fort Saskatchewan, Alberta.
Photo: Portal/TODD KOROL
The idea, says Caroline Brouillette, is to depoliticize the issue of federal carbon pricing and turn it into an economic issue. If a future government were to withdraw it, then it would have to pay for this insurance policy.
However, the interim director of Réseau Action Climat insists that carbon pricing is not a panacea in the fight against climate change.
The Trudeau government has put a lot of energy into its carbon pricing, but it’s just one tool in the toolbox to deal with the climate crisis, believes Caroline Brouillette.
The Climate Action Network calls for government investments of 2% of GDP in climate action that are real solutions and are not ultimately fossil fuel subsidies, explains Caroline Brouillette.
Could carbon difference contracts be seen as a disguised fossil fuel subsidy? The question arises, she believes.