According to information obtained by Radio-Canada, the Liberals are preparing to unveil a mechanism internally dubbed Poilievre Insurance
which would require the federal government to compensate companies if the price on carbon were to be reduced or abandoned.
The Trudeau government is working to develop carbon difference contracts
(contracts for carbon differences“,”text”:”contracts for carbon differences””>contracts for carbon differences
). Minister Chrystia Freeland will make the announcement in her budget on Tuesday.
With these agreements, Ottawa would guarantee the carbon price trajectory for a long period of time. It would commit to paying substantial financial compensation to companies that make investments to reduce their emissions in the event that the price on carbon is lowered or eliminated.
This would put an end to political uncertainty about the future of carbon pricing. A long-term government guarantee could incentivize more companies to invest in their decarbonization.
Poilievre Insurance
The Conservative leader’s promise to eliminate carbon pricing if elected is causing a lot of hesitation in the business community when it comes to investing to reduce emissions.
The government wants to eliminate political risk
for businesses, a source said on condition of anonymity.
The Trudeau government has announced that the tariff will reach $170 per tonne of carbon in 2030, which should normally stimulate investments in green technologies.
Among the risks for businesses is that policies change, the increase is less than expected, or carbon pricing is canceled altogether. Why would a company invest to reduce its emissions if the price on carbon were to be abandoned?
The idea is to ensure market predictability
according to Caroline Brouillette, Acting Director of the Climate Action Network.
Seeing the upcoming rise in the price of carbon, a company may want to invest in electrifying its operations. However, if a future government were to withdraw this pricing, these investments would become less competitive.
she explains.
These contracts for the carbon difference would also make it easier for companies to obtain financing from banks by offering them government guarantees in the event of a loss linked to a change in carbon policy.
These contracts would target, for the time being, large-scale decarbonization projects, which require investments adults
. We can think of the oil and cement sectors, cites our source 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 around carbon pricing. It is also a way of annoying the Conservatives.
The Conservatives’ promise to eliminate the price on carbon would then come at a considerable cost.
Interviewed on the show Power & Politics from CBC, the federal Minister of Innovation, Science and Industry, François-Philippe Champagne, did not hide the political intentions of the Liberal government.Poilievre wants to look back, that’s his business, he said. But the world is moving in one direction, that’s pretty clear. You saw the Inflation Reduction Act [la loi anti-inflation], for example, in the United States. This generates significant investments in North America.”,”text”:”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.”}}”>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 saw the Inflation Reduction Act [la loi anti-inflation], for example, in the United States. This generates significant investments in North America.
« I would say that Canadians trust us to say: listen, we have to look to the future. We must invest and have the structure to guarantee these investments. »
If the mechanism is adopted, it would force the Conservatives to quantify in their next election platforms the cost of these compensations to companies, which could amount to several billion dollars.
Shell Oil’s carbon capture facility in Fort Saskatchewan, Alberta.
Photo: Reuters / TODD KOROL
The idea, says Caroline Brouillette, is to depoliticize the issue of federal carbon pricing and make it 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 the Réseau Action Climat insists that carbon pricing is not a panacea in the fight against climate change.
The Trudeau government has invested a lot of energy
in its price on carbon, but it is only one tool in the toolbox to deal with the climate crisis
believes Caroline Brouillette.
The Climate Action Network calls for government investments equivalent to 2% of GDP in climate actions, which are really solutions and which are not ultimately fossil fuel subsidies
explains Caroline Brouillette.
Could contracts for the carbon difference be considered a disguised subsidy to fossil fuels? The question is valid
she believes.
