REGINA - Last week on April 1, Saskatchewan residents saw their bills go lower as the carbon tax came off.
The end of the federal consumer carbon tax meant a steep drop in prices at the gas pump, but April 1 also marked the day that the provincial industrial carbon tax, the Output Based Performance Standards, was lifted on heavy emitters, meaning lower electricity and other bills. In removing that, Premier Scott Moe said Saskatchewan would be the first province in Canada to go completely carbon tax-free.
To explain what is going on and what different types of carbon taxes have been imposed up to now, we turned to Ron Styles, lecturer in economics at the University of Saskatchewan. We began our discussion on the consumer carbon tax which was lifted last week.
What is the consumer carbon tax?
Okay, so let's start with the retail carbon tax, or at least what we call the retail carbon tax. And so it's a tax on very specific products, things like fuel as an example, that is intended to obviously increase the price and in return lower the use of that particular product and therefore reduce the amount of carbon that is going into the atmosphere.
So it's a pretty standard tax. It's very similar to a PST, it's essentially a consumption tax. So yeah, it's pretty straightforward.
On the flip side, maybe I should just add something to that. The way the federal government set it up is that it's returning the money actually on a revenue neutral basis back to individuals or to companies that pay that particular tax, commercial companies that are paying that particular tax. And so the idea is it's supposed to be revenue neutral, I'm not sure it ever was really, but it was supposed to be revenue neutral and the whole idea is just to reduce consumption of those specific products that have a lot of carbon in them.
What is the industrial carbon tax?
The OBPS, Output Based Performance Standards, that particular tax they sometimes call it the industrial carbon tax. But it is different.
The way it is set up, it is only applied to large emitters. There is a level of carbon above which those large emitters have to enroll in the program. The program sets out a penalty for exceeding certain levels of carbon emissions and then companies pay based on how far they exceed the level of carbon emissions.
The whole intent of the program is to encourage companies to make the necessary types of adjustments to lower the level of their carbon emissions and therefore result in less impacts on climate change. I don't know the exact number of companies in Saskatchewan, but again, there's large emitters. They are the ones that are affected by it.
Who would the large emitters typically be?
The largest single emitter in the province is the Saskatchewan Power Corporation. In the last budget, it was paying pretty close to 70 or 75 per cent of the total amount of penalties being paid by large emitters in Saskatchewan, so they are by far the largest.
But beyond them, you would have companies such as Evraz just outside of Regina here, the Yara (Belle Plaine) Fertilizer Plant, the potash players, a lot of (those) kind of companies. Again, the very big ones that are here in the province.
What would people notice with that OBPS charge being gone?
The key one is going to be SaskPower for people in Saskatchewan. Everybody that receives a bill from SaskPower, I think it's the very bottom line has a line that says “carbon tax” on it. That is the amount of money that you're paying as a result of the industrial carbon tax, the OBPS.
The government has indicated that that will be removed on SaskPower bills going forward.
Past that, the main impact of the OBPS, the industrial carbon tax, is on companies that don't really sell a lot in Saskatchewan. Evraz sells some things to Saskatchewan, but they sell a lot of their products outside the province. Potash does as well. If you're talking about somebody like Yara, it's exactly the same. They're selling a lot of their fertilizer products outside the province.
Those taxes themselves, that tax on those particular emitters, doesn't have a large impact on consumers in the province, but it does have an impact in terms of the price that the companies that have to pay the industrial carbon tax, it has an impact on their competitiveness is the phrase I would use. It's going to increase their cost base, obviously, and that means they have to get higher prices out of it.
Again, the whole purpose of the tax is to try to get people to lower their carbon emissions, but there is an aspect of competitiveness that goes in there, and that's the government's rationale for eliminating it.
Was this industrial carbon tax something the federal government mandated the provinces to do?
When the federal government started this, I don't remember the exact year, but when it first started these kinds of programs to reduce carbon emissions here in Canada, it put out both the retail carbon tax and it put out the industrial carbon tax as well. They were both originally federal programs, but provinces were provided with the ability to actually operate the retail carbon tax, plus they were given an opportunity, if they wanted to, to put their own industrial carbon tax in place.
Some provinces chose to take none of it over. Some provinces chose to take one part of it over. In Saskatchewan, the government here decided that it was going to take responsibility for the industrial carbon tax, and the OBPS is the provincial carbon tax that it put on large emitters.
Now the benefit of doing that when there's going to be a program —- the benefit of doing it is you get to control the funds that come out of it. In 2025-26, the potential revenues was around or was just over $400 million, I think closer to $425 million. The province could decide on how that money was going to be used, and it set up two or three different mechanisms.
There was a technology innovation program where some of the money was going back to large emitters for them to actually carry out capital projects that would reduce carbon emissions. Some of the money was flowing back to a fund that the government set up for small modular reactors. Some of the money was flowing back directly to SaskPower to help them develop low- emission or renewable power generation opportunities.
So the province is running the industrial carbon tax, or has been running the industrial carbon tax here in Saskatchewan, but originally it started as a federal, and then, again, the province had an opportunity to take it over, run it, or it could leave it with the federal government.
Explainer about a potential “federal backstop”
Well, when the province decided to take it over, it had to come to an understanding with the federal government as to what its program would look like.
And, again, it has to have all of the same impacts as the federal program would have. And so the province created the program, submitted it to the federal government, got approval for it. So we had had an agreement to take it over, to implement it, in effect.
With backing out of the program, and, again, the federal government has said repeatedly, and it's been repeated in the election, that they're going to continue on with a Canadian industrial carbon tax. So just depending upon what happens in the election, you could see the federal government reinstituted here in Saskatchewan, and the program would continue on.
What is happening at the federal scene, with the parties taking different stance on the industrial carbon tax
Well, their positions right now are that a Conservative government would cancel the industrial carbon tax, and their rationale is they want to make Canadian industry much more competitive, especially at this time when you're dealing with the tariff problems coming out of the United States.
The federal government — the present federal government, the Liberals — in the campaign have indicated that they will have the reimplementation of the OPPS, or of the federal carbon tax in Saskatchewan, if they were to return to power. So those are the two different positions in the election.
The real big question that comes out of all of this is that, if you believe that climate change is a big problem that is causing issues around the world, even here in Canada to a certain extent in terms of the magnitude of storms, etc., the question comes up for any government: what are you going to do about climate change, what policies are you going to adopt? That's something that really hasn't been talked about very much in the election.
I don't expect it's going to get much attention with the tariffs sucking up all of the attention right now. But it is the eventual question to come back to whatever government is in power, what are you going to do about climate change, or are you going to do anything about climate change?
If the Liberals do win again, what can we expect in terms of an industrial carbon tax? Would prices go up, would it affect the gas pump — what might we see?
It won't affect the gas pump, because what you see at the gas pump… is the retail carbon tax.
What it could affect, it could affect the price of electricity. Past that, the other companies don't have a lot of impact rate within Saskatchewan, because they export a lot of their products.
For instance, potash products. They export it, so it doesn't have a lot of impact. I think it was around $80 to $90 million that's going back to other large emitters in the province, exclusive to SaskPower. For them, there's not really a lot of impact within the province in terms of the people of Saskatchewan itself.
The big issue is, if it comes back into place, the carbon tax that you used to see in your electrical bill will come back into place. Point of fact, I think the government has said that they're leaving that line on the SaskPower electrical bills, because the federal government backstops the OBPSand they believe there's a possibility it could return.
They seem to understand the implications of their removal of the carbon tax, that it actually could return.
Climate change -- now what?
Well, I think people have become very focused on the whole question of carbon taxes, rather than what the true question is, and what are we going to do about climate change? That's really the question at hand.
Again, carbon taxes are only one of a variety of different policies that you can put in place. You can change standards. You can do a whole series of things around regulation.
The real question is, again, if you're a believer in climate change, you need to have a policy of what you're going to do: adapt, or are you going to try to mitigate? What are you going to do, and what are the policy tools that you're going to try to use to do that?
Climate change is not going to go away. In fact, the latest numbers around temperatures, etc., shows that our temperatures on a worldwide basis are even higher than what we were trying to constrain carbon emissions to cause.
Therefore, you're seeing some of the problems, for instance, especially the big ones that we've seen down in California. Some of the storms are hitting different places in the world. The magnitude and frequency of both increased quite a bit.
That means there's impacts on things like insurance. It's very difficult now to get insurance in both California and in Florida because of the impacts. That does wash over to a place like Canada, where we do reinsurance with other companies around the world.
We sometimes think, well, that's another country. It's somebody else's problem. But no, it washes back up into Canada, and we're going to see the impacts.
You're seeing the impacts around food to some extent as well. California has been a drought for a significant period of time, and they're having real problems right now, maintaining their production of things like avocados, almonds, those types of things. You're seeing it down in Florida, where they had a hurricane that came through and damaged their orange juice crop, if I remember correctly.
These things, like I say, it's a worldwide phenomenon. The question is, how do you deal with this? It's just not a simple problem, but it's going to have to get dealt with over time.
If not carbon taxes, what's the alternative? Is it more incentives?
It's everything from incentives, gradually changing over for capital stock in such a way that you have a less carbon-intensive set of products out there. Home heating facilities are a good example of that, I think. Again, changing out our generation throughout Canada, throughout the world, from being so highly based upon coal to things that are renewable that are less of a carbon problem.
Regulations are part and parcel of it as well. Again, some people like individual approaches, some don't. An example of this is on the transportation side, and the vehicles that are much more fuel efficient.
You've seen that for the past 40 years or 50 years, where the vehicles continue to get more fuel efficient all the time. The use of electricity and many other aspects of what's going on. There's quite an assortment of the vehicles or the policies you can use to reduce emissions.
It always comes down to the fact that any of those are going to have some impact. Some are more short-term, some are much longer-term, and governments are going to have to come to grips with which ones they want to implement, which ones they think are better, and which ones are acceptable to the public.
That's really been the big issue with carbon taxes. They haven't been acceptable to the public. Good policy ideas don't necessarily mean that the public are going to like them. I think that's the situation here. It just has such an impact on affordability. People just did not like the retail carbon tax.
