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Manitoba's Carbon Pricing Plan: What it gets right, and where we go from here

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By Jane McDonald, October 30, 2017

Last week, the Government of Manitoba announced A Made-in-Manitoba Climate and Green Plan.

This much-awaited blueprint for how Manitoba will tackle climate change turned out to be a consultation framework that contains the elements of a credible plan—though it still needs to land key details.

After this week’s scathing report by the Province’s Auditor General on the ineffectiveness of past climate policy in Manitoba, we look forward to working with the government to bend the curve on our emissions and invest now in efforts to improve the resiliency of this province.

Let’s break down the plan piece by piece to look at the pledges made and where the province needs to go from here.

We now have the three Prairie provinces converging on the same carbon pricing system, potentially paving the way for further Western Canada cooperation on climate change action.

Carbon pricing: A smart move on structure, but questions remain on long-term effectiveness

Manitoba is adopting a ‘two-track” approach to pricing carbon. First, they have laid out an economy-wide levy on carbon pollution, covering all the major fuel uses—with the exception of marked fuels use in farming operations. This is good practice and in line with coverage in all other existing carbon pricing systems in Canada.

Second, Manitoba’s largest emitters will have some of their emissions exempted from the levy based on the efficiency of their operations. This means companies will still have an incentive to reduce emissions while being shielded from competitiveness pressures. It’s good policy if: (1) the government sets standards that actually drive emission reductions and compare operations here with best-in-class efforts elsewhere and (2) negotiations don’t take years and these standards are in place by 2019.

For help getting these two carbon pricing tracks off the ground, Manitoba can look to lessons from Alberta and the federal government. This is the same system Alberta has in place and is also the approach the Government of Canada has announced it will use for Canadian provinces that don’t come up with their own price on carbon—right now that means Saskatchewan.

At CAD 25 per tonne, Manitoba’s carbon price is expected to generate approximately CAD 260 million in annual revenue. But it is unclear how that revenue will be used.

We now have the three Prairie provinces converging on the same carbon pricing system, potentially paving the way for further Western Canada cooperation on climate change action.

Turning to the actual price set under this system, things get more complicated. The new Manitoba levy will be introduced at CAD 25 per tonne in 2018 and will not increase over time. Arguments that a flat price will miss an important signal to industry and consumers to look for new ways to lower emissions over time are blunted by the province’s modelling, which they say shows their flat price resulting in slightly more emission reductions over the first five years than if they matched the federal benchmark of CAD 50 per tonne by 2022. That is fine, but not the end of the story.

A flat price of CAD 25 per tonne also means that by 2020 Manitoba will not be in compliance with the federal benchmark, which rises to CAD 50 per tonne by 2022. As a result, Manitobans presumably won’t receive some of the federal money on the table through the Low-Carbon Economy Fund and the federal government might end up charging Manitoba "top-up fees."

Additional policies and revenues from carbon pricing will be critical to reducing emissions

At CAD 25 per tonne, Manitoba’s carbon price is expected to generate approximately CAD 260 million in annual revenue. It is also expected to reduce emissions by 1 megatonne over five years. (A list of initial measures are listed at the end of the plan that add up to another megatonne over five years, although it is unclear whether these measures will be pursued or are presented for consultation). We will need to do better than this to contribute to a national and international effort to reduce emissions in line with what scientists say is needed.

A comprehensive analysis of the benefits, risks and costs of different approaches to reducing emissions in this province was not presented in this plan.

A Made-in-Manitoba Climate and Green Plan lists a wide array of other potential actions that could build on Manitoba’s clean electricity advantage and reduce emissions in the highest-emitting sectors of transportation, agriculture and buildings.

But a comprehensive analysis of the benefits, risks and costs of different approaches to reducing emissions in this province was not presented. As the Auditor General of Manitoba points out in last week’s Managing Climate Change report, this has been lacking for too long in our discussions.

Funds from the carbon levy attached to policies that can deliver concrete reductions in these areas will no doubt be essential. While the province has said that all revenue collected will focus first on lessening the impact of a carbon levy on lower and middle-income Manitobans and their families, no other firm commitments have been made—and more consultations will roll out in November in order to reach clarity by the next budget.

Manitoba, like Alberta, is adopting a ‘two-track” approach to pricing carbon.

Heading in the right direction on governance

The Manitoba government has clearly given some thought to how it will be held accountable for its approach, proposing concrete indicators of success across multiple climate and green objectives, including economic impacts.

It has also proposed that an Expert Advisory Panel help government set five-year targets for emission reductions, which could help keep ongoing reviews public and evidence-based. We look forward to further details about the make-up of that panel, how its advice would be developed and funded, and how industry and communities will be involved in the process.

Adaptation efforts are rightly front-and-centre but need investment

Manitoba’s Climate and Green Plan forcefully articulates the scale of the adaptation challenge, recognizing that climate impacts are an immediate threat and, if left unaddressed, will continue to undermine the well-being of Manitoba’s citizens. 

The plan recognizes that climate risk management in this province must include planning and investment in reducing flood and drought impacts and points to ecosystem management innovation using natural infrastructure such as wetlands and water retention storage systems as part of the solution.

Indicators of success in this keystone include counting the number of local governments with climate adaptation plans, and dollars invested in green infrastructure projects. However, based on the serious risks identified, the next step will be to develop a provincial adaptation plan that articulates climate vulnerabilities, with clearly defined actions, time frames and, critically, a budget.

Given how many details are still up in the air, IISD looks forward to participating in consultations over the next month to inform and provide detail for Made-in-Manitoba Climate and Green Plan. This government has started the right discussions in their plan; we look forward to finishing the conversation.