Federal budget extends industrial carbon tax, adds nuclear incentives for Sask.

By Brian Zinchuk

OTTAWA – Mark Carney’s first budget as prime minister had a few concessions for the energy sector, but still insists on an industrial carbon tax for many years to come.

It appears that Saskatchewan might be in the crosshairs on that point, as earlier this year Premier Scott Moe said the province would no longer be collecting that carbon tax, known as the Output-Based Pricing System (OBPS). At the Oct. 30 Premier’s Dinner in Estevan, Crown Investments Corp. Minister Jeremy Harrison noted that on that day, 80 per cent of that industrial carbon was being paid by one company, SaskPower. Eliminating it reduced power bills as a result.

The Saskatchewan government had passed a law making the minister responsible for all the liability of the carbon tax. Harrison noted on Oct. 30 that he has correspondence from the federal government seeking $261 million in carbon tax currently tacked onto his fridge. It looks like those bills are going to keep piling up on the minister’s fridge, as the budget clearly indicates the extension of the industrial carbon tax.

It said: “Fix the benchmark and improve the backstop: The government will improve its application of the benchmark—the tool that ensures all provincial and territorial (PT) industrial pricing systems are harmonized across the country in providing a common, strong price signal. The government will promptly and transparently apply the federal backstop whenever a PT system falls below the benchmark. The government will engage with PT governments about improvements to the benchmark and to PT pricing systems, such as harmonizing or linking carbon credit markets.”

This clearly sets up Saskatchewan for a fight with the federal government, as a backstop will reverse the provincial decision to end implementation, and enforcement will mean Saskatchewan ratepayers will be paying that backstop.

But there are some points in the budget that will be beneficial to Saskatchewan, especially when it comes to nuclear power developments.

Nuclear

Investment tax credits are also being extended to new nuclear projects via “Modifying the Small Nuclear Energy Eligibility under the Clean Technology Investment Tax Credit,” according to the budget.

It’s going to be at least four years before any reactors start construction in Saskatchewan, but if that measure still applies, it could have considerable impact on the financial viability of nuclear projects in the province.

To that end, the Government of Saskatchewan said in a statement to Pipeline Online: “The federal budget re-commits to making Canada an energy superpower. The federal government needs to engage with provinces and territories on policies and decisions in ways that they simply have not in the past. What we hope we are seeing in this federal budget is a recognition of the role that provinces and territories must play in our federation.

“Saskatchewan has a significant role to play in Canada’s energy future. While we await more details on the proposed changes in the budget, we are optimistic that the federal government will allow for the long-overdue flexibility to implement different solutions as we all work toward common goals of making Canada the strongest economy in the G7.

“Specifically, supports for nuclear energy, in addition to allowing public utilities to be eligible for funds, is an example of positive steps in this year’s budget.”

Harrison added in a statement: “As President Reagan said in negotiating with the Soviet Union – trust, but verify. I am encouraged that the budget appears to reflect ongoing discussions we are having with Ottawa. Those discussions will continue.”

Emissions cap

The budget also talks of possibly getting rid of the emissions cap on oil and gas producers, as the industrial carbon tax and carbon capture, utilization, and storage (CCUS) are expected to deal with emissions in other ways.

“Canada is committed to bringing down the emissions associated with the production of oil and gas. Effective carbon markets, enhanced oil and gas methane regulations, and the deployment at scale of technologies such as carbon capture and storage would create the circumstances whereby the oil and gas emissions cap would no longer be required, as it would have marginal value in reducing emissions,” the budget document said.

Greenwashing bill

The greenwashing Bill C-59 may also be toned down, as “The Competition Act was recently amended to create new enforcement provisions for false claims of environmental benefit. These ‘greenwashing’ provisions are creating investment uncertainty and having the opposite of the desired effect, with some parties slowing or reversing efforts to protect the environment.

“To provide more certainty to the marketplace, Budget 2025 announces the government’s intention to propose legislative amendments to remove some aspects of these provisions while maintaining protections against false claims.”

Carbon capture

While there’s substantial talk about carbon capture, utilization, and storage (CCUS), there’s a major issue that remains unchanged. There are tax credits if you just put the CO2 in the ground, but not if you use it for enhanced oil recovery.

The budget said: “The extent to which the CCUS tax credit is available to a CCUS project and respective eligible equipment depends on the end use of the carbon dioxide (CO2) being captured. Eligible uses include dedicated geological storage and storage in concrete, but not enhanced oil recovery (EOR).”

MP reaction

Steven Bonk is the MP for Souris-Moose Mountain, whose riding includes the entirety of Saskatchewan’s coal mining and coal-fired power generation. He said in a statement to Pipeline Online: “This budget talks a lot about growth and innovation, but it forgets who built Canada’s prosperity in the first place — the men and women working in our resource sector. Out here in Saskatchewan, we don’t just talk about energy security or food security — we live it every day. Our oil, gas, potash, and uranium don’t just power our province, they help power the entire country. Yet instead of supporting the industries that feed our economy and our families, this government continues to regulate, tax, and delay them at every turn.”