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Manitoba Releases Carbon Tax Framework and Guidance

Manitoba Releases Carbon Tax Framework and Guidance

Reporting begins January 1, 2019

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Manitoba has released additional details on its carbon tax framework which companies will have to comply with starting in 2019. The province's new discussion paper on the carbon tax framework that applies to large industrial emitters that it calls the Output-Based Pricing System (OBPS), sets out draft guidance for stakeholders to consider in the tax's design and implementation. The new tax is expected to come into force in December 2018, with emissions reporting under the framework required as of January 1, 2019.

Manitoba is accepting comments on the discussion paper until September 30, 2018, and indicates that it will hold workshop and consultations with stakeholders through the rest of 2018.

Background
Manitoba's carbon tax was first announced as one of the components of the province's Made-in-Manitoba Climate and Green Plan, released in Fall 2017. Manitoba confirmed its commitment to the carbon tax in its 2018 provincial budget, and tabled a bill in Spring 2018 that introduced a flat $25 per tonne carbon price, among other changes to implement environmental initiatives.

Overview
According to Manitoba, the new provincial framework will apply to industrial facilities with annual emissions of 50,000 tonnes or greater of carbon dioxide equivalent (tCO2e). All industrial facilities that exceed the 50,000 tCO2e threshold must register and will receive an OBPS registration certificate. The certificate will allow registrants to purchase carbon tax-free natural gas and solid fuels and receive a full rebate on the carbon tax paid throughout the calendar year on all other fuel types.

Facilities that have annual emissions between 10,000 and 50,000 tCO2e, may also opt-in to the program if they meet certain conditions, beginning January 1, 2020. However, for the interim period (December 1, 2018 to December 31, 2019), these facilities will be subject to the carbon tax on their fuel purchases.

The framework applies to certain greenhouse gases, such as carbon dioxide and methane, among others, but does not apply to emissions associated with electricity generation off-site and other indirect emissions sources.

Facilities that emit beyond their established emissions limit (which Manitoba says it will set in June 2019), will be required to pay the $25 per tonne carbon tax for each additional tCO2e emitted, or meet their compliance obligations through another approved compliance option (i.e., emissions offset credits). Facilities that emit less than their established emissions limit will be able to bank or sell emission credits (i.e. performance credits) to other covered facilities up to their limit at a compliance price of $25 per tCO2e. Manitoba says it is considering three options for establishing emission limits: facility specific standards, sector level standards or best-in-class standards. The province also says it is considering subjecting these standards to an annual 2% declining cap factor, with some exceptions.

Manitoba advises that it will institute an emissions registry to track the issuance, trading, and use of emissions performance credits.

Manitoba notes that it intends to provide a comprehensive review of the tax's efficacy in 2022.

For more information, contact your KPMG adviser.

Information is current to August 14, 2018. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500
 

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