- - Sunday, December 9, 2018

TORONTO — Wading into treacherous political waters, Canadian Prime Minister Justin Trudeau’s plan to dramatically increase taxes on carbon emissions to combat climate change is dividing the country, pitting six of the provinces against Ottawa and setting the stage for a bitter and partisan federal election next year.

“Scrap the jobs-killing carbon tax,” has become the rallying cry for Ontario’s Progressive Conservative Premier Doug Ford and his political allies across the country, who are revving up to defeat Mr. Trudeau’s center-left Liberal Party government in the national vote in October.

The Canadian clash is being watched carefully around the globe in the wake of violent protests that have shaken the government of French President Emmanuel Macron, protests originally sparked by a now-abandoned plan to hike fuel taxes at the pump as a way to fight climate change.

About 40 countries, including China, Japan and 10 European nations, have imposed some kind of levy on carbon emissions, although some, such as Australia, have repealed their carbon taxes in the face of political opposition. The U.S. is one of the few large industrialized countries without a carbon tax.

Mr. Trudeau’s plan to set a national price on carbon emissions of $7.5 a ton rising to $37.50 by 2022 has become a political wedge issue unlike any other in Canada in recent times.

“It penalizes farmers, it penalizes industry, it penalizes Canadians,” said Candice Bergen, head of the Conservative opposition in the House of Commons, predicting the tax would not be the boost to the environment that backers claim.

Although Mr. Trudeau’s plan allows each province to meet the emissions reduction targets in its own way, officials in Ontario, Manitoba, Saskatchewan, Alberta, Prince Edward Island and New Brunswick have turned against his project. Three provinces have gone to court to stop the tax.

Andrew J. Weaver, leader of the Green Party of British Columbia, is not one of Mr. Trudeau’s opponents. Yet when he and provincial Premier John Horgan announced their province’s plan to limit greenhouse gases, the two men made clear that British Columbia was going in a different direction from Ottawa.

“This isn’t a plan to make people spend a bunch of taxes and hurt people’s take-home pay,” Mr. Weaver said. It’s about sending a message that “we welcome business in B.C., but that business will be clean business.”

Mr. Trudeau has vowed to fight for his tax, and an Angus Reid poll found that national support for the tax has rebounded from July’s low of 45 percent to 54 percent in October, after the government announced plans to offer individual rebates for the extra costs. But the tax remains unpopular in Saskatchewan, Manitoba, Ontario, Quebec and the Atlantic provinces.

“Canadians are divided on the carbon tax by age and demographics, by politics and ideology. It’s an issue opponents are using to attack voters’ trust in the Trudeau government and whether carbon pricing is the right way to go,” said pollster Shachi Kurl, executive director of the Angus Reid Institute.

The government rejects the parallels some have drawn between Mr. Macron’s problems in France and the opposition in Canada. Officials note that revenue from the Canadian carbon tax will be levied on industry and corporations — with some costs passed on to consumers. In provinces that follow the federal tax model, some 90 percent of the revenue will be given back to taxpayers in refunds. In France, the proceeds of Mr. Macron’s now-withdrawn gas tax were to be kept by the government to pay down the national debt.

Businesses divided

Despite the prospects of higher costs, many of the country’s bigger business groups support Mr. Trudeau’s tax.

“We’ve supported carbon pricing as an effective means to combat climate change since 2011,” said Aaron Henry, director of natural resources and environmental policy for the 200,000-member Canadian Chamber of Commerce.

He acknowledged concerns that the tax could make Canadian products less competitive internationally, especially in the U.S., where President Trump has lowered taxes and rolled back environmental regulations on American companies.

“The Trudeau government is committed to competitiveness and climate policy, but there are many areas of regulatory duplication and jurisdictional overlap that cause multiple taxing of the same carbon molecule,” he said.

Despite this, he remains confident about the prospects for Canadian business. Making fossil-fuel-based activities more expensive could open other market opportunities, he said.

“Carbon pricing can be an excellent way to increase earnings because clean technology will be a trillion-dollar market by 2030,” he said.

Small-business advocates say they have problems with the way the government wants to structure the tax.

“Among our members, even those who like the concept of a carbon tax don’t like the federal tax,” said Dan Kelly, president of the Canadian Federation of Independent Business, which represents more than 100,000 small and medium-sized businesses.

The national plan offers rebates to individuals and financial incentives for large businesses while leaving out small and medium-size companies, he said. He noted that the federal government has announced plans to provide billions of dollars in financial aid to small business, although the details have yet to be released.

Ontario Environment Minister Rod Phillips said when the federal carbon tax is fully implemented, it will cost the average family about $300 annually and add about $3,750 annually to the cost of operating a small business. Yet his province-level climate plan includes financial penalties for companies that emit a large amount of greenhouse gases.

Environmental groups are urging Mr. Trudeau to stay the course in the face of political headwinds.

“Canada is setting an example” by allowing “different economies in different provinces to take different approaches,” said Catherine Abreu, executive director of Canada’s Climate Action Network.

Speaking from Poland, where she is attending the U.N. conference on climate change, Ms. Abreu said the attacks on carbon pricing are signs of rising political polarization in Canada.

“The majority of Canadians understand climate change is real and they want governments to do something,” she said. “But because the carbon tax is so visible, it has become a political football.”

The next election “will be a litmus test of whether Canadians are willing to pay higher prices for energy and make more lifestyle changes by using less carbon-based energy,” said Ross Laver, senior communications executive for the Business Council of Canada, an organization of CEOs from Canada’s largest companies.

“France is going through a chaotic exercise now that is focused on the same issue, and the French government has decided to delay higher taxes,” he said. “It’s a tough issue. But we can’t keep talking about the threat to our climate and do nothing.”

If Mr. Trudeau loses this fight and is forced to back down, it will “demoralize his base,” said Ms. Kurl, the pollster.

It will energize the Conservatives and allow the more left-leaning New Democratic Party to seize the role as champions on climate change from Mr. Trudeau’s Liberals, she said.

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