The federal Liberals have proposed a market-based plan to cut carbon emissions by targeting industries that emit the most greenhouse gases, capping total emissions by company and charging those that exceed them.

The tarsands industry, including this Suncor Energy plant near Fort McMurray, Alta., rang in total profits of $30 billion in 2005. Under the Liberals' carbon budget proposal, tarsands companies would have to invest an estimated $1 billion in a green investment fund.
(Canadian Press)

Liberal Leader Stéphane Dion, announcing the plan on Friday, said it does not involve taxes. Instead, it would offer a series of penalties and incentives to curb greenhouse-gas emissions by the biggest sources — especially the oil and gas industry, energy-intensive companies and electricity generators.

Dion said the Liberals, if elected, would set the hard cap on emissions by large companies in the three targeted sectors, effective Jan. 1, 2008. The quota would be set to return the country to 1990 levels as specified in Canada's international obligations under the Kyoto protocol, which the country now far exceeds.

Each of those companies would be given a "carbon budget" and, if it exceeded the budget, would have to pay $20 per tonne ($30 in 2011) of extra emissions into a green investment account.

Dion estimated that tarsands companies alone would have to invest about $1 billion to meet the requirements — equal to three per cent of the industry's 2005 profits of $30 billion.

"The polluter pays," Dion said as he announced the proposal in Ottawa, pointing out that about 700 big companies account for about half of Canada's greenhouse-gas emissions.

Account could be tapped to fund green technology

Dion said the proposal would make Canada a leader in the fight to curb greenhouse gases, as well as leading to an investment boom in green technology.

The green investment account would be managed by an independent agency including government, industry and environmental groups.

Companies could access the money to make investments proven to cut emissions. At least 80 per cent of the money would have to be spent in the province where the polluting plant was located.

Companies that beat their carbon budgets would be able to sell their unused allotment to other companies, while those that broke their budgets would be able to offset up to a quarter of their excess by buying international credits.

Not a carbon tax: Dion

Dion said the plan could not be considered a carbon tax, because the government would not get the money.

Some economists believe a carbon tax is the most effective way to penalize emissions, but it is perceived to be politically impossible.

Dion contrasted the Liberal plan with Conservative policy, which he said focuses on cutting the amount of emissions per unit of output, but may not cut total emissions.

Both Dion and Conservative Leader Stephen Harper have been making daily promises, fuelling speculation that a federal election call is imminent.