OTTAWA The Liberal government has likely painted itself into a corner on carbon taxes, particularly after Environment Minister Jonathan Wilkinson said he was wrestling with the approval of a major oilsands mine.

Ottawa has declined to commit to major carbon tax increases after 2022, despite Liberal claims that the levy will play a key role in meeting their climate targets. The Liberal government has committed to meeting its 2030 Paris agreements as well as a more recent pledge to reach net-zero emissions by 2050.

Wilkinson on Wednesday signalled that the 2050 target could weigh heavily on his decision to either approve or reject Teck Resources $20.6-billion oilsands mine in Alberta, saying it was not clear the project would fit into the Liberals environmental goals.

That is something that we will have to be discussing and wrestling with as we make a decision one way or the other, Wilkinson told reporters in Calgary on Wednesday.

The stakes are very, very high

The Frontier project north of Fort McMurray would mark the most significant new investment in the Alberta oilpatch in years. It is expected to generate $70 billion in tax revenue for the federal, provincial and local governments, create 7,000 construction jobs and 2,500 permanent jobs.

It would also generate about 4.1 million megatonnes of greenhouse gas emissions per year over its 40-year lifespan. A federal-provincial review this summer found that the project would be in the public interest, while also laying out a number of environmental damages that would come from the mine.

Wilkinson will make a final decision before the end of February on whether to approve the project.

But killing it would be a major blow, said Alberta Environment Minister Jason Nixon.

It would send a signal to investors that Alberta is not open for business and the federal government is going to go out of their way to stop projects. The stakes are very, very high, he told the Edmonton Journal.

Wilkinsons dilemma over the approval seems to underscore the challenge facing Prime Minster Justin Trudeau as he continues to claim that the Liberals can accommodate environmental concerns while also grow the economy. The environment minister will have to account for new sources of greenhouse gas emissions like Frontier, even as his office has declined to raise its carbon tax over the $50 per tonne threshold.

A report by the Parliamentary Budget Office, meanwhile, estimates that Ottawa would have to introduce various carbon levies of a combined $102 per tonne by 2030 in order to meet its environmental goals. By its own projections, the Liberal government is currently set to fall well short of meeting its Paris targets.

Various environmental policies under Trudeau have been met with intense criticism by some voters, particularly those in oil-rich Western provinces like Alberta and Saskatchewan. Critics of the policies argue that carbon emissions reduction should come entirely through technology, rather than taxes placed on households.

Wilkinson has said his office would conduct an early review of the carbon tax in 2020 and a second review in 2022, where it will consider further increases above the $50 threshold. Trudeau recently laid out directions in his mandate letter for Wilkinson, which included strengthening existing environmental policies while seeking to exceed Canadas 2030 targets.

A spokesperson for Wilkinson said Ottawa would close the gap on its emissions reduction shortfalls by planting two billion trees, subsidizing electric vehicles, retrofitting homes, and subsidizing clean technologies through a separate $5-billion fund.

Environmental groups broadly agree that Ottawa needs to raise its carbon tax well beyond $50 per tonne, and that it should be more open about the pace of that increase in order to give families and businesses time to plan for the additional costs.

What we need to see is transparency and consistency in how this is applied, said Josha MacNab, director of policy at the Pembina Institute, an environmental group.

What weve heard from business and industry consistently is that changing the rules of the game, rolling back policy, introducing new policy, not being clear about whats happening its not helpful.

Industry groups, meanwhile, have long claimed that Ottawa could continue to approve emissions-intensive projects like oilsands facilities, while achieving emissions reductions through other measures.

Oilsands producers have managed to make strides in reducing emissions in the past 20 years, largely through technological investments that they claim will continue to drive down greenhouse gas emissions and costs.

What we need to see is transparency and consistency

The Frontier project has been called one of the last major oilsands mines that will be built in northern Alberta, largely because producers are increasingly using steam-driven production methods as a way to target deeper-lying bitumen formations.

A November report by Canadas Ecofiscal Commission found that carbon taxes would have to reach as high as $210 per tonne by 2030 in order to meet the countrys targets, a move that it said might prove politically challenging. The increase would raise costs of gas by roughly 40 cents per litre, the report estimated.

The report said that the alternative to rising carbon taxes could be achieved through regulations, which it said was an even more costly option. People both opposed and supportive of carbon taxes have warmed to the more expensive regulatory option, as it is often hidden from sight and less likely to raise a political fight.

Under the Harper government, Canada agreed to reduce greenhouse gas emissions 30 per cent below 2005 levels by 2030. Trudeau promised in September to implement legally binding policies that would bring Canada to net-zero emissions by 2050 if re-elected.

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Liberals in dilemma over carbon taxes, greenhouse gas emissions and a $20B mine in Alberta - National Post