Vancouver (Platts)--7Jun2007

Quebec will become the first Canadian province to introduce a carbon tax,
forcing the hydrocarbon industry to pay about C$200 million ($188 million) a
year into a fund to help it meet the 2012 greenhouse gas emissions targets set
by the Kyoto Protocol, natural resources minister Claude Bechard said
Wednesday.
     The taxes will cover all hydrocarbons used in the province, Bechard said.
     Speaking after the Liberal government cabinet of Premier Jean Charest
approved the plan, Bechard said the tax is based on a "polluter pays"
principle and is "not negotiable."
     The taxes will be 0.5 cents/liter for propane, 0.8 cents/l per for
gasoline, 0.9 cents/l for diesel fuel, 0.96 cents/l for light heating oil, 1
cent/l for heavy heating oil, 1.3 cents/l for coke used in steel making and
$8/metric ton for coal.
     The government expects the tax will generate C$69 million a year from
gasoline sales, C$43 million from heating oil, C$39 million from natural gas
producers and C$36 million from diesel fuel.
     Around 50 companies will pay the tax, including refinery operators
Ultramar, Petro-Canada and Shell Canada and distributors Imperial Oil, Irving
Oil and independent retailers.
     Bechard said in a televised news conference he has no assurance that the
tax will be absorbed by the companies, but he called on the industry to do its
share to protect the environment by not passing the cost to consumers.
     He said the tax is small when compared with refinery profit margins that
have climbed over recent months from 8 cents/l to 19-22 cents/l.
     "Everybody has to do their share [to reduce greenhouse gas emissions],"
Bechard said. "Each citizen wants to do their share and I think oil companies
must also do their share."
     While "counting on the goodwill" of the companies, he said the government
will soon announce a new mechanism to monitor pump prices. He has previously
threatened to impose a ceiling price on gasoline.
     The Canadian Petroleum Products Institute did not have any immediate
reaction to the tax.
     Quebec's Green Plan, introduced a year ago, targets a reduction in the
province's annual emissions by 10 million mt to 80.2 million mt a year by
2012.
     Quebec is heavily reliant on hydroelectricity and already produces the
lowest emissions per capita in Canada. It has consistently been the strongest
supporter of the Kyoto Protocol among the 10 provinces. None of the others has
explored a tax, but most are considering caps on emissions.