Plans to introduce a carbon tax in Quebec have been under discussion since last year. However, when the provincial government announced earlier this month that the tax would come into effect in October this year, the decision was received with mixed reactions.

Carbon taxes are gradually being implemented in several western European countries but this will be the first tax of its kind to be introduced in Canada. They create a carbon emission royalty, paid according to the hydrocarbon concentration of the product being sold. Initially, energy producers will pay an additional 0.8 cents per litre on gas and 0.9 cents per litre on diesel sold wholesale. The government plans to raise $200 million per year for the next six years from this tax, which will help finance Quebec’s Green Fund.

The Green Fund is an ambitious project that will cost Quebec $1.2 billion. It is designed to help Quebec meet Kyoto protocol targets to lower greenhouse gas emissions to 1990 levels by 2012. The Green Fund will be used to finance building retrofit projects, education programs about cutting emissions and improvements to public transport, amongst other measures. Quebec already has the lowest greenhouse gas emission rate in Canada but these projects are necessary to meet the Kyoto targets. After 2010, vehicles sold in Quebec will also be subject to strict energy efficiency standards as part of the green plan.

Whereas Prime Minister Stephen Harper has said the Kyoto goal of a 6 per cent reduction in greenhouse gas emissions by 2012 may not be possible, Quebec Natural Resources Minister, Claude Béchard, has said, "Kyoto is not a dream; it is possible to achieve". Quebec, along with Manitoba, Newfoundland and Labrador, has since reaffirmed its commitment to the Kyoto accord, regardless of whether the national government meets targets.

Quebec Premier Jean Charest is insistent that it will be the oil companies, not the consumers, who will pay the carbon tax and make these contributions to the Green Fund. Mr Béchard told a news conference in Quebec City earlier this month that he is appealing to oil companies’ "sense of social responsibility and their good faith" and hopes that “the companies will make the effort to absorb the costs”.

Other parties are less confident. Since the tax levies a charge on energy when it is consumed, not when it is produced, it is far easier for energy producers to download its costs. Indeed, Mr Béchard has admitted that there “are no guarantees that companies won’t try to pass the tax on to the consumer”. Jean-Thomas Bernard, who teaches economics at Laval University, has stated more definitely that "it will end up being paid by the consumer”.

Such fears seem to be confirmed by statements released by the Canadian Petroleum Products Institute. Carol Montreuil, a spokesman for the Institute, warned in 2006 that "there is no doubt that consumers will pay more for the measures…We are talking about $200-million, and in one way or another, this money will have to come out of the pockets of consumers…You can't expect an industry to absorb an additional $200-million cost."

If the tax does get passed on to the consumer, this will have an immediate impact on any businesses that have transport needs, as costs for this sector will inevitably rise. Either way, this is a glimpse of what is to come. The carbon tax is proof that the provincial government is serious about reducing energy use and greenhouse gas emissions and is prepared to introduce stringent measures to meet Kyoto targets. Companies should be prepared for further energy use reducing measures being introduced by the provincial government.

A more exciting prospect is the possible financial incentives that will be made available by the Green Fund for Quebec companies to embark on energy reducing projects, such as building retrofit programs. Environmental groups are welcoming the Green Fund and carbon tax since they believe that even without specific provisions to force the energy producing industry to absorb the carbon tax, oil companies will be forced into some efficiencies, including considering a shift to alternative bio-fuels and renewable energy sources. Over the coming years, the way that Quebecers consume and use energy is clearly set to change.