Quebec will be the first Canadian province to tax energy producers on carbon and expects to raise C$200 million ($189 million) per year to help fund efforts to reduce greenhouse gas (GHG) emissions and meet targets set by the Kyoto Protocol, which Canada ratified in December 2002.

During a Wednesday speech, Natural Resources Minister Claude Bechard said the tax was based on the principle of "polluter pays." Quebec Premier Jean Charest announced plans for the tax one year ago with the intent of financing efforts to cut emissions of carbon dioxide and other GHG gases.

According to Quebec's Natural Resources Ministry, the provincial government approved the tax Wednesday. It will cover all hydrocarbons used in the province. The government said it expects C$39 million of the anticipated C$200 million will come from natural gas producers, with C$69 million coming from gasoline sales, C$43 million coming from heating oil and C$36 million from diesel fuel.

Bechard said he expects companies will absorb the higher costs realized from the tax, but he said he couldn't guarantee that they wouldn't be passed on to consumers. Tax proceeds will be directed to a "green fund," from which funds will be invested in mass transit projects such as commuter rail.

In the United States, some energy players have been calling for a tax on carbon emissions for a while. One of them is NRG Energy CEO David Crane. "We think there should be a mandatory carbon tax and it ought to be on the national level," Crane told the financial analysts at the Bank of America Energy Conference at Key Biscayne, FL, late last year.

"The greatest attraction of a carbon tax is that it allows us to share the cost of reducing greenhouse gas emissions across all sectors of the economy -- minimizing the disruption in any one area," said former Duke Energy CEO Paul Anderson in Spring 2005.

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