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OECD calls on Canada to increase its taxes on oil sands

MONTREAL --The Organisation for Economic Cooperation and Development (OECD) on Wednesday urged Canada to raise taxes on non-renewable resources including its oil reserves, which are the third largest in the world.

The organization in an annual report warned that high commodity prices have created “wide regional economic disparities.”

Strong commodities demand over the past decade has pushed up the Canadian dollar (currently at US$0.92), which has hurt Canadian manufacturers by making their goods more expensive to foreign buyers.

Western provinces such as Alberta and Saskatchewan with vast oil and gas reserves have seen a jump in incomes since 2002, while eastern Ontario — the nation's manufacturing hub — is facing a massive budget deficit.

“Incomes have risen in resource-rich provinces, but the resulting currency appreciation has placed pressures on manufacturing,” the OECD said in the report.

It urged increasing royalties on non-renewable resources and distributing it more fairly to provinces that are not blessed with an abundance of oil, gas or minerals.

The OECD also called for more efforts to protect the environment and meet Canada's international commitments to reduce greenhouse gas emissions linked to global warming.

It noted that oil sands production in Alberta represents the fastest growing source of emissions in Canada. The federal government has taken a sector-specific regulatory approach but has not yet released regulations for the oil and gas sector.

On Monday, Prime Minister Stephen Harper said Canada would not impose climate regulations that would hurt the economy.

“It's not that we don't seek to deal with climate change, but we seek to deal with it in a way that will protect and enhance our ability to create jobs and growth and not destroy jobs and growth in our country,” he said.

Canada has committed to reducing emissions by 17 percent below 2005 levels by 2020.

But the federal government projects that, based on policies currently in place, emissions will fall by only 0.4 percent.

“The main reason is that expanded oil-sands production in Alberta is projected to push oil and gas emissions 23 percent higher by 2020, completely offsetting improvements in the electricity sector through the phasing out of coal-fired power generation,” according to the report.

To critics, the government has pointed out that Canada produces fewer than two percent of global emissions.

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