With a fight brewing between the country's largest province and the federal government over carbon pricing, Canada's smallest province says it's already fighting Ottawa's plan to implement a price on carbon emissions across the country.

On Wednesday, P.E.I.'s Environment Minister Richard Brown confirmed the climate action plan his government is preparing to submit for Ottawa's Sept. 1 deadline will not include a carbon tax.

Nor has the province opted to go with a cap and trade system, the other option Ottawa has given the provinces under its plan to reduce carbon emissions by putting a cost on them.

"We're fighting for Islanders here. We're saying if the federal government's plan is to reduce carbon, we have a plan to reduce carbon," Brown said.

But he said the province's plan to reduce emissions 30 per cent below 2005 emission levels by 2030 "doesn't require a tax to meet our targets."

"If the objective is to reduce carbon in the air, and we have a plan to do that, then why do we need a tax?"

Sara Hastings-Simon says P.E.I. would likely find itself in the same situation as Ontario if it submits a plan to Ottawa that doesn’t include putting a price on carbon. (Courtesy of Sara Hastings-Simon)

If the federal government decides to impose its own carbon tax on the province, "that's their choice," said Brown, who is part of P.E.I's Liberal government. "They can impose their tax."

Ottawa is threatening to impose its federal carbon tax on Ontario after premier Doug Ford announced the province will scrap its cap-and-trade system.

As well, a spokesperson for Federal Environment Minister Catherine McKenna said the federal government is reviewing hundreds of millions of dollars in funding to Ontario under the Low Carbon Economy Leadership Fund.

P.E.I. recently announced plans to spend almost $23.8 million dollars in federal funding under that plan, much of it to support energy efficiency upgrades for Island buildings.

Sara Hastings-Simon leads the carbon pricing program at the Pembina Institute, a think tank that promotes clean energy.

She said P.E.I. would likely find itself in the same situation as Ontario if it submits a plan to Ottawa that doesn't include putting a price on carbon -- with a tax imposed by Ottawa and with its low carbon funding in jeopardy.

She said Ottawa has been "very clear" that provinces have to either implement a carbon tax or cap-and-trade system, "so if that is not part of P.E.I.'s plan it will clearly not be in compliance."

Caroline Thériault, press secretary for McKenna wouldn't comment on whether P.E.I's plan would comply with federal rules but told CBC News via email that government "will be assessing climate plans in the fall to ensure they meet the national standard."

She also said putting a price on carbon "is a critical element of the national climate plan."

Revenues would bypass province

Last week the Prime Minister said Ottawa would return any proceeds from a carbon tax collected in Ontario directly to Ontarians, bypassing the provincial government.

Hastings-Simon said the same would be the case with P.E.I. if Ottawa imposes its carbon tax there.

The province has estimated revenue from the tax would be worth $23.5 million in the first full year with carbon prices at $20 per tonne, rising to $58 million per year in 2022 when carbon prices reach $50 per tonne.

When asked if P.E.I. might join Saskatchewan (and now possibly Ontario) in a legal challenge of the federal carbon tax, Brown said that decision would have to come from cabinet.

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