The federal government is relaxing its carbon tax limits on large emitters, after bending to pressure by industry groups concerned about the ability of Canadian producers to compete with their counterparts in the United States, officials confirmed Wednesday.

The office of Environment Minister Catherine McKenna confirmed the move to Radio Canada International following a report in the Globe and Mail newspaper.

“Let’s be clear—we can’t afford to let big polluters off the hook,” McKenna said in an emailed statement. “Unlike the Conservatives, we believe that big polluters should pay and we have an ambitious plan to protect the environment for our kids.”

While industry groups welcomed the move, environmental activists said the government is doing exactly that – letting big polluters “off the hook.”

The Liberal government had initially planned to tax companies for emissions over 70 per cent of an industrial sector’s average pollution intensity, “with the possibility of adjustments to that starting point based on an assessment of the potential risks from carbon pricing to the competitiveness of the sector and to carbon leakage.”

Now, Ottawa is easing that limit in most sectors to allow for emissions up to 80 per cent of the industrial average.

In “a small number of sectors,” the limit will be even higher and allow emissions up to 90 per cent of the industry average.

Environment and Climate Change Canada says it has determined following consultations that four sectors are in a “high competitive risk category” and will be able to emit at 90 per cent of the sector average:

• cement
• iron and steel manufacturing
• lime
• nitrogen fertilizers.

All remaining industrial sectors will face a carbon tax on emissions over 80 per cent of the industry average.

McKenna said it’s important to make big polluters pay, and that it will force them to reduce emissions and innovate.

“But we have to do it in a smart way,” she said Wednesday during a visit to the Gaspésie region of Quebec.

“I’ve always said the environment and economy go together, and we don’t want to drive industry out of our country. We want to have the most energy efficient, smart industries here that create good jobs, at the same time do what we need to do to tackle emissions. And that’s exactly what we’re doing.”

The federal carbon pricing system will apply on Jan. 1, 2019 in each province or territory that requests it, and in any jurisdiction that does not have a carbon pricing system that meets the federal benchmark, officials said.

With files from CBC News