October 23, 2018
The federal Liberal government will place a carbon tax on fuels in provinces with no adequate emissions pricing plan, but will issue annual rebates to Canadian families to offset most of the added costs of this climate-change fighting plan.
Prime Minister Justin Trudeau unveiled the federal plan this morning, but spoke to CBC Toronto’s Metro Morning before, saying, “Because pollution doesn’t stop at provincial borders, we’re going to move forward with a federal approach that will bring in a price on pollution and compensate families for the extra costs.”
Trudeau said “every resident of the province” will be eligible for a rebate, referring to it as a “climate change incentive.”
The Canadian Taxpayers Federation (CTF) Federal Director Aaron Wudrick took direct aim at the tax, calling it “ill-advised.”
“Today’s announcement shows that the Prime Minister is choosing to ignore growing opposition to his ill-advised carbon tax,” said Wudrick’s statement. “Trying to buy Canadians off by sending them cheques merely shows that he already knows how unpopular his new tax will be. Imposing a new tax is not how you save Canadians money.
“Canadians understand that climate change is a global issue and that we should not be punishing ourselves with a new tax that will have no impact on global carbon emissions.”
There are two parts to the federal “backstop” climate program, which will apply differently across the country in our patchwork system of Canadian federalism.
The first part is what the government is calling “a regulatory charge on fuel,” which will be levied on gasoline, light fuel oil, natural gas and propane.
Under the terms of the national climate framework, a deal agreed to by most of the provinces and the federal government some two years ago, Ottawa will levy a tax of $20 a tonne of greenhouse gas emissions starting in 2019, rising by $10 each year to $50 a tonne by 2022.
According to background documents supplied by the government, the $20-per-tonne carbon tax will result in an approximate cost increase of 4.42 cents a litre for gasoline, 3.91 cents per cubic metre for natural gas and 3.10 cents a litre for propane.
Consumers will not pay the tax directly to the federal government, but rather, Ottawa will levy the tax on fuel and production and distribution companies — for example, natural gas providers like Enbridge — who will in turn pass on those costs to customers.
This federal backstop will apply in provinces that do not have adequate climate pricing plans of their own that meet federal standards: Saskatchewan, Manitoba, Ontario and New Brunswick, beginning in April 2019, but also Yukon and Nunavut as of July 2019.
So what was initially intended as a backup plan in the event that a few provinces failed to design their own carbon pricing plans has now become the principal carbon pricing mechanism for nearly half of the country’s population. Roughly 47 per cent of Canadians live in provinces or territories that have said they will not follow through on the national climate framework.
In an effort to make most Canadian families in those provinces whole, and to offset the resulting costs of these new taxes, the Liberal government will offer direct rebates to taxpayers — called “climate action incentive” payments.
A federal official estimated 70 per cent of families in these provinces will receive more in climate payments than they will pay each year in new carbon taxes.
For efficiency, people in affected provinces will indicate on their tax returns if they are eligible for the payment.
The Canada Revenue Agency (CRA) will then ensure people are adequately compensated. Thus, the payments will be made annually and will reflect about a year’s worth of emissions.
If someone is entitled to a tax refund, that refund would be boosted by the amount a taxpayer is entitled to under the new climate incentive payment program. If you owe the federal government money at tax time, that amount would be reduced by the amount you stand to gain from this initiative.
The payment is not intended to be part of the federal tax system per se — the government said CRA’s existing infrastructure is best placed to make payments like these to taxpayers.
Here’s what the average household in these provinces stand to gain:
The amount will vary based on the province you live in and the number of people in your household. For example, a single adult in Ontario stands to gain about $154 next year.
These payments will rise in lockstep with the annual hike in the carbon tax.
Payments for people in small communities and rural areas will include a 10 per cent supplement, government officials said, “in recognition of their specific needs.”
The second part of the system is a separate fuel charge for large industry, known as the output-based pricing system. Officials said details of this component will be provided at a later date.
The proceeds from this large industry tax won’t be returned to Canadians through payments, but will be used to support future climate actions in the jurisdiction in which the revenue is raised.
Canada signed on to ambitious emissions reduction targets at the Paris climate accord meeting in 2015, and a national pricing strategy is seen by Ottawa as the best way to accomplish their goal.
The government projects the carbon pricing plan will reduce carbon pollution by 50 to 60 million tonnes in 2022
However, the government has conceded a carbon price alone won’t be enough to meet those targets.
(CBC News / Canadian Taxpayers Federation)