October 17, 2018
According to a new report from the C.D. Howe Institute, Ottawa should rebate revenues from its carbon pricing backstop directly to citizens in non-compliant provinces that reject its plan.
In The Rocky Road to Canada-wide Carbon Pricing, author Tracy Snoddon argues that this option for returning backstop cash ensures government accountability is fair and flexible.
As the deadline for the federal government’s carbon pricing plan approaches, several provinces and territories are not yet in compliance with its requirements. Effective January 1, 2019, Ottawa intends to implement a minimum carbon price backstop in any non-compliant province or territory and promises to return the revenues to the jurisdiction where they are collected.
The choice of how to do this is, however, still in flux.
“The politics of carbon pricing may have changed, but the climate change challenge has not,” says Snoddon. “As some provinces take a step back from carbon pricing, the federal government’s minimum-price backstop, and how it is deployed, is more important than ever.”
Ottawa has plenty of options for returning backstop revenues including cash grants to provincial and territorial governments, targeted federal spending, or equal per-capita rebates to the jurisdiction’s residents. Backstop revenues will be sizeable.
As an example, the author conservatively estimates Ottawa would raise $2.8 billion in 2019 if the backstop was implemented in Ontario, Saskatchewan, New Brunswick, Newfoundland and Prince Edward Island. In Saskatchewan, for instance, estimated backstop revenues for 2019 translate into $459 per person and would be sufficient to lower the provincial sales tax rate in the province from 6 to 4.5 per cent. In Ontario backstop revenues could put an estimated $133 per person in pockets of Ontarians, or $300 for the average household.
The report findings include: