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User:Mindmatrix/Skunkworks/Carbon tax (Canada)

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The carbon tax is a tax imposed by the Government of Canada that will take effect on 1 April 2019.[1] It will apply a base carbon price of $20 per ton, increasing annually until 2022, that will determine effective tax rates for various fossil fuel products used in all provinces and territories that have not created their own carbon pricing plan. As of December 2018, these are Manitoba, New Brunswick, Ontario, and Saskatchewan.[1]

Background

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Canada is a signatory of the United Nations Framework Convention on Climate Change and has ratified the Paris Agreement for climate change mitigation, requiring the country's net greenhouse gas emissions to be reduced by 30% between 2005 and 2030.[2]

During the campaign leading to the 2015 Canadian federal election, the Justin Trudeau of the Liberal Party of Canada announced a national carbon pricing plan as part of the party's election platform.[3] the proposed plan would implement a national framework, but would allow each province to design its own program to satisfy the national targets.]].[3] At the time, Alberta, British Columbia, and Quebec had carbon pricing policies in place.[3]

In October 2016, the government of Canada stated that provinces could opt out of the carbon tax, but would have to implement a provincial plan that could demonstrably reduce emissions more than the carbon tax.[4] The provincial system would have to result in a price on carbon of at least $20 per metric ton, either via a carbon tax or cap and trade program.[5]

Act

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In June 2018, the government passed the Greenhouse Gas Pollution Pricing Act.

The preamble states that "there is broad scientific consensus that anthropogenic greenhouse gas emissions contribute to global climate change", and that the impacts of such changes are affecting Canada.[2]

The industrial sector is exempt from the tax, and is instead subject to the Output-Based Allocations system, which is functionally similar to a cap and trade system.[2] The rate each industrial emitter pays will be based on a portion of their emissions, and their energy efficiency compared to industry peers.[1]

Provincial and territorial programs

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Although New Brunswick implemented its own carbon tax, the federal government did not deem it to satisfy the federal requirements, and so the province is subject to the federal carbon tax.[6]

All three territories (Northwest Territories, Nunavut, and Yukon) have opted to use the federal carbon tax instead of implementing their own programs.[7] Revenues collected will be transferred to the territories instead of being returned as rebates to individuals.[7]

Rates

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Beginning on 1 January 2019, the carbon price will be set at $20 per ton, and will increase by $10 per ton each year until 2022.[2] The associated rates for various fossil fuels are presented in the table.[8][9]

Type Units Rate
2018 2019 2020 2021 2022
Carbon dioxide equivalents $/tonne 10 20 30 40 50
Aviation gasoline $/litre 0.0249 0.0498 0.0747 0.0995 0.1244
Aviation turbo fuel $/litre 0.0258 0.0516 0.0775 0.1033 0.1291
Butane $/litre 0.0178 0.0356 0.0534 0.0712 0.0890
Ethane $/litre 0.0102 0.0204 0.0306 0.0408 0.0509
Gas liquids $/litre 0.0167 0.0333 0.0499 0.0666 0.0832
Gasoline $/litre 0.0221 0.0442 0.0663 0.0884 0.1105
Heavy fuel oil $/litre 0.0319 0.0637 0.0956 0.1275 0.1593
Kerosene $/litre 0.0258 0.0516 0.0775 0.1033 0.1291
Light fuel oil $/litre 0.0268 0.0537 0.0805 0.1073 0.1341
Methanol $/litre 0.0110 0.0220 0.0329 0.0439 0.0549
Naphtha $/litre 0.0225 0.0451 0.0676 0.0902 0.1127
Petroleum coke $/litre 0.0384 0.0767 0.1151 0.1535 0.1919
Pentanes plus $/litre 0.0178 0.0356 0.0534 0.0712 0.0890
Propane $/litre 0.0155 0.0310 0.0464 0.0619 0.0774
Coke oven gas $/cubic metre 0.0070 0.0140 0.0210 0.0280 0.0350
Marketable natural gas $/cubic metre 0.0196 0.0391 0.0587 0.0783 0.0979
Non-marketable natural gas $/cubic metre 0.0259 0.0517 0.0776 0.1034 0.1293
Still gas $/cubic metre 0.0270 0.0540 0.0810 0.1080 0.1350
Coke $/tonne 31.80 63.59 95.39 127.19 158.99
High heat value coal $/tonne 22.52 45.03 67.55 90.07 112.58
Low heat value coal $/tonne 17.72 35.45 53.17 70.90 88.62
Combustible waste $/tonne 19.97 39.95 59.92 79.89 99.87

Rebates

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Most households will receive a rebate referred to as the Climate Action Incentive payment under the federal program; it will be based on the number of individuals in a household and reimbursed to one tax filer in that household.[10] The Government of Canada estimates that in provinces which have not implemented a provincial carbon pricing program, about 80% of households will receive a rebate exceeding their annual direct and indirect costs related to the carbon tax.[10] The values vary depending on the mix of fossil fuels consumed provincially, with households in provinces using more fossil fuels both incurring larger costs and receiving larger rebates.[10]

Reaction

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After the 2018 Ontario general election, the newly-formed majority Progressive Conservative Party of Ontario led by Doug Ford repealed participation in the cap and trade program with Quebec and California, and also cancelled the programs funded by its revenues.[11] As a result, the federal government's program will be imposed on the province, but the provincial conservative government is undertaking legal action against the federal government to oppose it.[11] The province of Saskatchewan has challenged the imposition of the federal carbon tax, with a ruling about its constitutionality expected from the Court of Appeal for Saskatchewan in 2019.[6] Manitoba scrapped its proposed carbon tax in October 2018.[6]

Ford has referred to the rebates as "phony" and a "temporary vote-buying scheme that will be discarded once the (2019 federal) election is over".[1]

Carbon pricing is supported by the Canadian Chamber of Commerce, the largest business group in the country, which identifies the carbon tax as the most efficient program to reduce greenhouse gas emissions domestically.[12] It also advocates for a reduction in environmental regulations targetting carbon emissions.[12] The Canadian Federation of Independent Business supports the carbon tax, but stated that rebates should not be restricted to consumers.[13]

The Business Council of Canada issued a press release stating that the organization "advocated for carbon pricing as the most efficient means to contribute to achieving Canada’s climate change goals".[14] It is also broadly supported by the petroleum industry in Canada, which has used the effects of climate change and the implementation of carbon pricing as means to drive efficiency upgrades for processing bituminous sands, resulting in lower costs, larger profit margins, and a smaller carbon footprint for each barrel of oil produced.[14]

Effects

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As a result of the tax, the cost of natural gas in 2022 will increase by about 75% compared to market rates of October 2018.[2]

Revenues from the carbon tax will be used for household rebates, funding emission-reduction programs, reducing other federal government taxes, or included as part of federal government revenues.[6]

When General Motors announced the shuttering of the Oshawa Car Assembly as part of a larger global business change, leader of the Conservative Party of Canada Andrew Scheer blamed it on the impending carbon tax.[5] The company stated that public policy did not have an effect on its business restructuring decision.[5]

In December 2018, a survey commissioned by Global News and conducted by Ipsos-Reid found that a gasoline price of over $2.00/L (nearly double the prices at the time) would cause a majority of Canadians to purchase more fuel-efficient vehicles.[15] An increase in gasoline prices of $0.0442/L (the carbon tax in 2019) would result in at most 18% of Canadians reconsidering the mode or type of transportation they use.[15]

Notes

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  1. ^ a b c d McCarthy & Stone 2018.
  2. ^ a b c d e Nuccitelli 2018.
  3. ^ a b c McCarthy 2015.
  4. ^ Guly 2016.
  5. ^ a b c Austen 2018.
  6. ^ a b c d The Globe and Mail & November 2018.
  7. ^ a b Roman 2018.
  8. ^ Greenhouse Gas Pollution Pricing Act, Schedule 2.
  9. ^ Greenhouse Gas Pollution Pricing Act, Schedule 4.
  10. ^ a b c McCarthy 2018.
  11. ^ a b CBC 2018.
  12. ^ a b Robson 2018.
  13. ^ Wingrove 2018.
  14. ^ a b Turner 2018.
  15. ^ a b Kalvapalle2018.

References

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