Small and medium sized businesses in Ontario, Saskatchewan, Manitoba and New Brunswick have been promised about $155 million to cushion the initial shock of fuel surcharges when the first phase of the four-year incremental rollout of carbon pricing begins next spring. Another $73 million has been earmarked for municipalities, Indigenous communities and the education, health care and non-profit sectors. Annual disbursements of $385 million for business owners and $185 million for the other designated sectors are projected by 2022.
“Canadians know that polluting isn’t free,” Minister of Environment and Climate Change Catherine McKenna reiterated yesterday, as she and Prime Minister Justin Trudeau outlined forewarned carbon price and rebate plans for provinces that have ignored the deadline for devising their own schemes.
This includes a four-part schedule of surcharges for 22 different fuel types. However, most consumer expenditure is expected to go to gasoline and natural gas price add-ons. A carbon levy of $0.0442 per litre will go on at the gas pumps beginning next spring, rising to $0.1105 per litre by April 2022. The carbon levy on natural gas will begin at $0.0391 per cubic metre (m3) and climb to $0.0979/ m3 over the four-year period.
Federal strategists are aiming for greenhouse gas (GHG) emission reductions on two fronts. The upfront premium is meant to encourage more efficient use of GHG-emitting fuels, including fossil-fuel-generated electricity. Collected funds can then be invested to develop and commercialize low-carbon technologies and to encourage energy efficiency and a shift to low-carbon energy sources.
“The case is clear: Canada needs to cut greenhouse gas emissions that cause climate change, and the best way to do that is to put a price on carbon pollution,” asserts Minister of Finance Bill Morneau. “Pollution pricing encourages Canadians and businesses to innovate, invest in clean technologies, and take advantage of long-term growth opportunities.”
As envisioned, the federal government will collect and redistribute approximately $4.2 billion in Ontario every year (and another $1.44 billion in New Brunswick, Manitoba and Saskatchewan) once the full carbon surcharge of $50 per tonne of carbon dioxide equivalent (CO2e) is in place. The major share of this will be channelled into what’s to be known as climate action incentive payments, to be delivered as rebates directly to residents.
In 2019, when carbon is initially priced at $20/tonne, the federal government projects $1.58 billion will be rebated to Ontarians, translating to an average of $300 per household. That’s 15 per cent more than the $260 in annual savings the Ontario government claimed to have delivered to average families when it invoked a carbon pollution amnesty through the dismantling of the province’s cap-and-trade system earlier this year.
Since rebates are prorated to carbon price expenditures, households in Saskatchewan — where, in 2016, the carbon intensity of the electricity supply was pegged at 660 grams of CO2e per kilowatt-hour (kWh) — are in line for largest rebates. This is projected at an average of $1,161 when the $50/tonne price is in place versus an average of $697 in Ontario, where the carbon intensity of the electricity supply was 36 grams of CO2e/kWh in 2016.
In addition to funds announced yesterday, small and medium businesses, non-profits, Indigenous communities and broader public sector players, such as municipalities, educational institutions and hospitals, have access to the existing Low Carbon Economy Fund to promote energy efficiency upgrades and fuel switching.
Meanwhile, Ontarians are invited to submit their ideas to the public consultation on a Made-in-Ontario plan. It’s promoted as an alternative to “the previous government’s insistence on imposing a punishing, job-killing carbon tax on Ontario families and businesses”. Instead, the current government emphasizes “resiliency efforts, pollution reduction and how government can better partner with the private sector.”
Rod Phillips, Ontario’s Minister of Environment, Conservation and Parks, rebutted yesterday’s federal announcement via Twitter, stating: “Anyone who tries to convince you that any tax will put more money in your pocket should have you thinking twice.”
Phillips, the former president and chief executive officer of the Ontario Lottery and Gaming Corporation, also labelled it a “regressive tax”. However, the Business Council of Canada endorses the approach.
“We support the price mechanism because it provides the economic incentive for consumers to change their behaviour and for business to invest in technologies that progressively reduce their emissions over time,” says Goldy Hyder, the Business Council’s president and chief executive officer.