Sun. Sep 25th, 2022
An oil refinery in Alberta.
enlarge An oil refinery in Alberta.

In 2018, Canada passed a federal carbon pricing law in an effort to reduce greenhouse gas emissions. The Greenhouse Gas Pricing Act was designed not to hinder any province that had independently put a price on carbon, so long as a province’s system met the requirements of federal law. In counties that had not acted, the federal scheme would go into effect instead.

That scheme included a tax on fuels starting at CAN$20 per tonne of CO2rising to CAN$50 in 2022.

On Friday, the government announced its plan for the program until 2030. Although the price increased by CAN$10 every year until 2022, it will now increase by CAN$15 every year after that. That means it CAN $170 per tonne of CO. would reach2 by 2030, notably higher than current prices around the world. For this reason, the announcement also notes that the government will “examine the potential of border carbon adjustments” — a type of import tax designed to protect domestic industry from goods produced in countries without comparable carbon taxes.

It all goes back

The tax revenues are redistributed among the population, with 90 percent going to private individuals and 10 percent to companies and institutions (including hospitals) that cannot really pass on the higher costs. Individual payments are progressively scaled based on income, and the government estimates that 80 percent of households should receive slightly more than they paid. Of course, if you can reduce the use of fossil fuels, you will pay less incremental costs while still receiving the same discount payment, providing an additional incentive.

A separate part of the program introduced a cap-and-trade system for large industry, limiting emissions and allocating tradable permits proportionally.

These new, higher prices will significantly increase the tax revenue that is redistributed. The costs also mean that some of the more expensive forms of emission control, such as carbon capture2 from chimneys or ambient air and injecting it underground may become economically viable.

Canada’s goal is for emissions to be 30 percent below 2005 levels by 2030, and the new carbon prices have been chosen to achieve that. The announcement also includes CAN$15 billion in other initiatives, including grants for energy efficiency improvements in homes and electric vehicles.

Costs and Payments

According to CBC News, the 2030 carbon price would add about CAN$0.38 per liter to gasoline costs. (It currently averages about CAN$1.00-1.20 per liter.) But 2030 rebate payments would range (based on the average fuel spending of each province and territory) from about CAN$2,000 to nearly CAN$4,000 per year for a family of four.

As for provinces that have their own carbon tax programs, such as British Columbia, the federal government says it will review current requirements and “consult with provinces and territories and indigenous peoples about these proposals in the coming months.” Currently, however, provincial programs must be at least equal to the federal price by 2022, so they may need to follow the same timeline for 2030.

Lawsuits challenging the constitutionality of the 2018 law are still pending, but so far none have been successful.

By akfire1

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