How Carbon Pricing Works
by Stephanie Ho Lem, CHCA Director – Living Green
Everyone seems to cringe when the word “tax” is brought up in conversations and certainly carbon tax. As on April 1, the customer carbon levy for gasoline was raised to $80 per tonne from $65 which means the carbon price on a litre of gasoline will now be 17.6 cents per litre, up 3.3 cents per litre from before. That means filling a 50-litre tank from empty will cost about $8.80 in carbon price, about $1.65 more than before.
Greenhouse gas emissions have contributed to climate change and for 2023, we experienced the warmest year on record with wildfires spreading across the country. In Alberta, there were 1,092 wildfires burning a total of 2.2 million hectares. The wildfires have destroyed habitats and for threatened species (Alberta Wilderness Association), it will never be the same again. Much of Alberta is under extreme drought as this past winter has been warm compounded with the lack of snowfall. The province has declared the start to the wildfire season on February 20. Will we see another year of record wildfires or was it a rare event?
There is no single approach to reducing emissions that works for every part of the country. As a nation, a price on pollution is a cornerstone of Canada’s plan to tackle climate change. The federal price on carbon, implemented in 2019, means that every jurisdiction has had a price on carbon pollution. Canada has two different carbon pricing programs – one for big industry where companies pay the price on a share of their actual emissions, and a consumer carbon levy which is applied to fossil fuel purchases. Putting a price on pollution is better than doing nothing.
Unlike most other taxes, the carbon tax comes with a rebate. “All direct proceeds from the federal pricing system are returned to the province or territory where they were collected” – Government of Canada. The Parliamentary Budget Officer, Yves Giroux has noted the carbon tax minus rebates would benefit lower income households the most. It’s estimated that eight out of ten households receive more from the rebate than they pay in added costs created by the tax. In Alberta, individuals will receive a quarterly payment of $225 and a family of four will receive $1,800. Canada’s carbon pollution pricing will contribute as much as a third of Canada’s emissions reduction in 2030 and to reach net-zero by 2050.
Economists in general have reiterated that the most cost-effective way to attack greenhouse gas emissions is to put a price on pollution. The carbon levy reduces emissions at a lower cost than other measures, and it has a negligible effect on overall inflation.
BC has had their own carbon tax since 2008. They are a textbook example of carbon taxation as it covers approximately 70% of provincial GHG emissions. Generally, the BC policy has been successful in significantly reducing the level of GHG emissions without compromising economic growth and development.
Sources: Calgary Herald – March 30, April 2, 4 and 5; Government of Canada website “How carbon pricing works”, World Economic Forum.
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