The Price on Carbon — it’s Time for Substance not Slogans
“When I am prime minister, I will axe the tax so that Canadians can bring home more powerful paycheques.” So states the leader of the Opposition, claiming that the price on carbon is responsible for everything from our rate of inflation to the high cost of groceries, including the $100 turkey that he bought for Thanksgiving.
The Conservative campaign is based on slogans and false information. The problem is that when untruths are repeated again and again, the message is accepted as fact by many voters. We have seen this tactic work for the Republicans in the US and more recently by the UCP’s Danielle Smith in Alberta.
The reality is that the largest contributor to greenhouse gas emissions is the burning of fossil fuels. These emissions are causing climate change, leading to a significant increase in forest fires, floods, drought, and other environmental events in our province and around the world. Climate change is expected to cost Canada’s economy billions of dollars in direct cost. In addition, disruptions to the supply system related to these events will impact consumers through the higher cost of groceries, other consumer goods, and insurance premiums.
Why a Price on Carbon
Carbon pricing is about recognizing the cost of pollution and accounting for those costs in daily decisions. Putting a price on carbon emissions is widely recognized as the most effective way of reducing greenhouse gas emissions while also driving innovation. Approximately forty other countries have some sort of price on carbon; the success of these programs often depends upon politics — whether certain sectors or fuels are exempted from the carbon pricing regime.
In Canada, the federal carbon pricing system (commonly labeled the carbon tax) applies in provinces and territories that do not meet federal regulations on carbon emissions. The federal system puts a price on fuel — gasoline, diesel fuel, heating oil, propane, and natural gas. The price is based on the amount of carbon dioxide emitted as the fuel is burnt. Heating oil releases more carbon pollution than natural gas, so the tax is higher on heating oil. The current price is based on $65 per tonne of carbon dioxide and increases on April 1 of each year until it reaches $170 per tonne in 2030. The objective is to encourage Canadians to change their behavior and to move to greener forms of energy.
How it Works
Many people are not aware that Canada’s carbon pricing system is revenue neutral in that the revenue collected is returned to the jurisdiction in which it was collected. Ninety per cent of the revenue collected is returned to families through a Climate Action Incentive payment; these payments are made on a quarterly basis. The balance of the revenues is used to provide additional top- up payments to small businesses, Indigenous groups and rural Canadians.
Farmers are exempt from paying the fuel charge on fuel used for farming activities. Bill C-234 (currently in the Senate) will exempt the fuel charge on natural gas and propane used by farmers in drying grain.
And as we all know, the government recently announced a three-year exemption for all Canadians on the fuel charge on home heating oil, a very expensive fuel. The government will also top up a grant program aimed at helping Canadians make the switch from using heating oil to heat their homes to electric heat pumps. So far, only the Atlantic provinces have signed on to the enhanced grant program.
What About the Impact on Inflation?
So, how significant is the carbon pricing system’s contribution to Pierre’s Thanksgiving turkey and Canada’s inflation problem? Canadian families in provinces under the federal carbon pricing system are paying in three ways — a price built into the price at the pump when they fuel their vehicles, a price built into home heating fuel, and an indirect cost that is built into the price of groceries and consumer goods (businesses pass this on to consumers for carbon costs they incur in the transportation of goods, among other things).
You can easily determine what your family is paying for fueling your vehicle and heating your home. The indirect cost is not as apparent, and this is the number that the Conservatives are trying to make a big deal of.
The Bank of Canada has estimated that the direct carbon price contributes to 0.15 % of inflation. A research paper by economists Jennifer Winter, Brett Dolter and Kent Fellows estimates that for a family with an annual income of $100,000, the indirect impact of carbon pricing is between $31 to $38 per month.
By comparing the amount that you receive from the Climate Action Incentive payment and the actual carbon pricing paid, you can determine the impact that the federal price on carbon has on your family budget. The federal government estimates that 80% of Canadian households receive more than they pay.
The link below opens a web page that has a calculator that provides an estimate of a family’s net balance on the carbon price they pay and the Climate Action Incentive payment they receive:
In the End Analysis
So, will axing the tax result in a more powerful paycheck? Absolutely not! In fact, it would have the opposite effect. A Conservative government would have to replace the current carbon pricing system with something else, to address the increasing impacts of climate change. Any system that they implement would necessarily result in higher indirect costs to consumers.
The slogans and untruths will continue. The Liberals need to do a better job of explaining and communicating the impact of the carbon pricing program. Alberta Liberals can help — by making sure that we understand how it works and spreading the word to our families, neighbors and friends.
Larry Krushelnitzky is a retired Imperial Oil chemical engineer and the current Chair of Edmonton Strathcona Federal Liberal Association
