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Analysis | The much-unloved carbon tax

Natasha Kumar By Natasha Kumar Mar22,2024

Analysis | The much-unloved carbon tax

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Citizens of Alberta, Manitoba, Ontario, Saskatchewan, New Brunswick and Nova Scotia receive a “Canadian rebate on carbon” in the form of direct deposit or by check, every three months.

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There are 73 carbon pricing initiatives in the world, in the form of a tax, as is the case with the Canadian federal regime, or in the form of a carbon market, as is the case in Quebec for over a decade. Conservative Leader Pierre Poilievre's campaign against carbon pricing bucks the global trend.

In fact, over the past 10 years, the share of global emissions covered by carbon taxes and markets has increased from 7 to 23%, according to a World Bank report. This is an increasingly popular solution, but it is far from being the only one. And there is no global unanimity on this subject, it must be said.

Nevertheless, putting a price on our polluting emissions aims to try to get public decision-makers and the population to make choices that reduce their carbon footprint. This allows for investment in innovation and productivity, and above all it is a tool that can help governments achieve their climate targets.

Introducing a price signal to try to mitigate climate change is essential to spur investment and behavioral changes aimed at reducing emissions, writes Jennifer Sara, climate change lead at the World Bank, in its 2023 report. It adds: Carbon pricing must continue to grow, both in terms of coverage and price, to drive the transformational change needed to achieve the Paris targets.

Putting a price on carbon also provides predictability for businesses. Knowing that the vast majority of countries around the world have adopted a framework to reduce their greenhouse gas emissions, companies and investors are no longer seeking to avoid environmental rules, but more to understand and integrate them. They want to reduce uncertainty as much as possible and wish to work with a clear framework on the price of carbon.

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Establishing a carbon market as Canada did, then canceling it, as Pierre Poilievre wishes to do if he becomes Prime Minister, is a scenario that plunges businesses into unpredictability. This is anything but predictable, knowing that another government could decide to subsequently reinstate a price on carbon.

Imagine in 2024 that you can pollute for free, it's literally shoveling problems into the future. This means postponing costs that could be even higher.

The leader of the Conservative Party of Canada is winning electoral points by leading a very effective popular offensive against the carbon tax. Pierre Poilievre succeeds in capturing the economic anxiety of many households, struggling with a surge in the cost of living in recent years. He also succeeds in capturing popular fatigue with measures and speeches on the environment which seem to yield no results.

This fatigue is palpable and policy makers cannot pretend that it does not exist. The carbon pricing solution seems counterproductive these days, and Prime Minister Justin Trudeau needs to take notice.

In return, if we were to eliminate this tax, Pierre Poilievre must explain to Canadians what we would replace it with. Would there be some form of carbon pricing? What would the price of carbon be? What would the new mechanism be? Would polluting, under the Conservatives, become free again? And if we don't tax carbon and we favor green technology projects, at what price will we do it? Would a Conservative government be even more generous than the Liberals in terms of subsidies for green projects?

If the Trudeau government's carbon tax must be abolished, what is the Conservative plan to achieve Canada's climate goals? Above all, we must ask ourselves the question: do the Conservatives care about climate change?

In an interview with The Canadian Press on April 8, 2023, Parliamentary Budget Officer Yves Giroux said that everything we do to fight climate change will have a cost. We have the choice between a carbon tax or regulations to reduce the use of fossil fuels. Regulation also has a cost. Doing nothing also has a cost.

Doing nothing also has a cost. This is important to remember.

That said, the World Bank's pollution report highlights that revenues from carbon pricing are used in different ways: almost 40% of the money goes to green investments. And it's only 10% that compensates households or businesses, which is the federal government's current formula.

Now, this formula is all except optimal. An Angus Reid poll from last fall, which the Globe and Mail reported again earlier this week, told us that 42% of Ontarians said they had never received financial rebates from the government in connection with the carbon tax, or at least were not certain of it.

Should we be surprised by this confusion? The short answer is no. The Trudeau government has put in place a system that is difficult for ordinary people to understand. You know when you pay your taxes, but you don't really realize the financial discount that is made every three months and especially its link with the taxes you have paid.

The federal government has failed to explain policy to Canadians, writes Christopher Ragan, director of the Max Bell School of Public Policy at McGill University, in the Globe and Mail, Thursday morning. He was chair of the Canadian Commission on Ecofiscality.

However, 8 out of 10 households subject to federal carbon pricing will receive more money in the form of compensation than what they will pay in carbon tax. And 90% of revenue from pricing is returned to households.

The Parliamentary Budget Officer in Ottawa has published several analyzes on the subject. In a study released in 2022, he wrote that most households will realize a net gain because they will receive more in federal carbon pricing rebates under the government's climate plan than the total amount they pay in federal fees. on fuels (directly and indirectly).

What the Trudeau government now calls “the Canadian carbon rebate” is paid to the citizens of Alberta, Manitoba, Ontario, Saskatchewan, New Brunswick and Nova Scotia by direct deposit or check every three months. A family of four can receive approximately $200 to $450 per quarter.

In Quebec, taxpayers are not entitled to this rebate while the government is banking on a carbon market. The proceeds are entirely paid into the Electrification and Climate Change Fund and are invested in projects aimed at reducing greenhouse gas emissions, adapting to climate change and electrifying the economy.

The Trudeau government shot itself in the foot by deciding to reduce the carbon tax on fuel oil last October. This decision, intended to temporarily relieve users of this type of fuel, is a destructive element of carbon policy. Today, all sectors and the majority of provinces are calling for a carbon price freeze or a suspension of its application for certain types of energy, such as natural gas.

According to a study by the Canadian Climate Institute, Canada must ask itself, in the current context, whether environmental policies should not focus primarily on industries. The price on carbon in the industrial sector is the largest contributor to carbon reduction in the country, says Rick Smith, the president of the organization, in an interview with the Globe and Mail. p>

According to this study, from 2025 to 2030, carbon pricing in the industrial sector will be responsible for 20 to 48% of emissions reductions while pricing that aimed at consumers will represent 8 to 14% of reductions.

With the cost of living being high and a government that is worn out after eight years in power, Conservative leader Pierre Poilievre has an easy time taking political advantage of the carbon tax. He hears Canadians' criticism of this tax and gives them an answer that may seem attractive.

But what does Mr. Poilievre propose in return for the next generations who will have to live with the consequences of global warming, the effects of which are exponential? Does he have a realistic and effective proposal to replace carbon pricing and ensure a predictable and stable framework for businesses?

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Natasha Kumar

By Natasha Kumar

Natasha Kumar has been a reporter on the news desk since 2018. Before that she wrote about young adolescence and family dynamics for Styles and was the legal affairs correspondent for the Metro desk. Before joining The Times Hub, Natasha Kumar worked as a staff writer at the Village Voice and a freelancer for Newsday, The Wall Street Journal, GQ and Mirabella. To get in touch, contact me through my natasha@thetimeshub.in 1-800-268-7116

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