The facts on the tax
Increases on April 1 come amid political hullaballoo over who wins and who loses
P.E.I. residents will see an increase in prices at the pumps on April 1, but many will also receive rebate cheques later in the month as part of the federal government’s carbon pricing program.
The increases in the carbon tax – or of the price on carbon for its proponents – have sparked a new round of antitax furor from the federal Conservatives, who are hoping leader Pierre Poilievre can use it to his advantage ahead of a planned 2025 election.
And despite the number of climate experts who support the policy, public opinion has turned against further increases to the carbon tax, according to a national poll released by Angus Reid on March 25.
Here’s a primer on the carbon tax, rebate cheques and the political hullaballoo surrounding the issue.
CHEQUES AND CHARGES
The federal government’s carbon pricing fuel charge is set to increase from $65 to $80 a tonne on April 1. This will mean a 3.3-cent per litre increase in the price of gasoline and a four-cent per litre increase in the price of diesel.
About 17.6 cents per litre of the gas price at the pumps will go towards the federal carbon levy. Planned increases would bring this federal levy to 37.4 cents per litre by 2030.
To offset this, households will receive a rebate cheque from the federal government. Those who have filed their taxes for 2023 by March 15 can expect to receive this cheque by mid-April. Those who haven’t filed their taxes yet will receive their payment after their return is assessed.
A single individual in P.E.I. will receive $110 as part of their carbon price rebate cheque while a couple can
expect to receive $165. A family of four can expect to receive $220.
Quarterly cheques will either be mailed to individuals or deposited automatically via the Canada Revenue Agency.
Between April 1, 2024, and March 31, 2025, single individuals will receive $440 in rebates, while a family of four will receive $880.
Due to lobbying from Atlantic Canadian Liberal MPs, home heating fuels were given a three-year exemption from carbon pricing last fall.
DOES THE CARBON TAX HELP COMBAT CLIMATE CHANGE?
It’s hard to tell.
The goal of carbon pricing is to make polluting more expensive. Since their election in 2015, the Trudeau Liberals have argued this will help change behaviours of individuals and companies, making it more attractive to drive a vehicle that pollutes less or to install a heat pump in their homes.
More than 100 economists released an open letter on March 26 arguing that carbon pricing reduces climate emissions at a lower cost than other policies.
An analysis by the Canadian Climate Institute also projected that lowered emissions from carbon pricing fuel charges would add up to close to 10 per cent of what is needed to meet Canada’s climate targets by 2030. The institute also estimated that industrial carbon pricing initiatives will be far more crucial to meeting climate targets.
However, it is not clear if there is proof that the last five years of federal carbon pricing policy has resulted in lower carbon emissions.
“The pandemic made it hard to draw a direct line because there was a dramatic drop in greenhouse gas emissions,” said Charlottetown Liberal MP Sean Casey.
“Yet the price on carbon received no credit for it. It was all credited to the decline in economic activity.”
During an “Axe the Tax” rally of about 20 people in front of Casey’s office in Charlottetown on March 26, Jake Stewart, Conservative MP for Miramichi-Grand Lake, N.B., said the carbon tax has been a failure.
“Yes, they have a climate agenda. And it’s a tax agenda,” Stewart said, referring to Casey and the Trudeau Liberals.
“Is it working? Well, it’s taxing the guts out of Canadians and they can’t afford it.
And emissions aren’t even being curbed. So, it’s a total failure.”
While the March 26 letter from the 100 economists disagreed with claims, often made by Conservatives, that carbon pricing has failed to reduce emissions, the letter also said this one policy alone is not enough on its own to meet Canada’s climate change goals.
This point has been made by environmentalists for years.
Brendan Haley, an adjunct research professor at Carleton University’s school of public policy, says broad climate-oriented industrial policies have still not been developed by the federal government to reduce emissions in sectors like buildings or transportation.
Good programs and policies exist, he said, such as a federally-funded program to provide low-cost heat pumps in P.E.I. But these policies are piecemeal.
“There is still not, you know, a concerted plan to how are we going to retrofit all the buildings we need to retrofit between now and 2050,” Haley said.
“What we do have is … small incentives or pilot projects instead of a kind of overarching strategy.”
Are taxes more expensive than rebates?
Speaking outside of Casey’s office, Stewart said the net cost of the carbon tax has harmed P.E.I. residents.
He referred to a report by Ottawa’s Parliamentary Budget Officer (PBO).
“We’re not in favour of a tax at all, so there would be no need for a rebate. And the significant thing about the rebate is Islanders are still paying more. That’s been proven by the Parliamentary Budget Officer,” Stewart told SaltWire.
Stewart was not fully accurate about the PBO’s conclusions.
A March 2023 report by the PBO found that the wealthiest 20 per cent of Prince Edward Island households would pay out more in carbon taxes than they would receive in rebate cheques by 2030. The other 80 per cent of Island households would receive back more from rebate cheques than they paid and the poorest 20 per cent of households would receive the biggest benefit.
However, the PBO also estimated carbon pricing would have other economic impacts such as a loss in investment income and job losses. The PBO estimated that these economic impacts, as well as the net cost of the carbon tax, would have a negative impact for 60 per cent of P.E.I. households and a positive impact for the poorest 40 per cent by 2030.
Casey said this PBO report has been “widely debunked” by economic and environmental groups.
But he also said the PBO report undercuts Conservative arguments about the carbon tax.
He argued that Conservative opposition to the carbon tax amounted to a “war on the poor” because the rebate cheques provided a higher benefit to lower and lowermiddle income households in P.E.I.
Casey said Conservatives have used “misinformation and disinformation” to claim that getting rid of a carbon tax would help working families.
“They’ve preyed upon the difficulties that people have with the current situation that we’re in to score political points. But they’re making a connection that doesn’t exist,” Casey said.