Here’s what you need to know about Liberal carbon price plan

What’s the government doing?

The federal government’s carbon price plan has two prongs. The first is a fuel tax on everything from aviation turbo fuel to gasoline and combustible waste. This tax starts in April 2019 at $20 per tonne of greenhouse gas emissions. It is scheduled to go up $10 per year until 2022, when it is $50 per tonne.

The second component is called an output-based pricing system. This is for heavy emitters in industries like cement and fertilizer production. Companies in these industries get a set amount of emissions taxfree. Firms that emit less than their industry allotment will receive credits. Firms that emit more than their industry allotment can either buy credits from their competitors or pay the federal tax.

Which provinces will be affected by the federal tax?

On Tuesday, the government announced it will impose its pricing system on four provinces that refused to devise their own plans that met federal standards: Ontario, New Brunswick, Saskatchewan and Manitoba. Nunavut, Yukon and Prince Edward Island voluntarily accepted the federal fuel tax instead of creating their own systems.

Why a tax?

The federal government argues that “putting a price on pollution” is the best way to encourage individuals and businesses to make greener decisions. The fuel tax is designed to give people and businesses an incentive to burn less fuel. Many economists argue such a carbon tax is more economically efficient than alternatives like regulations to phase out fossil fuels.

What’s this supposed to accomplish?

The carbon price is a central plank of Ottawa’s framework with the provinces and territories to curb greenhouse gas emissions (other parts of the plan involve weaning off subsidies to the oil and gas industry, regulating methane emissions, and phasing out coal power across Canada).

What will happen to the tax

revenue?

The fuel tax in the four provinces where it is being imposed is expected to raise $2.3 billion in the 2019-20 fiscal year — $1.7 billion from Ontario alone.

Ninety per cent of that will go to individuals and families via rebates added to their annual tax returns, the government says. A family of four in Ontario will get a $307 rebate next year, when the government predicts extra costs from the tax for that family will be $264. By 2022, the rebate will be $697 for an average Ontario household, when costs are expected to hit $564, according to government officials.

The remaining 10 per cent of tax revenues will support smalland medium-sized businesses.