No plan yet for $3.6B in refunds
Small businesses, Indigenous groups push federal government for their promised cut of revenue
The federal government hasn’t decided how it will refund more than $3.6 billion in carbon price revenue to businesses and Indigenous groups, after promising for more than five years to return all proceeds to the jurisdictions where they are raised.
Those waiting for the money feel they are entitled to speedier refunds as they bear the brunt of Prime Minister Justin Trudeau’s signature climate policy, which the government expects to cover up to one third of Canada’s promised emissions reductions by 2030.
“It’s not a fair system,” said Christina Santini from the Canadian Federation of Independent Business, a group pressing for faster rebates to small businesses.
Returning revenues from the carbon price’s “fuel charge” on consumer gasoline and natural gas is a key part of the pricing scheme set up in 2019. While more than 90 per cent of the proceeds go to households in provinces where the levy is in place through rebates paid out four times per year, the rest of the money has always been earmarked for groups the government deemed worthy of extra help paying the carbon price.
These originally included a smattering of groups and institutions — such as schools and hospitals — but while some money has flowed in refunds over the past five years, the government has also been redesigning how and to whom it will return this chunk of the carbon price proceeds.
In 2021, for instance, Ottawa announced it would return proceeds to farmers, which so far has included more than $100 million delivered through a tax credit, according to Environment Canada. Beyond that, the government says it plans to refund the remaining pool of money to Indigenous governments and small and medium enterprises (SMEs) — though it did not provide a specific timeline for how or when the cash will get distributed to these groups.
“The government plans to return all outstanding proceeds to these groups as expeditiously as possible,” wrote Benoit Mayrand, a finance department spokesperson, referring to $3.1 billion the government pledges for SMEs in “emissions-intensive, trade-exposed sectors.” That includes $2.5 billion for the collection years 2019-20 to 2023-24, along with $621 million for the coming 2024-25 fiscal year, the government has said.
Meanwhile, for Indigenous groups, Environment Canada spokesperson Josh Brighton said officials from his department “have engaged” with First Nations and Métis groups since 2021 to discuss ways to return the money they’ve been promised. That includes $282.2 million for proceeds collected from 2020-21 to 2023-24, and $249.3 million for the upcoming 2024-25 fiscal year, according to Environment Canada. Brighton said the department is working to announce how this cash will be distributed “as soon as possible.”
Christopher Ragan, a carbon pricing advocate who heads the Ecofiscal Commission, said it is never helpful for the results of a controversial policy to appear out of sync with what the government promised — referring to long-standing pledges to refund the proceeds from the fuel charge.
“It doesn’t help the policy, and these days they could use all the possible help,” he said.
Questions about the refunds are one aspect of a federal carbon pricing system that has come under political assault from opponents like Conservative Leader Pierre Poilievre, who vows to “axe the tax” he blames for contributing to Canadians’ struggles with the rising cost of living. The Liberal government has also faced pressure to weaken the pricing system from its own MPs, and last fall decided to lift the fuel charge from heating oil, while pumping an extra $500 million into a program to provide lower-emission electric heat pumps and pledging to use the carbon price proceeds to double the “top-up” for households which pay the fuel charge and are defined as rural.
The decision to lift the charge from heating oil prompted calls from provincial governments for the levy to also be removed from natural gas heating, while some in rural areas have bemoaned how their residents don’t get the extra rebates because Ottawa doesn’t define them as “rural.”
Because of these changes, 93 per cent of the fuel charge revenues are slated for households, starting in 2024-25, according to the finance department. Two per cent of the money is now pledged for Indigenous governments, while the rest — five per cent — will go to SMEs, the department said.
Now, small businesses say they’ve yet to receive any details on how that money will be spread out, and they’re growing increasingly frustrated after several years of facing the brunt of the price on pollution without relief, says the Canadian Federation of Independent Business.
“It definitely makes it feel like the small businesses are being asked to sort of pay for everyone else,” said Santini, CFIB’s director of national affairs. “However, many small business owners aren’t particularly wealthy. Those we represent, they’re the mom and pop shops, they’re the ones that are working 59 hour workweeks or scraping by a living for their family.”
By March 2023, the government had returned $31 million from carbon price proceeds to small businesses through its first program to return the fuel charge revenues to SMEs, according to Environment Canada. But Santini said such a program leaves a significant burden on struggling businesses. That’s why they want a rebate program much like the one for households to pay out the money — $2.5 billion — they say they’re owed.
“Access to capital is increasingly a barrier. And most small businesses probably wouldn’t have that much money or that much need to invest in that much capital,” she said.
Indigenous groups have, too, joined in on the chorus of those criticizing the federal government’s handling of the rebates for carbon pricing. Neither the Assembly of First Nations nor the Chiefs of Ontario (COO) responded to the Star’s requests for comment for this story, though COO filed for a judicial review of the price on carbon in November. Because First Nations face additional infrastructure gaps that make it harder to transition away from fossil fuels and as many Indigenous people don’t qualify for the household rebates, the program was inherently discriminatory, they charged.
According to Environment Canada, the government returned $7.33 million in carbon price proceeds to “Indigenous recipients” in the 2019-20 fiscal year, before it started consultations on how to refund a larger portion of the revenues to Indigenous governments.
“The charge is not supposed to generate revenue for Canada, but when it’s applied to us it does,” Grand Chief Abram Benedict said at the time.
“We don’t get the rebates and returns that other communities get and it’s unfair.”