Carbon price jumps to $65/tonne but rebates will also rise for millions of households

The carbon tax takes a substantial leap today. (Christopher Katsarov/The Canadian Press - image credit)
The carbon tax takes a substantial leap today. (Christopher Katsarov/The Canadian Press - image credit)

Canada's national carbon price saw its largest hike yet today when it jumped from $50 per tonne of emissions to $65. But the rebates millions of households receive to compensate them for the surcharge are also set to rise.

Usually, the national price increases annually by $10. This year, under the federal government's strengthened climate plan, it's rising by $15.

Because carbon pricing differs from province to province and territory to territory, not everyone will feel the impact of this increase the same way.

In places where the federal carbon pricing system applies, Canadians will see an increase to the fuel charge — what's known as the carbon tax — while heavy emitters will see increases through their output-based pricing systems.

This month's increase will add an extra three cents per litre at the pump for Canadians who live in Ontario and all of the Prairie provinces, says the Canadian Taxpayers Federation.

The federation estimates that after the increase, the total impact of carbon pricing will amount to an extra 14 cents per litre of gasoline, another 12 cents per cubic metre of natural gas and another 17 cents per litre of diesel.

Environment Minister Steven Guilbeault said most families who live in provinces where the federal fuel charge applies will get "more money back than what they pay."

That's because the Climate Incentive Action Payments rises with the price per tonne of greenhouse gas emission.

Chad Hipolito/The Canadian Press
Chad Hipolito/The Canadian Press

Guilbeault said higher-income households won't net out as much from the program.

"People like me who are better off … we will be paying more and that's how the system is designed," Guilbeault told CBC News.

How much will you get back?

According to Finance Canada numbers provided to CBC News, this is what a family of four will receive each quarter from the Climate Incentive Action Payments starting this month:

  • Alberta: $386

  • Saskatchewan: $340

  • Manitoba: $264

  • Ontario: $244

Residents in small and rural communities receive a 10 per cent top-up to their rebates.

In November, the federal government announced that Nova Scotia, Prince Edward Island and Newfoundland and Labrador now fall under the federal fuel charge. But their levies and rebates won't start until the summer. Here's what Ottawa says a family of four will receive in rebates each quarter starting in July.

  • Newfoundland and Labrador: $328

  • Nova Scotia: $248

  • Prince Edward Island: $240

The logic behind carbon pricing is to incrementally make fossil fuels, which drive climate change, more expensive, making it relatively cheaper for individuals to choose low-carbon options, like electric vehicles or heat pumps.

In principle, carbon pricing could give businesses a strong incentive to switch from heavy-emitting fuels to cleaner ones, or to employ technologies like carbon capture.

The Liberal government believes carbon pricing is the most efficient way to price pollution and drive clean innovation. But many claim carbon pricing imposes a too-heavy burden on low-income families.

"It's going to mean a lot of pain for a lot of people who are already struggling," said Franco Terrazzano, federal director the Canadian Taxpayers Federation.

Do you really get back more than you pay at the pump?

When assessing the impact of the fuel charge on families, both Liberals and Conservatives point to a report that appears to support both of their positions.

The parliamentary budget officer's annual analysis of the impact of the federal fuel charge suggests that when the carbon price eventually hits $170 per tonne, all lower-income families and most middle-income families will get back more from the rebates than they pay out through carbon pricing.

That's only if you consider how much households pay minus the rebates they receive — what the PBO calls the "fiscal impact."

But if you consider the impact of the loss of jobs and investment income from moving away from fossil fuels — the "net impact" of the federal fuel charge — most households will get back less.

In the House of Commons on Friday, the Conservatives seized on that aspect of the PBO report.

"Businesses are struggling with the extra burden of this tax. Some are unsure if they will even be able to survive this year due to the rising costs," said Alberta MP Glen Motz.  "What Canadians need is a Conservative government that will axe the carbon tax."

Conservatives, under their new leader Pierre Poilievre, have not said how they will meet Canada's climate change commitments under the Paris Agreement.

The party does say it will rely on clean technology to help Canada reduce its emissions, but hasn't provided more details.

Recent estimates from the Canadian Climate Institute show the carbon price could be beginning to lower Canada's emissions. Although total emissions may rise in a given year, the independent research institute estimates they aren't growing at the same rate as our economy is growing.

"We run models, and we see that carbon pricing is projected to contribute more emissions reductions than any other policy plank of the government's emissions reductions plan," said Dale Beugin, the executive vice president of the Canadian Climate Institute.