Carbon tax hits Canadian households hardest: Parliament Budget Office

Families in Ontario, New Brunswick, Manitoba, and Saskatchewan will carry the burden of federal “carbon pricing” according to Parliament Budget Officer Yves Giroux and his office’s analysis of the federal tax in effect since April 1st this year.

“Households will largely bear the cost of the pricing system through their consumption of energy used for residential and transport purposes, and carbon charges embodied in non-energy products,” according to the analysis.

The PBO’s latest report—“Fiscal and Distributional Analysis of the Federal Carbon Pricing System”—calculates source revenue related to the federally mandated carbon tax in jurisdictions absent of such regimes, will be 90 per cent fuel-based reaping $2.63 billion this year; $6.21 billion by 2021.

Transportation needs means households in larger more disparately populated regions like Saskatchewan “will incur the highest average annual cost ($425 in 2019, $910 in 2024));” compared to New Brunswick ($193–$435).

In terms of heating costs, Statistics Canada’s data that’s seven years old notes 50 percent of Canadian households heat with natural gas (2011), and the majority of these are in Ontario. According to the Canadian Association of Petroleum Producers, natural gas supplies about 35 percent of country’s total energy demand.

But the government has largely exempted energy intensive and trade exposed industries from paying the carbon tax—up to 90 percent said Giroux and that “between 80 and 90 percent of (these) emissions will be free of charge and only between 10-20 percent of emissions will be under the carbon rate.”

Of more than 9 billion cubic feet of natural gas supplied in Canada daily, nearly 70 percent is consumed by industry compared to less than 20 percent for domestic purposes, says CAPP.

After the oil and gas sector, transportation contributes the most to Canada’s 704 megatonne annual GHG output (2016).

And the purported goal of the Liberal government’s carbon tax is to meet our Paris Accord commitments by reducing our carbon footprint to 30 percent below 2005 levels of 732 Mt.

While the modelling conducted by Environment Canada on policy measures taken since 2018 to meet this target, forming a partial basis for PBO’s analysis, it will not get Canada anywhere near 512 Mt (30 percent below Paris Accord standards).

And as a tax it cuts across household income levels, the more one earns, the more one is likely to pay. “[Those] in the top income quintile, or top one-fifth, will pay between two and three times the gross fuel charge amounts paid by lower income households,” the PBO estimates.

Though revenue neutral to the provinces, when re-dispersed the PBO concludes “net benefits are broadly progressive by income group…lower income households will receive larger net transfers than higher income households.”

Ian Lee, faculty chair at Carleton’s Sprott School of Business says the Liberal government played fast and loose with its definition of revenue neutral.

“To me when you’re talking about an individual tax, paid by individual persons, and per individuals, why are you suddenly talking of revenue neutrality of a higher level of organization of a government?” said Lee. “It’s almost like a card trick … the provinces don’t pay my taxes. In fact, the province takes my money.”

Lee said that CBC columnist Neil Macdonald’s column was “really on to something when he described [carbon tax] as basically an income redistribution scheme that could be irresistible, over the long run, for the provinces.”

“I’m responsible for the budget of me, individual Joe Taxpayer. If you call a tax paid by me revenue neutral, if I, Ian Lee, pay $1000 in carbon taxes, I [should] get $1000 back.”