Week 3, January 20: Canada’s Carbon Tax
This is one of the 26 segments of Guy Dauncey’s Climate Emergency: A 26-Week Transition Program for Canada. Excerpted by permission.
Carbon taxation is a net benefit to all Canadians and an essential tool as we navigate a rapid transition to renewable energy. The current tax is $30 per tonne in 2020, rising by $10 a year to $50 by 2022, the revenue from which is being returned to Canadians as tax rebates. In Ontario, the average family paying $357 in carbon tax costs per household is receiving $439 in rebates. 90% of the revenue is going to consumers as rebates, and 10% is going small and medium-sized businesses, schools, hospitals, and other organizations.
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The purpose of the tax is to incentivize citizens, businesses, organizations and utilities to switch to low or zero carbon energy. Thus a family whose members travel by bicycle, bus or electric vehicle and who have retrofitted their home to use a heat pump will pay much less carbon tax, but they will receive the same tax rebate as other households. Later announcements will offer subsidies, grants, and tax incentives to reduce emissions.
The tax will remain revenue neutral, but instead of being returned as a tax rebate, the revenue will be distributed in the mail to all Canadians each January as an annual dividend.
We will increase the tax and matching rebates by $25 a year, reaching $155 by 2025 and $280 per tonne by 2030, in keeping with scientific estimates of the price needed to reduce carbon emissions sufficiently to meet the Paris climate goals. In 2025, a household that pays $1,855 in carbon taxes will receive $2,268 in tax rebates. As the decade proceeds and the transition to renewable energy accelerates, the taxes paid and rebates received will decline.
2121: $55 2022: $80 2023: $105 2024: $130 2025: $155
2026: $180 2027: $205 2028: $230 2029: $255 2030: $280
Non-fossil-fuel export-sensitive industries will be able to apply for partial or total exemptions, so that Canadian business is not lost to countries which do not have a carbon tax or which charge a lower rate. In a future announcement we will discuss the possible use of border carbon adjustment tariffs.