Carbon tax looking less costly even as NDP shies away

Like most other Canadians we received our quarterly carbon tax rebate on Tuesday – $154 electronically transferred to our credit union account. Despite news stories declaring that for the first time banks would label such direct deposits as “Canada Carbon Rebate”, ours was tagged simply “Canada”, demonstrating that not all financial institutions are on board yet with the government’s efforts to ensure Canadians know why they are receiving a chunk of money from the feds.

But that complication aside, arrival of the latest round of rebates, combined with lower gasoline and heating fuel prices may take some of the oomph out of the Conservatives’ “axe the tax” campaign. And if that’s not enough, there’s the latest re-working of estimates by the Parliamentary Budget Office of the impact of the tax and the rebates on household incomes. Spoiler alert – the re-calculation makes Poilievre’s carbon tax “nuclear winter” ravings even more ridiculous. (For details, see “nuclear winter” below).

The latest PBO report comes after two earlier versions were recalled to repair a defect. Estimates in those reports erroneously included not only the hotly-disputed consumer carbon tax – or fuel charge – but the industrial carbon tax as well. As I predicted here the PBO’s re-calculation, limited only to the fuel charge, would further expose the deceit behind Poilievre’s (and Tim Houston’s) hyperbolic attacks on carbon pricing.

Remember the Trudeau government’s claim that 80 percent of households would get more in rebates than they would pay through the fuel charge? The new PBO calculations suggest the percentage will be even higher. The average household in each of the eight affected provinces (B.C. and Quebec have their own systems) will receive more from the rebate than they pay in the federal fuel charge. The only groups to which that good fortune does not apply are the top 20 percent of households in the Maritime provinces. So too bad for those higher income Maritimers, but good news for the other 98 percent of households.

And for that 98 percent, the average per-household benefit rises significantly in most provinces when only the fuel charge is calculated. The table below compares the estimate in the PBO’s latest report with the 2023 calculation based on  inclusion of industrial pricing. 

Fiscal Impact by PBO Report

Province	2023 Report	2024 Report	% change
Nova Scotia	$33	$313	848.5%
Saskatchewan	$699	$1,205	72.4%
Manitoba	$321	$537	67.3%
Ontario	$202	$331	63.9%
Newfoundland	$436	$713	63.5%
New Brunswick	NA	$241	NA
Alberta	$776	$725	-6.6%
Prince Edward I.	$253	$204	-19.4%

    Source: PBO (my calculations)  

Households in Nova Scotia see by far the largest percentage increase in benefit – probably because the impact of the industrial carbon tax on Nova Scotia Power is removed from the calculation. The PBO report doesn’t offer an explanation.

Not all rosy

Anyone who has tried to follow the carbon tax saga will know that the fiscal impact, both direct at the gas pump or oil tank and indirect through increases in things like cab fares or rents, is only part of the story the Budget Office tells. There is also the negative economic impact of the fuel charge, a dampening effect on the economy that, according to the PBO’s 2023 report, equated to an average of between $1,316 and $2,773 per household by the time the tax reaches $170 per tonne in 2030. 

The PBO’s approach has been criticized – not least because it fails to take into account the economic consequences of doing nothing to mitigate climate change or the cost of a different approach based on subsidies or regulation. And for its part, the Canadian Climate Institute has argued that the PBO’s negative economic impact calculations are too high. 

The Conservatives nevertheless embraced the numbers wholeheartedly, especially the $2,773 for Alberta households. But that was then. Now, with the revised estimates, the Conservatives may have to  go back to the drawing board. PBO’s amended estimates are much lower – a 75 percent drop down to $697 for Alberta. The new low-high range is $457 per household in New Brunswick and $903 in Ontario. 

Moreover the latest calculations confirm that the effect of the tax is progressive, meaning that because they consume more, the middle and upper income quintiles pay more than those at the bottom. Even when the fiscal and economic impacts are combined, rebates more than cover the cost of the fuel tax for those 40 percent of households in the two lowest income quintiles. Which brings us to the NDP.

Targeting “big polluters” 

The progressive nature of the fuel charge makes somewhat puzzling the federal and British Columbia NDP’s current ambivalent position on carbon pricing. The party was never a big supporter of the carbon tax – B.C. New Democrats coined the “axe the tax” slogan back around 2007 when it was brought in by B.C.’s Liberal government. And most people on the left  maintain correctly that consumer carbon pricing alone will not do anywhere near enough to reduce emissions from fossil fuels. 

However, Jagmeet Singh’s argument for questioning the tax – “we want to see an approach to fighting the climate crisis where it doesn’t put the burden on the backs of working people, where big polluters have to pay their fair share,” adopts at least part of the Conservatives’ specious argument, bringing slings and arrows from both sides of the ideological spectrum.

For example, writing from the left, The Tyee commentator Steve Burgess compared the NDP’s waffling on carbon tax to U.S. Republicans “grovelling before Trump to save their own political hides” and asked whether abandoning the carbon tax is “a desperate attempt by national and provincial New Democrats to escape the suction of the sinking Liberal ship.”

From the right, Sun columnist Lorrie Goldstein said the “policy reversals” go beyond mere flip-flops – “this is more like blowing a two-and-a-half reverse somersault dive in the pike position at the Olympics and ending up doing a massive belly flop into the pool.”

Colourful journalistic prose notwithstanding, more attention should be paid to the second part of Singh’s statement, where he talks about the need for big polluters to pay their fair share. That’s more than mere rhetoric. 

As the Canadian Climate Institute (CCI)  reported  earlier this year, the consumer fuel charge plays a relatively minor role in cutting GhG emissions, providing, at most, only 14 percent of emission reductions projected for 2030 under current policies – policies that, incidentally, would leave Canada more than 100 million tonnes above the legislated target of 440 mt. As the CCI report pointed out, significant reductions to get Canada even close to those targets will have to come from Singh’s “big polluters.” 

That means sticking with existing policies affecting large emitters, including industrial carbon pricing, and implementing planned policies, such as the oil and gas emissions cap – currently under attack through the Alberta government’s trans-Canada propaganda campaign.    

Industrial carbon pricing – also known (pardon the jargon) as output-based pricing (OBPS) or large-emitter trading systems (LETS) – is projected to achieve three to four times more emission reductions than the consumer fuel charge. That’s provided the provinces which have designed the systems to meet federal standards follow through.The other major sources of potential reductions are the controversial oil and gas emission caps and the existing regulations on methane emission from oil and gas production. Together those two policies, if carried through, would account for more than double any reductions expected from the consumer fuel charge.

By pivoting away from the fuel charge, the NDP is indicating that in the battle against climate change, the much maligned carbon tax is not a hill worth dying on. Instead, Singh is promising a plan for tackling the main source of emissions. The plan may end up being a tougher version of what the Liberals have already proposed for industrial emitters, but without the unfortunate stigma Poilievre and his allies have attached to the carbon tax. And because it will, of necessity, include big emission reductions from oil and gas, we can be sure it won’t be copied by the Conservatives.

Poilievre hasn’t been clear on whether the Conservatives would axe industrial carbon pricing as well as the consumer levy. But with Alberta being the source of at least half of Canada’s GhG emissions from large industrial facilities, it’s a safe bet that if any federal carbon pricing plan appears in the Conservative platform it will be designed with Poilievre’s ally Danielle Smith in mind. And with the carbon tax monkey off its back, the NDP will be better positioned to critique whatever climate policies the Conservatives may or may not concoct.

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Nuclear Winter? In case you missed it, the following Poilievre outburst, reported by Canadian Press on September 15, takes carbon pricing fear mongering to a new level.

OTTAWA — Conservative Leader Pierre Poilievre signalled the Liberals’ carbon price and the economy will remain his prime target when Parliament resumes this week.

He painted a dystopian picture during a Sunday morning speech to his caucus, saying the Liberal government’s plans to increase the price would cause a “nuclear winter” for the economy.

“There would be mass hunger and malnutrition with a tax this high … our seniors would have to turn the heat down to 14 or 13 C just to make it through the winter,” Poilievre said.

“Inflation would run rampant and people would not be able to leave their homes or drive anywhere.”

At least there’s no reference to eating pets…but maybe that’s implied.