Canada’s Carbon Tax: Explained
With varying coverage of Canada’s carbon tax, it is difficult to navigate what exactly it is, how it will work and where Ontario’s plans fit in the mix. Over the next few weeks, we’ll give you an overview of the carbon tax and what this means for Ontarians.
What is a carbon tax?
Carbon taxes are taxes that are based upon the carbon content of fuels. Energy or carbon taxes are a form of carbon pricing.
Carbon pricing is becoming more and more common globally as countries recognize the need to implement policy that addresses climate concerns. Energy taxes or carbon taxes are one way to mitigate and decelerate the environmental and health impacts of climate change.
By reducing harmful levels of carbon dioxide emissions through a carbon tax, we create less greenhouse gas emissions and promote policy that tackles climate change without significantly impacting the economy.
The Canadian context
This past fall, the federal government announced the implementation of a nation-wide carbon price.
In a market economy like Canada’s, it becomes increasingly important to encourage businesses to practice sustainable economic activity. Households and businesses investing in green innovation may be paying more upfront costs only to get a payback in energy savings over a lengthy period of time. A carbon tax makes investing in these innovations more feasible. A carbon tax rebate protects affordability while still maintaining industry competitiveness.
During an appearance in the fall at Humber College in Etobicoke, Prime Minister Justin Trudeau highlighted social and economic benefits of implementing a carbon tax, one of the ways his government was addressing climate change within a national climate framework.
“Starting next year, it will no longer be free to pollute anywhere in Canada,” said Trudeau.
Many provinces and territories already have their own carbon pricing system. Quebec, Newfoundland, Nova Scotia, Alberta, British Columbia, and Northwest Territories all either plan to implement carbon prices that meet the federal government’s standard or have an existing pricing system in place that meets those standards.
But not all provinces have gotten in line. Ontario, Manitoba and Saskatchewan did not set up a provincial carbon tax plan.
The Ontario government’s conflicting views with the federal government over climate change and the carbon tax don’t help the confusion around this issue and what it means for Ontarians.
What is Ontario’s plan?
The Ontario government said they were pursuing an innovative approach for a plan but in late fall unveiled a climate change action plan that did not include a carbon tax. Meant to replace the previous provincial government’s cap-and-trade system, the Ontario Carbon Trust was created. As part of the climate change action plan, an independent group will work with the private sector, identifying projects and technologies that will reduce emissions.
Many have compared the carbon trust to a similar model, Australia’s Emissions Reduction Fund, put in place to address growing climate change concerns. Businesses, farmers and landowners adapting green practices and innovation benefit from taxpaper-funded incentives, but critics are sounding the alarm that it has in fact allowed emissions to rise.
The federal government plans to compensate by providing rebate cheques, offsetting some of the added costs such as heating bills and gas prices imposed by the new tax.
A sustainable future
The UN recently reported that there are about 12 years remaining to avoid the worst of the effects of climate change. With limited time left, swift action and shifts in policy are required to avoid further impact.
The carbon tax is part of a number of behaviour-changing measures that many countries around the world are taking to decelerate the impacts of climate change.
As our country implements climate policy that can pave the way for a more sustainable future, let’s consider how our own everyday actions and uses of technology can be part of that change for a healthier future for Canada.