Five things to know about Trudeau’s carbon price
"Why
do we need a carbon price?" "Are there alternatives?" and
"Where does the money go?" are just a few of the
Why a carbon price?
Putting a price on
carbon is meant to give people and companies an incentive to look for lower
emission options to save money. The price can come in the form of a specific
tax or levy, like the minimum $10 per tonne the federal government has set for
2018, or a more indirect cap-and-trade system.
Which provinces currently have a carbon tax in place?
British Columbia
introduced a carbon tax in 2008 and it now stands at $30 a tonne, adding an
extra 6.67 cents to each litre of gasoline and 7.67 cents to each litre of
diesel. In August, the province said it would stick to that price until other
jurisdictions catch up.
Alberta announced last
November it will have a $20-per-tonne carbon levy in place next year, rising to
$30 a tonne in 2018. For both provinces, the tax applies to gasoline, diesel,
natural gas and propane.
What are the alternatives?
Quebec joined
California in a cap-and-trade carbon market in 2014, and Ontario is set to
start trading in the same market next year. Cap-and-trade systems set
economy-wide limits on emissions and then establish a carbon market, within
which industries are allotted permits for emissions that they can buy and sell,
with the costs passed on to consumers.
The federal government
says provinces that go this route have to set emissions caps that correspond to
how much a specific carbon price is expected to reduce emissions.
Where does the money go?
Provincial governments
that have implemented carbon taxes get to keep that revenue, while the federal
government said it will also return funds from any federally-imposed carbon tax
to the jurisdiction of origin.
British Columbia’s
system is designed to be revenue neutral, meaning the government will take in
no extra money from the tax and instead return it through tax cuts and credits.
Alberta’s system returns some of the costs to lower-income consumers in the
form of a rebate, and small business taxes have been reduced from three per
cent to two per cent to help offset costs. But about two-thirds will go towards
spending more generally on diversifying the economy, including on renewable
energy, transit infrastructure and energy efficiency measures.
Who is exempt?
Alberta and B.C. have
several exemptions to the tax, such as those that apply to the agricultural
sector and some air travel. Large emitters in Alberta including oilsands
operations fall under a different system that sets specific emission reduction
goals.
The federal government
said any carbon pricing should minimize competitiveness impacts and avoid
simply driving emitting industries abroad, particularly for trade-exposed
sectors.