This week, the Parliamentary Budget Office released a report on how much revenue the federal carbon price would generate and how that would impact households and businesses.
While the PBO correctly showed that the bulk of the revenue raised would come from the fuel levy, rather than industry, all the money from this levy is going directly back to households and businesses. In fact, the typical household will earn more in rebates than they pay in carbon taxes in each of the 4 impacted provinces (Ontario, New Brunswick, Saskatchewan, and Manitoba). Only households in the highest quintile, which earn $164,117 per year on average, would end up paying more than they receive in rebates. In every province, the lowest income earners will be the best off under the government’s system.
To be clear, those who are saying the PBO report demonstrates that most of the burden of the tax falls on households are misinformed. All households, except for the highest earners will be better off, due to the rebates. In contrast, the money being paid by industrial emitters is not rebated. So it is the industrial emitters that are facing net costs, not households.
Industrial emitters will have net costs in excess of $200 million in 2019 alone. The output-based pricing system under which these large emitters are regulated is designed to address concerns about competitiveness while ensuring these emitters pay for polluting the air, and are incentivized to lower their emissions.
Although not a major focus of the report, small and medium-sized businesses pay into the fuel levy and the federal government has not yet announced how they will use the 10% of carbon revenue that is supposed to flow back to these businesses. We encourage the government to consider a business tax cut for these firms as a way to reduce their costs while boosting competitiveness.
“Overall, the PBO report reinforces that carbon pricing will leave all but the highest-earning households better off, while ensuring large emitters are charged and have an incentive to reduce their emissions. It’s further evidence that this is a fair and affordable way to fight climate change,”Michael Bernstein, Executive Director of Clean Prosperity.