Trudeau promises rebates as Ottawa moves to levy carbon tax on provinces outside the climate plan

The federal Liberal government will slap a carbon tax on fuels in provinces and territories with no adequate emissions pricing plans, but will send annual rebates to Canadian families to offset most of the added costs of this climate-change fighting plan.

Average household in Ontario stands to receive about $300 a year; Tories brand rebate payments a 'gimmick'

Prime Minister Justin Trudeau speaks to the media and students at Humber College regarding his government's new federally imposed carbon tax in Toronto on Tuesday, October 23, 2018. (Nathan Denette/Canadian Press)

The federal Liberal government will slap a carbon tax on fuels in provinces and territories with no adequate emissions pricing plans of their own — but will send annual rebates to Canadian families to offset most of the added costs of this climate-change fighting initiative.

Extreme weather events like floods, wildfires, storms and droughts offer proof that Canada is already grappling with the effects of climate change — and these increasingly frequent events demand action from Ottawa in the form of a national price on carbon, Prime Minister Justin Trudeau said Tuesday in Toronto.

Watch Minister of Intergovernmental Affairs Dominic LeBlanc explain the backstop on Power & Politics

'Climate change is real, people expect their governments to take action,' says the Minister of Intergovernmental Affairs. 8:56

Trudeau said he believes the added cost on fuels will tamp down carbon-intensive consumption, reduce emissions and help curb pollution.

"The science is unequivocal: putting a price on pollution is one of the best ways to move forward," he said to reporters and Humber College students in the Etobicoke riding of Ontario Premier Doug Ford, a vocal carbon tax foe.

PM Justin Trudeau announces the federal price on pollution will be implemented in four provinces that haven't come up with a plan of their own - Ontario, Saskatchewan, Manitoba and New Brunswick. 2:27

"The problem exists because your political leaders have done far too little about this. Will we kick this can down the road yet again? Or will we show some courage to do what needs to be done?" Trudeau said.

"Starting next year, it will no longer be free to pollute anywhere in Canada. And we're also going to help Canadians adjust to this new reality ... Every nickel will be invested in Canadians in the province or territory where it was raised."

Climate plan differs across Canada

There are two parts to the federal "backstop" climate program, which will apply in different ways across the country.

The first part is what the government is calling "a regulatory charge on fuel," which will be levied on gasoline, light fuel oil, natural gas and propane.

Under the terms of the national climate framework — a deal agreed to by most of the provinces and the federal government roughly two years ago — Ottawa will levy a tax of $20 on every tonne of greenhouse gas emissions starting in 2019, rising by $10 each year to $50 a tonne by 2022.

According to background documents supplied by the government, the $20-per-tonne carbon tax will result in an approximate cost increase of 4.42 cents a litre for gasoline, 3.91 cents per cubic metre for natural gas and 3.10 cents a litre for propane.

Consumers will not pay the tax directly to the federal government; rather, Ottawa will impose the tax on fuel and production and distribution companies — natural gas providers like Enbridge, for example — which will in turn pass on those costs to customers.

This federal "backstop" will apply in provinces and territories that do not have adequate climate pricing plans of their own that meet federal standards — that's Saskatchewan, Manitoba, Ontario and New Brunswick starting in April 2019, and Yukon and Nunavut as of July 2019.

The other provinces — Quebec, Alberta, B.C., Nova Scotia, P.E.I. and Newfoundland and Labrador — will meet the federal benchmark of having a price on carbon of at least $20 a tonne as of Jan. 1, 2019. The federal backstop will not apply in those jurisdictions.

So what initially was meant to be a backup plan in the event that a few provinces failed to design their own carbon pricing plans has now become the principal carbon pricing mechanism for nearly half of the country's population. Roughly 47 per cent of Canadians live in provinces or territories that have said they will not follow through on the national climate framework.

'Action' incentives promised

In an effort to make most Canadian families in those provinces whole, and to offset the resulting costs of these new taxes, the Liberal government will offer direct rebates to taxpayers — called Climate Action Incentive payments.

While Trudeau insisted that the carbon tax and the payment program will be revenue-neutral for the federal government, a government official at a technical briefing for journalists acknowledged that some Canadians — about 30 per cent of them — will pay more a year in carbon taxes than they stand to gain from the new backstop program. The official said these people are more likely to be wealthier Canadians who have to heat bigger homes or fuel larger vehicles.

On the other hand, a sizeable majority of Canadians receiving the federal payments — the other 70 per cent in those provinces without carbon pricing plans of their own — will receive more in climate payments than they'll pay each year through the new carbon tax.

PM Justin Trudeau says he is not buying votes for next year's federal election by giving rebates to families in advance of the carbon price implementation in Ontario, Saskatchewan, Manitoba and New Brunswick. 2:09

For efficiency, people in affected provinces will indicate on their tax returns if they are eligible for the payment.

The Canada Revenue Agency (CRA) will then ensure people are adequately compensated. So the payments will be made annually and will reflect about a year's worth of emissions.

If someone is entitled to a tax refund, that refund would be boosted by the amount a taxpayer is entitled to under the new climate incentive payment program. If you owe the federal government money at tax time, that amount would be reduced by the amount you stand to gain from this initiative.

The payment is not intended to be part of the federal tax system as such; the government said CRA's existing infrastructure is best placed to make payments like these to taxpayers.

Here's what the average household (defined by Ottawa as 2.6 people) will receive from the federal government:

  • In Ontario: about $300 a year.
  • In New Brunswick: $248.
  • In Manitoba: $336.
  • In Saskatchewan: $598.

The amount will vary based on the province and the number of people in a household. The payment is not a means-tested benefit and thus it is not dependent on income levels.

The Liberals say average households will come out ahead in its plan to levy a carbon tax and provide direct rebates to consumers in six provinces and territories that don't have a carbon-pricing plan. Conservatives say it will make everything more expensive, while the NDP and Greens say it won't get Canada to its emissions targets. (CBC News)

For example, a single adult in Ontario, regardless of income, would see about $154 next year from the payment.

These payments will rise in lockstep with the annual hike in the carbon tax. Even after accounting for the fuel cost hike, most families will come out marginally ahead, officials said.

Payments for people in small communities and rural areas will also include a 10 per cent supplement, government officials said, "in recognition of their specific needs."

Election 'gimmick'

Conservative Leader Andrew Scheer dismissed the Liberals' plan as an election campaign tactic, and questioned the government's claim that the new program won't result in a sizeable hit to wallets.

"Today, Justin Trudeau unveiled his election gimmick to try and trick Canadians into paying higher taxes on the basic necessities," he said, calling the levy a "tax plan dressed up as an emissions plan."

"Canadians are now supposed to take his word that a measly $12.50 a month will cover the true cost of his carbon tax ... it will make everything more expensive for the people who can afford it the least," he said, adding many Canadians simply don't have the means to replace a less efficient furnace or buy an electric vehicle.

(The $12.50 figure Scheer cited is the approximate amount a single Ontarian would receive, each month, to help offset the carbon tax on fuels.)

Ontario Premier Doug Ford accused Prime Minister Justin Trudeau of making the federal carbon tax announcement a personal attack against Ford because Trudeau held the announcement in the premiers' back yard. 0:22

Ford said the decision to unveil the tax at a college in the premier's riding was no coincidence.

"Justin Trudeau wants to make it personal, going to my backyard to make the tax. I'll tell you one thing, people of Etobicoke don't see eye-to-eye with Justin Trudeau, number one, but they [also] don't see eye-to-eye with Justin Trudeau when he wants to get his hands in your pocket, another tax grab from Justin Trudeau's Liberals.

"That's all he knows how to do," Ford said at an event in Sault Ste. Marie, Ont.

Trudeau said the Liberals picked the location because it's the riding of federal Science and Sport Minister Kirsty Duncan.

Another anti-carbon tax crusader, Saskatchewan Premier Scott Moe, said the payment program is a "shell game" and a "cynical vote-buying scheme" that will make life more expensive. Moe has vowed to press ahead with a legal challenge of the climate framework.

While the carbon pricing plan was being ripped by conservative voices Tuesday, it drew praise from many of the country's environmental organizations.

Catherine Abreu, executive director of the Climate Action Network-Canada, praised Trudeau for refusing to "bow to industry pressure and provincial politicking" and following through on his stated commitment to implement a national carbon price.

"The latest UN climate report makes it clear that climate change is a health emergency and carbon pricing is a critical way of addressing that emergency. Political leaders in provinces and in Ottawa who continue to pretend pollution is free and score cheap points with the denial of climate action are doing a criminal disservice to Canadians," Abreu said.

Opposition Leader Andrew Scheer takes a shot at the government's carbon tax plan. 0:44

The David Suzuki Foundation said the carbon pricing scheme will encourage greater economic efficiencies and investments in cleaner energy choices.

The second part of the new federal backstop system is a separate fuel charge for large industry, called the 'output-based pricing system'. Officials said details of this policy will be provided at a later date; Ottawa hasn't finished designing this program yet. When it takes effect, it will be retroactive to Jan. 1, 2019.

While P.E.I. will have its own provincial price on fuels, it will look to Ottawa to apply this charge on larger emitters when the program is up and running.

The proceeds from this large industry tax won't be returned to Canadians through payments, but will be used to support future climate actions in the jurisdiction in which the revenue is raised.

Tax to help meet Paris climate targets

Canada signed on to ambitious emissions reduction targets at the Paris climate accord meeting in 2015, and a national pricing strategy is seen by Ottawa as the best way to live up to the accord.

PM Justin Trudeau says his government will move forward with a carbon pricing plan despite opposition from many provinces, and says all citizens will get a rebate 1:52

(The Liberal government maintained the same targets set by the former Conservative government: 17 per cent below 2005 levels by 2020 and 30 per cent below by 2030.)

The government projects the pricing plan will reduce carbon pollution by 50 million to 60 million tonnes by 2022 — the
equivalent of taking 12 million cars off the road or closing 14 coal plants.

However, the government has conceded a carbon price alone won't be enough to meet those targets.

The national climate plan also includes other measures to battle climate change, including new building codes to boost energy efficiency, more charging stations for electric cars, expanding clean electricity sources and upgrading power grids.

Watch the Power Panel tackle the imposed carbon tax below

Francoise, Evan, Supriya and Dan discuss Trudeau's move to impose a carbon tax on certain provinces. 12:27

About the Author

John Paul Tasker

Parliamentary Bureau

John Paul (J.P.) Tasker is a reporter in the CBC's Parliamentary bureau in Ottawa. He can be reached at john.tasker@cbc.ca.