Prime Minister Mark Carney said Friday he was ending the consumer carbon price, touting the move as helping “hard-pressed Canadians.”
While that fulfilled growing calls from premiers across the country — both progressive and conservative — some economists say Canadians will notice a difference both in some costs and also in the lack of rebates.
The carbon price was geared towards putting a price on pollution to get people to use fewer fossil fuels, but it has faced criticisms for years and seen pushback at both the provincial and federal levels.
The federal government tried to offset its carbon pricing plan with the Canada Carbon Rebate, which saw quarterly tax-free payments delivered to eligible Canadians. Ottawa has said about 80 per cent of Canadians are getting more from the rebates than they pay in carbon pricing.
A family of four in Ontario living in a city, for example, could receive up to $1,120 annually through rebates. A rural family of four would see rebates o up t0 $1,344.
Those families in Alberta would get up to $1,800 in urban areas and $2,160 in rural communities.
According to Moshe Lander, an Alberta economist who also teaches at Concordia University, the cut to the carbon price could mean a drop in gas prices of about 10 cents to 15 cents per litre. But with the rebate also cancelled — one more payment in April is still expected — Lander said Canadians will likely both positive and negative impacts.
“You’re not going to get that cheque every three months and so that is going to leave a bit of a hole,” he said. “And when Canadians are concerned about cost of living affordability issues, this is a problem.”
Where did Canadians see the carbon price?
The carbon price has been a polarizing issue over the years since its inception.
There are two parts: a consumer carbon price, which is a charge on fossil fuels, and an industrial system.
The federal government set a standard criteria for both in 2019. Provinces and territories then designed their own programs to meet the federal benchmarks or have the federal backstop kick in.
That federal backstop for both the consumer and industrial systems applies in Yukon, Nunavut, Manitoba and Prince Edward Island. Provincial or territorial consumer and industrial systems apply in British Columbia, Quebec and the Northwest Territories.
The remaining provinces have their own industrial systems but use the federal carbon price for consumers. Those provinces are Alberta, Saskatchewan, Ontario, New Brunswick, Nova Scotia, and Newfoundland and Labrador.
About 17 cents is added to gas costs on average from the consumer carbon price, with the carbon price sitting at $80 per tonne following last year’s increase.
In provinces and territories that used the federal consumer carbon price, the tax collected was returned to Canadians in the form of the Canada Carbon Rebate.
The rebates, however, did not quell fears that higher prices at the pump or on energy bills would risk increasing costs of essentials such as food and transportation as the carbon price filtered through the economy.
So what happens now?
“All kinds of things get shipped either by train or by truck or by plane, so all kinds of prices are going to readjust,” said Christopher Ragan, an economics professor at McGill University’s Max Bell School of Public Policy.
“Most consumers didn’t notice it when they went up because they went up by very small amounts and different amounts depending on the carbon intensity of the supply chain. So now they will come back down, but they’ll take a while to come back down and that also won’t be noticed.”
A report by the Parliamentary Budget Officer last year estimated that Canadians would save a few hundred dollars in the 2025-26 fiscal year, depending on where they lived, if the carbon price was eliminated.
The average family in Ontario, for example, would save about $477, while a similar family in Saskatchewan would see savings of about $133, according to the estimates.
“The irony is that even though most consumers will pay less upfront, they actually may end up worse off overall because a lot of households, especially lower income households, get more back in rebates than they pay in carbon pricing right now,” said Hadrian Mertins-Kirkwood, a senior researcher at the Canadian Centre for Policy Alternatives.
However, Mertins-Kirkwood said when looking at how much Canadians pay compared to how much they get back, there’s not much benefit.
“Due to consumer carbon pricing, households are paying hundreds of dollars more per year, in some cases thousands of dollars and again, it’s usually higher income families with multiple vehicles and big homes that would be paying those higher amounts,” he said.
“And then for the most part, households are getting most of that money back through rebates now. So if there are savings, they’re going to be marginal.”
Lander also notes that while a Canadian family might have been paying more at the gas station or on their home heating bill upfront, when looking at the entire year, the savings may not amount to much.
“Even if we were to say the average family is losing out on $150 to $500, put that over 365 days and you’re talking about a couple of Timbits to a small cup of coffee at Tim Hortons,” he said.
“It’s not that the carbon tax was making the average Canadian a huge amount of money and, in this case, the removal of it isn’t costing or benefiting them with a huge rebate that’s coming back.”
— With files from Global News’ Sean Boynton and Aaron D’Andrea