Carbon Tax Changes In Canada Put Entire Program At Risk

Canadian Prime Minister Justin Trudeau recently announced changes to the federal carbon policy to reduce the cost for rural Canadians. Specifically, the change exempts home heating oil from the carbon tax for the next three years. This primarily impacts households in the Atlantic provinces, an important voting region. The government will also increase the rebate received by rural Canadians. This announcement has resulted in the two extreme sides of the carbon tax debate finally both agreeing: agreeing that it’s a bad decision. Advocates of the tax, and environmentalists, feel betrayed, and the opposition says it justifies their worst fears about how it is applied. To understand why, the history of the carbon tax is important.

The Canadian carbon tax program has been in place at a federal level since 2019. Alberta legislated greenhouse gas reductions before that, since 2007, even though it’s never thought of that way. The federal program is applied based on the carbon content of fuels and is applied across every jurisdiction. Provinces or territories are then allowed to design their own programs within the broader scheme if they meet minimum thresholds. The goal is to create a financial incentive for people to pollute less, and putting a price on carbon hopefully drives innovation at the same time. The program is revenue-neutral, meaning most of the proceeds are returned to families through Climate Action Incentive Payments, which are added to annual tax returns.