OTTAWA — Carbon taxes have been applied unequally in different provinces, a new report from the Canadian Taxpayers Federation is pointing out, with some Canadians paying as little as half a cent more per litre of gas than they were before carbon pricing came into effect.
The federal carbon tax, which was rolled out in Ontario, Manitoba, Saskatchewan and New Brunswick on April 1, has added about 4.4 cents to the price of a litre of gasoline. The tax was applied to those four provinces because they refused to develop their own carbon prices, and is supposed to increase to 11 cents per litre by 2022.
But in other provinces whose carbon pricing plans have the federal government’s approval, the actual increase in gas prices is substantially smaller than that. Both Newfoundland and Prince Edward Island have offset their carbon taxes by cutting existing provincial gas taxes, such that Newfoundlanders are now paying just 0.42 cents more per litre than they were before the carbon tax was levied, and Islanders are paying just one cent more. P.E.I. also plans to increase its carbon tax by just one cent per litre in 2020 — less than the federal backstop, which is expected to increase by 2.2 cents per litre next year — and it’s not clear whether it will continue to increase past 2020.
Meanwhile, Nova Scotia’s cap-and-trade system has residents there paying less than one additional cent per litre, according to the report. In contrast, Quebec’s cap-and-trade system costs nearly five cents per litre.
“(Ottawa) seemed to be applying the standard for which the federal backstop kicks in differently depending on the province,” said Aaron Wudrick, federal director of the taxpayers federation, which opposes the carbon tax. He said if other provinces had proposed similar tactics, like cutting provincial gas taxes to offset the carbon tax, “I’m not sure that Ottawa would have been so accommodating with it.”
Under the federal plan, provinces have the right to develop their own carbon prices, but every province must have a carbon tax of at least $20 per tonne of greenhouse-gas emissions in 2019, rising to $50 per tonne in 2022, or a cap-and-trade system that will achieve equivalent emissions reductions. A spokesperson for Environment Minister Catherine McKenna told the Post by email that the federal backstop was only imposed on those provinces that “did not step up.”
“Provinces had the flexibility to design a system that works for them, provided it meets the federal standard,” Sabrina Kim said.
The four provinces where the federal tax has been imposed have fought hard against carbon pricing. In Ontario, Premier Doug Ford repealed the former Liberal government’s cap-and-trade system, and both Ontario and Saskatchewan have launched legal challenges of the federal plan. Earlier this month, the Saskatchewan Court of Appeal ruled in a split decision that the federal carbon tax is constitutional.
I have great problems with the way it’s been implemented. — Larry Hughes, Dalhousie professor
By comparison, governments of the Atlantic provinces, with the exception of New Brunswick, have raised concerns about the financial impact of carbon pricing but have not waged war with Ottawa. “Presumably there’s a great deal of politics involved,” said Larry Hughes, a professor at the MacEachen Institute for Public Policy and Governance at Dalhousie University in Halifax. Consequently, he said, the application of carbon pricing across the country is “completely inconsistent” and unfair.
Wudrick suggested Ottawa may have felt inclined to approve carbon pricing plans coming from friendlier governments than those in Ontario, Manitoba, Saskatchewan and New Brunswick, regardless of inconsistencies. “Are they looking the other way a little bit?” he said. “I think there’s a strong incentive to.”
The federal government is rebating most of the money collected through the backstop carbon tax to residents in the four provinces where it applies, and says most residents will get back more than they spend. This isn’t the case in the other Atlantic provinces, meaning it’s not necessarily true that New Brunswickers are now worse off than their neighbours.
However, the federal government argues the incentive to cut emissions will remain as the carbon tax increases, even with the rebate. Presumably that incentive is lower in provinces that have seen almost no change in their gas prices. Under Nova Scotia’s cap-and-trade system, Hughes said, “the prices are so low that it’s hardly going to make an impact on anyone driving here.”
People in Alberta and British Columbia are paying the highest carbon taxes in the country, with British Columbians paying close to nine cents per litre and Albertans paying 6.7 cents per litre under their provincial plans, the report says. However, Alberta Premier Jason Kenney has announced he will repeal that province’s carbon tax by the end of the month, and Ottawa then plans to impose the federal backstop .
Hughes said the principle of carbon pricing — increasing the price of gas to get people to use less of it — makes sense, but the inconsistencies across provinces are a problem. “In many respects I have no problem with the carbon tax,” he said. “I have great problems with the way it’s been implemented.”
The study from the taxpayers federation found that taxes, including sales taxes, excise taxes and the carbon tax, now account for 34 per cent of the pump price of gasoline on average. Those taxes range from about 34 cents per litre in Manitoba to nearly 55 cents per litre in Montreal. The organization is also criticizing the fact that Canadians pay sales tax on the excise and carbon taxes on gasoline. It claims this “tax on tax” costs an extra 3.4 cents per litre on average.
Wudrick also said gas taxes in U.S. border states are now significantly lower than those in Canada, and Canadians who can cross the border to get gas could save thousands of dollars a year.
Copyright Postmedia Network Inc., 2019