The new experimental Environmental tax statistics (ETS) product collects revenue from environmental taxes paid by industries, government entities, non-profit organizations, and households, as well as revenue from gross fixed capital formation. The ETS only tracks transfers to the government and not returns, such as the carbon tax refund received by householders in some provinces.
Environmental taxes are classified into four basic categories: energy, transportation, pollution, and natural resources. Environmentally connected taxes, as defined by the United Nations, are taxes whose tax base is a physical unit (or a proxy for it) of something that has a proven, particular, harmful impact on the environment.
Total environmental taxes generated in Canada reached $29 billion in 2018, a 1% increase from 2017. Overall, in 2018, these taxes represented one-tenth of total taxes on products and on production.
Energy taxes include taxes on energy and fuel for transport (e.g., gasoline, diesel and natural gas), carbon taxes and emission trading permits. Examples of transportation taxes are personal and commercial motor vehicle registration taxes. Pollution taxes cover, among others, fees on ozone-depleting substances and pollutant emissions to air, as well as recycling fees like tire eco fees. Hunting and fishing licenses are examples of natural resources taxes.
Energy tax category drives environmental tax revenue
Of the $29 billion total in total environmental taxes, close to three-quarters (72%; $21 billion) were attributable to energy taxes in 2018. An additional 24% were attributable to transportation taxes, 3% reflected natural resources taxes, and 1% were from pollution taxes.
Over the time series, energy tax revenue was by far the largest contributor to environmental taxes at the national level and consistently represented over 70% of the total.
Adoption of new taxes results in increased revenues in 2013
A year-over-year increase of 33% in the transportation tax category was observed in 2013. This was driven by the introduction of the new federal air transportation tax that same year, combined with an increase in revenues collected from the federal custom import tax as a result of an increase in goods and services imports that had an environmental tax component.
This combination also resulted in a 41% increase in revenue in the pollution tax category that same year (from $178 million in 2012 to $250 million in 2013).
Industry sector environmental tax revenue edges out the household sector
In 2018, just over half (52%) of environmental taxes were paid by the industry sector, followed by households (47%), and the remaining 1% was attributable to gross fixed capital formation. However, households had a slightly greater share for six of the seven years from 2010 to 2016.
Ontario accounts for the largest share of environmental taxes
In 2018, Ontario contributed for one-third (33%) of the total environmental taxes collected, followed by Quebec (21%), Alberta (17%) and British Columbia (15%).
The shares of these four main contributors remained relatively stable over the time series. Ontario reached its highest share in 2017 (36%), while Alberta reached its peak in 2018 (17%).
What is Canada’s National Carbon Tax and how does it affect us?
Climate change is well on its way to disaster, and Canadians experiencing unusually high temperatures this summer, along with raging wildfires burning away communities and forests across Canada, have seen a taste of the gloomy future if urgent action is not taken.
Read Also: The Main Issues of Taxpayer Rights
On March 25th of this year, Canada’s Supreme Court affirmed the Trudeau government’s 2019 implementation of the Greenhouse Gas Pollution Pricing Act in an effort to mitigate climate change and not a second too soon.
This act implements a carbon tax that puts a price on carbon in an effort to reduce emissions by at least 30% below 2005 levels by 2030, and it’s one of many ways we’re aiming to undo the environmental damage done by human hands. Here’s what you need to know about Canada’s carbon tax.
A carbon tax is a tax imposed on the amount of carbon emitted into the atmosphere as a result of human activity. The carbon emitted is usually in the form of carbon dioxide (CO2) from burning fossil fuels.
The goal of a carbon tax is to create incentives for individuals and businesses to reduce their amount of carbon emissions in order to help curb climate change. Carbon tax may also be referred to as carbon pricing, price on carbon, greenhouse gas tax (GHG tax) or fuel charge, although each of these has slightly varying definitions.
The term “carbon pricing” or “price of carbon” can be misunderstood, because rather than the traditional way of understanding price, where the price is related to the amount of something consumed, carbon pricing indicates the amount of carbon emitted. Carbon pricing is applied to the amount of carbon in the form of CO2 emitted into the atmosphere from burning fossil fuels. It is used in both carbon taxes and the cap-and-trade system.
A greenhouse gas tax, or GHG tax, is generally speaking what most carbon taxes actually refer to. Carbon dioxide is one of many gases that contribute to the greenhouse effect which warms the atmosphere, so taxation on such gases are all-inclusive of the various types of gases. If it wasn’t, then a tax that purely targets carbon dioxide would mean people and industry may shift towards using another harmful type of emission-producing fuel rather than renewable energies.
Fuel charge refers to the part of carbon tax that affects individuals, whereby the fuel consumed for operating motor vehicles or heating homes have an additional tax separate from HST. Carbon taxes take into account activities such as fueling cars and homes and the operation of factories that burn greenhouse gases. The reason why carbon emissions need to be reduced is that carbon dioxide emitted into the atmosphere directly contributes to climate change.
The science that backs the carbon tax
When fossil fuels such as coal, petroleum and natural gas are combusted in order to generate power for various machinery and uses, carbon dioxide is emitted into the atmosphere. This contributes to the greenhouse effect of the Earth’s atmosphere, where heat gets trapped inside the atmosphere, being absorbed by its immense amount of ocean surfaces and heating up the average temperature of the planet.
Through many scientific models of climate, it is unanimously understood that a shift in average temperature will have devastating effects on the livability of the planet, including its oceans and land.
The Earth’s climate has had several drastic shifts before, and carbon in the atmosphere does not even comprise a majority of the greenhouse gases. So why do we care about carbon emissions?
The reason for this is that the rapid accumulation of carbon in the atmosphere is due to human activity on an industrial scale. The amount of carbon in the atmosphere has significantly increased since the beginning of the industrial revolution in the late 18th century.
This rapid accumulation of carbon has contributed to the average temperature on Earth increasing by more than 1° Celsius since 1880. This shift in temperature is leading to devastating effects, as explained in Tipping Points: Climate Change and Society from the University of Exeter.
Carbon taxes help tackle the scale of the issue
It is undeniable that human activity is what has contributed to global warming. There are individual things we can do to live more sustainably, such as opting for a plant-based diet or avoiding fast fashion, but because of the scale on which any solution must come about, it is up to governments to implement policies that will reduce the carbon in the atmosphere. This is where carbon taxes come in.
Carbon taxes are used as an incentive to reduce these emissions in a direct way. In order to pay less in carbon taxes, individuals and businesses will reduce their use of excessive carbon emitters while renewable energy producers will be given a competitive edge.
Carbon Tax Advantages and Disadvantages
Although popular amongst many economists and governments, a carbon tax is not without its critics. There are many pros as well as cons to using a carbon tax as a way to reduce the carbon in the atmosphere. Here, we offer insight into some of the advantages as well as disadvantages of using a carbon tax to combat climate change.
Pros of carbon taxes:
- Carbon taxes are a direct step in saving the planet. It is generally agreed upon by economists that carbon taxes are an effective and efficient way to lower carbon emissions because it allows the market to determine the most efficient way to reduce emissions and gives renewable energy sources a more competitive edge.
- Carbon taxes support innovation that helps the environment. These taxes bolster renewable energy industries by giving facilities and individuals who use energy incentives to opt for renewable sources, offering them a bigger market share of buyers.
- Putting a price on carbon is something that can be implemented fairly quickly without overhauling an entire system. Taxes are something that individuals and industry are used to, and is something that is perennially accounted for. Adding a carbon tax is not a strenuous reinvention of the system, which means it can be applied quickly and efficiently.
- Carbon taxes encourage both industry and individuals to reduce their carbon footprint in order to save money in addition to saving the planet.
- The efficacy of carbon taxes is backed by evidence. Most countries that have implemented carbon taxes before Canada have done so successfully with a reduction in their carbon output. The one exception is Australia, which repealed its carbon tax after two years in 2014 by their then centre-right government.
Cons of carbon taxes:
- Implemented on their own, carbon taxes can be harmful to lower-income families. These households tend to use a higher percentage of their income on high-emission activities, such as heating homes and transportation, than those with higher income. This makes the carbon tax a regressive tax.
- Money might not be a big enough incentive for those who have money. It has been proposed that those with more money can afford to pay more and thus may not effectively reduce their burning of fossil fuels. One would hope that the effects of burning these fuels on the environment would be enough to deter certain practices, but there is no guarantee that understanding of the climate crisis is universal.
- Carbon taxes have been criticized as a scheme that continues to operate under a for-profit system. This system is seen by many as the underlying cause of climate change, whereby the system itself must be fixed. Carbon taxes do not alter the system but rather operate within it, which leaves some skeptical of the long-term change that it may affect.
An example of the tax being harmful to low income families is if an individual’s annual income is 35,000 dollars, and they spend 3000 dollars commuting to and from work plus an additional 4000 dollars on their home, 20% or a fifth of their income would be used on an activity that contributes to carbon emissions.
Contrast this with someone whose income is in the 6-figures range, and there is a stark difference in disposable income after the fact. But governments are well aware of this. To counter the regressive property of carbon taxes, these taxes are usually implemented along with other measures to ensure that those with lower income are not hit the hardest.
These measures may be either a redistribution of the revenue from carbon taxes or with carbon tax rebates. For the Canadian carbon tax, the federal government offers a rebate to individuals in order to offset increases in bills. If you’re in Ontario, Alberta, Calgary or Manitoba, you may be eligible for a carbon tax rebate from the federal government.