Canadian Households Worse Off Overall Under Carbon Tax, PBO Report Finds for Second Time

Parliamentary Budget Officer Yves Giroux waits to appear before the Standing Senate Committee on National Finance in Ottawa on Oct. 25, 2022. Adrian Wyld/The Canadian Press

A second analysis of the federal carbon tax has shown that Canadian households will generally be worse off when impacts on gross domestic product (GDP) and investment income are considered, the federal budget watchdog has announced.

The Parliamentary Budget Office (PBO) report, released Oct. 10, found the average Canadian household would receive more from the Canada Carbon Rebate than what they pay in the federal carbon tax and related goods and services tax by 2030. When the economic impact on Canada’s GDP and investment income is taken into account, however, many households will be worse off, it said.

By taking into consideration the fiscal and economic impacts of the carbon tax, the PBO estimates the “average household” in every province except Quebec and B.C. would see a net cost.

The carbon tax would also lower income from both employment and investments, the report said. Since these sources make up a large portion of total income for higher-income households, their net costs would be higher as a result.

“Lower-income households see larger net gains compared to higher-income households, reflecting the per capita nature of the Canada Carbon Rebate,” the report said.

The federal carbon tax, meant to reduce C02 emissions in Canada by taxing carbon-emitting fuels, was introduced in 2019 at a $20 per tonne price. It rose to $50 per tonne in 2022 and will continue to rise $15 per tonne each year until it eventually reaches $170 per tonne in 2030.

The Liberal government has said eight out of 10 households will receive back more in rebates than they pay in carbon taxes.

Parliamentary Budget Officer Yves Giroux released a report in 2022 showing that, when factoring in the economic impacts of the carbon tax, eight out of 10 households would be worse off financially. The report came under fire by the federal government in May 2024 after the PBO said that there was an “inadvertent error” in the calculations made by incorporating the industrial pricing system for large emitters into the analysis.

Giroux told The Epoch Times in May that his revised analysis of the carbon tax’s impact would not change the overall outcome, because the costs for industrial emitters are “not that high.” Giroux accused Ottawa in June of withholding the government’s own analysis of the carbon tax’s economic impact, which contained similar information to the PBO report.

Conservative Leader Pierre Poilievre reacted to the PBO report by saying it “confirmed everything I’ve been saying” about the carbon tax. Poilievre has repeatedly vowed to “axe the tax,” arguing that it increases the cost of food, fuel, and housing during a cost-of-living crisis.

Poilievre also reiterated his call for there to be a “carbon tax election,” saying Canadians should decide whether to keep or remove the tax by casting their ballot for the party that represents their wishes.

Environment Minister Stephen Guilbeault called the report an “important correction,” saying it confirms that the majority of Canadians would receive more back from the rebate than they would pay through the tax. He made the comments in an Oct. 10 statement, saying the report’s update “shows that carbon pricing is the most cost-effective way to fight climate change.”