Most Canadian Families Will See ‘Net Loss’ From Ottawa’s Carbon Tax: Parliamentary Budget Officer

Parliamentary Budget Officer Yves Giroux prepares to appear before the Senate Committee on Official Languages in Ottawa on June 13, 2022. The Canadian Press/Justin Tang

Ottawa’s carbon tax will result in a “net loss” to most Canadian households even after they receive federal rebates, according to a report by the Parliamentary Budget Officer (PBO).

“When both fiscal and economic impacts of the federal fuel charge are considered, we estimate that most households will see a net loss,” said PBO Yves Giroux in a statement on March 30 when announcing the release of the report.

“Based on our analysis, most households will pay more in fuel charges and GST—as well as receiving slightly lower incomes—than they will receive in Climate Action Incentive payments.”

The report, titled “A Distributional Analysis of the Federal Fuel Charge Under the 2030 Emissions Reduction Plan,” is an updated version of the previous one released last March.

The latest report includes analysis of how the carbon tax will impact households in Nova Scotia, Prince Edward Island, and Newfoundland and Labrador once the federal plan comes into effect in these Atlantic provinces on July 1—previously not reported.

It also provides an update on how the costs continue to apply to households in Alberta, Saskatchewan, Manitoba, and Ontario.

Under the climate plan by the Trudeau government, the carbon tax is set to rise to $65 per tonne starting April 1, and gradually go up by $15 every year until 2030, by which time fuel will cost $170 per tonne.

The PBO report estimated that by 2030, the net cost of carbon tax will hit $1,513 on average for households in Nova Scotia, $1,512 in P.E.I., and $1,316 in Newfoundland and Labrador, when fiscal and economic impacts were taken into account.

While the lowest income households in these provinces will benefit from several hundred dollars in rebates, the top income quintile can expect to see a net loss of more than $4,000 as cost appears to increase relative to rising income, based on the report’s calculation.

Specifically, households in the lowest income quintile in Nova Scotia will receive $226 in federal rebates while the highest earners have to eventually fork out $4,368 in 2030–31. In PEI, the lowest-income families will see a net gain of $449 whereas families who earn the most will have to pay $4,833.

A similar pattern is observed in Newfoundland and Labrador where those in the lowest income quintile receive $689, while those in higher quintiles pay from $680 to $4,872.

The updated report also noted the net costs calculated last year for families in the other four provinces have risen.

“In dollar terms, our updated estimates of household net cost for Alberta, Saskatchewan, Manitoba and Ontario are somewhat higher compared to our March 2022 report,” it said.

In the previous report, it was estimated that Albertan families will pay on average $2,282 for carbon tax by 2030–31. The report on Thursday sees the cost increase by nearly $500 to $2,773.

For Saskatchewan, the average net cost was estimated to be $1,464 in the last report, but families will now have to pay out $1,723. In Manitoba, the cost of carbon tax now stands at $1,490 on average, compared to last year’s analysis of $1,145.

Ontario doesn’t fare better as the updated net cost will have households pay $1,820, compared to $1,461 in the previous estimate.