The conversations around carbon pricing have raised a lot of questions. We've highlighted and answered some of the most popular questions below:
- Is this just a tax grab?
- How do Carbon Dividends help fight climate change?
- If all of the money is returned, why would I change my habits?
- Do Carbon Dividends kill jobs?
- What about small and medium sized businesses?
- What does climate change mean for Canadians?
- I have to drive to work and heat my home so doesn't this just mean I end up paying more tax with no benefit to the environment?
- Why are big companies getting exemptions while small businesses are asked to pay?
- Won't this increase the price of gasoline or home heating, where the costs are already too high?
Is this just a tax grab?
No. All citizens and businesses alike, pay the carbon fee. But all of the money collected in each province that falls within the federal government's plan (Saskatchewan, Manitoba, Ontario, and New Brunswick) will be returned to the province that it came from. 90% of the money will go directly to households, who will receive equal payments for every taxpayer and household. 10% will be used to help small business, municipalities, schools, hospitals and others who also face carbon costs. This means that the majority of households will receive a larger dividend than the fee they paid. In Ontario, for example, the average household will receive $300 but will pay about $244 in carbon costs.
How do Carbon Dividends help fight climate change?
By making it more expensive to pollute, we all have an economic incentive to reduce emissions. For example, we can try to set the thermostat lower or arrange to carpool. As we change our habits, we can help reduce our carbon output, lessening our impact on the environment. Carbon Dividends provide financial support which can either be used to offset increased prices for carbon intensive goods, or to make changes to help save even more money, such as better insulating our home or saving for a more fuel efficient vehicle.
If all of the money is returned, why would I change my habits?
The amount of money you receive does not depend on your income or your personal emissions. Each resident of the province receives an equal dividend payment back from the carbon fee revenue. So if you choose to reduce your carbon footprint, you'll save money! Here's an analogy, let's say you walked into the grocery store and were given a $5 bill at the door but then found out that the 1 lb bag of potatoes you usually buy is now $10 instead of $5. You could still buy the bag of potatoes and be no worse off, but you might also choose to buy a 1 lb bag of sweet potatoes or rice for $5 instead, and thus pocket the $5. Unless you much prefer potatoes to rice or sweet potatoes, you'd have a strong incentive to switch. Therefore, the less you use fossil fuels, the greater value your return will show. As you find ways to lessen your environmental impact, the more value you'll find in the carbon dividend.
Do Carbon Dividends kill jobs?
No, it shouldn't have a major impact either way. Taxes can negatively impact businesses and jobs but this policy is specifically intended to compensate businesses. Large carbon-intensive industries that export product will be under a different system called output based pricing that is designed to protect them from foreign competitors that don't face carbon pricing (see here if you'd like details). Small and medium sized businesses will be compensated under a fund being created under the federal program. Furthermore, by encouraging businesses to move to a lower carbon economy, carbon pricing incentivizes the creation of new technologies which can create more jobs.
What about small and medium sized businesses?
10% of the carbon fee revenue is allocated to support small and medium sized business in their efforts to reduce their environmental footprint.
What does climate change mean for Canadians?
Canada is not immune to the impacts of climate change. An increase in global temperatures means an increase in extreme weather events, forest fires, coastal storms, and droughts. This puts a lot of Canadian livelihoods at risk, including farming, lumber, and fishing. Additionally, insurance rates and property values across Canada will be negatively affected by these changes.
I have to drive to work and heat my home so doesn't this just mean I end up paying more tax with no benefit to the environment?
If there's nothing you can do, the program is designed to ensure that you will be no worse off as they will be sending you a carbon dividend. That said, there's typically at least small changes that most people can make. For example, switching to a more fuel efficient car can be expensive but perhaps you can carpool or take transit to work or school. Or, perhaps you can set your thermostat slightly lower or add weather-stripping to your doors or windows to seal out the cold in winter.
Why are big companies getting exemptions while small businesses are asked to pay?
Small businesses will be receiving support through a dedicated fund. Some large emitters are being regulated under a separate system because they export products and the government is trying not to put them at a disadvantage in international markets. This will avoid companies moving jobs to other markets that don't have carbon pricing.
Won't this increase the price of gasoline or home heating, where the costs are already too high?
Yes, gasoline and home heating are expensive. That is why the government is trying to support families by returning 90% of the increased tax on fuels in the form of dividends. The potential increase in gas in the first year is going to be about 4.5 cents per litre so the impact, while significant, will be modest.