There are basically two ways to put a more appropriate price on carbon: carbon tax or by implementing a cap and trade system.
Both methods generate revenue that can then be recycled to enable us to change our behaviour, technology, systems, and infrastructure so that we emit less greenhouse gases (GHG) every day.
A carbon tax has the consumer of a fossil fuel pay tax to the government. The rate of that tax for each fuel is calculated based on the GHG emissions released by the burning of that fuel.
Key advantages of a carbon tax as compared to cap and trade include these aspects:
- easy for consumers to see and to understand
- easier and quicker for governments to implement
- relatively low administrative overhead
In order to avoid leakage, carbon pricing needs to be applied as universally as possible. The federal Pan-Canadian Framework on Clean Growth and Climate Change set the price at $10 / tonne starting in 2018 and rising to $50 / tonne in 2022. Provinces who have chosen not to impose a price on carbon are subject to the “federal backstop” in this plan. The price rises on April 1 each year.
In October 2017, the Manitoba government announced their Made-in-Manitoba Climate and Green Plan. This plan was to include a carbon tax of $25 / tonne right away and remain constant for 5-years. However, this was never implemented.
Since Manitoba is not collecting carbon revenue, it does not have access to funds that could be recycled in programs that would help us move away from fossil fuel dependence. Instead, the Canadian federal government is collecting the carbon tax and returning most of that revenue from Manitobans back to Manitobans. This “dividend” is returned as a Climate Action Incentive (CAI) payment.
Initially, the CAI was returned as a single payment at income tax time. Starting in July 2022 Manitobans will automatically receive CAI payments four times a year.
In 2022-23, the CAI payments mean a family of four in Manitoba will receive $832 for the year. Families in rural and small communities are eligible to receive an extra 10 per cent.
The following table shows the impact various carbon prices would have on the price of fossil fuels that Manitobans typically buy.
To put this in perspective, each $10/tonne that the carbon tax is raised will increase the cost of a 50 litre gasoline fill-up by $1.16. (If gasoline is $1.50/litre, a 50 litre fill-up costs $75) And currently, most of those payments are returned in Climate Action Incentive payments.
|Year||Cost per tonne CO2e||Additional cost per litre gasoline||Additional cost per litre diesel fuel||Additional cost per m3 natural gas|
|2018-19||$10||2.33 ¢/L||2.74 ¢/L||1.96 ¢/m3|
|2019-20||$20||4.65 ¢/L||5.48 ¢/L||3.91 ¢/m3|
|$25||5.83 ¢/L||6.85 ¢/L||4.90 ¢/m3|
|2020-21||$30||6.98 ¢/L||8.21 ¢/L||5.87 ¢/m3|
|2021-22||$40||9.30 ¢/L||10.95 ¢/L||7.83 ¢/m3|
|2022-23||$50||11.63 ¢/L||13.69 ¢/L||9.79 ¢/m3|
|$100||23.3 ¢/L||27.4 ¢/L||19.6 ¢/m3|
|$200||46.6 ¢/L||54.8 ¢/L||39.2 ¢/m3|