National

The Carbon Tax

– And A Controversial Pause, Explained

A temporary change to a pivotal The tax provides an incentive to do A broad initiative

Canadian environmental policy has
stirred up controversy and is putting
Prime Minister Justin Trudeau’s
governing Liberal Party in the
hot seat.
In October, the federal government
announced that it was placing
a three‑year moratorium on a
nation‑wide carbon tax collected from
people who heat their homes with oil.
Oil is a highly polluting fossil fuel.
A carbon tax primer
So what exactly is a carbon tax?
In Canada, it’s officially called the
Greenhouse Gas Pollution Pricing Act
(GGPPA). This law was passed in 2018
and is designed to put a steep price
on greenhouse gas emissions causing
climate change. The goal of the tax
is to encourage Canadian businesses
and consumers to gradually stop using
fossil fuels such as coal, oil, gasoline,
and natural gas.
that by charging a levy on the amount
of greenhouse gases that are emitted
into the atmosphere. The hope is that
we’ll reduce our use of dangerous
carbon emissions in order to pay less
of the tax.
Putting a price on pollution in this
way also makes the cost of renewable
energy more competitive, so choosing
alternatives to fossil fuels becomes
increasingly attractive.
But does it work? That’s a hard one to
call. Canada’s emissions did fall by 53
million tonnes in the two years after
the law was introduced, but experts
say it’s hard to know how much of that
was because of carbon pricing.
However, in British Columbia, which
has had a carbon tax since 2008,
research indicates that the tax has
reduced emissions in the province by
between five and 15 percent.
Although it’s commonly called a
carbon tax, the GGPPA actually
applies to all greenhouse gases that
contribute to global warming. But
it gets its nickname because such
emissions usually take the form of
carbon dioxide (CO2) – a side effect of
burning fossil fuels.
These energy sources are the biggest
contributors to – and are directly
responsible for – the current climate
change crisis. But some are worse than
others. For example, to produce the
same amount of energy, coal sends
more carbon into the atmosphere than
natural gas, so the federal carbon tax
on coal is higher.
The nitty-gritty
That’s the big picture. But how does
the tax work at the local level? The
concept is simple. The government
sets a price that emitters must pay
for each tonne of greenhouse gases
they produce.

Definitions
fossil fuel: fuel such as coal or oil that was formed over
millions of years from parts of dead animals or plants
incentive: something that encourages you to do something
levy: an extra amount of money that has to be paid, especially
as a tax to the government
moratorium: a temporary stopping of an activity, especially by
official agreement
pivotal: of great importance because other things depend on it
renewable energy: types of energy that can be replaced
naturally such as energy produced from wind or water

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 National
The Carbon Tax
– And a Controversial Pause, Explained
The price starts low to give Canadians
time to change their habits. It then
increases at regular intervals as they
keep adjusting. In 2023 the carbon
tax is $65 per tonne, but it will go up
by $15 per tonne each year until it hits
$170 by 2030, where it will stop.
The plan takes a two-pronged
approach. The first affects everyday
consumers who must pay a fuel charge
on their use of coal, natural gas,
gasoline, and other polluting energies.
Distributors of these products pay the
tax, but pass the cost on to users.
The second component of the tax,
called an output-based pricing
system (OBPS), is aimed at industries
like chemical plants that typically
produce more than 50,000 tonnes of
CO2 annually, or the equivalent in
other greenhouse gases. To remain
competitive, such enterprises don’t pay
the tax on the energy they consume.
Instead, they pay for the emissions
they produce.
A flexible program
When the Liberals formulated the
GGPPA, several regions already
had some kind of carbon pricing
in place. Others resisted the idea
of a carbon tax altogether. So the
government provided flexibility.
Individual jurisdictions were given
the option of setting their own carbon
pricing system or choosing the
federal government’s plan. However,
they all have to meet minimum
GGPPA guidelines.
At present, 10 of the 13 Canadian
provinces and territories have adopted
the federal system. Three – British
Definitions
exempt: to give somebody official permission not to do
something or not to pay something they would normally have to
do or pay
jurisdiction: a country, state, or other area where a particular
set of laws or rules apply
2023/2024: Issue 4
Columbia, Quebec, and the Northwest
Territories – have a separate plan that
meets the minimum standard.
A painless tax
As taxes go, the GGPPA has a lot
in its favour. The reason: nearly all
the proceeds from the tax must be
returned in the form of a rebate.
Bottom line? About 80 percent of
Canadian households get more from
the rebate than they pay in carbon tax.
The remaining 20 percent pay more
tax than they get back because they
tend to drive gas-guzzling cars or live
in big houses that need more energy.
Why the controversy?
But now the Liberals have called for
a pause in the tax as it affects heating
oil – something only three percent of
Canadians use.
The federal government justifies the
decision by saying it must give tax
relief to those lower-income families
that have been hit hardest by inflation.
“Heating oil is two- to four-times
more expensive than natural gas. It
went up by 75 percent in 2022,” Energy
and Natural Resources Minister
Jonathan Wilkinson said in a recent
interview. “If you look at the people
who typically are using heating oil,
it is people who generally are less
well off.”
However, critics say the move unfairly
benefits the Atlantic provinces because
it’s the region of the country where oil
is most used to heat homes. And some
observers believe that Mr. Trudeau’s
Liberals made the decision to exempt
heating oil as a way to win favour with
mitigate: to make something less harmful, unpleasant, or bad
rebate: an amount of money that is returned to you, especially
by the government
undermine: to make something weaker, often gradually
What in the world? • Le vel 2
Atlantic voters with the 2025 federal
election fast approaching.
For his part, Pierre Poilievre, leader of
the opposition Conservatives, wants
to abolish the carbon tax entirely
and will campaign on that promise
in the next election. At the moment,
he’s demanding a temporary stop of
the carbon tax on all forms of home
heating. He is getting support from
an unlikely ally, NDP Leader Jagmeet
Singh, who supports the carbon tax
but has called the Trudeau policy on
home heating oil “divisive.”
And many people worry that the pause
severely undermines the effectiveness
of a key tool that the Canadian
government is using to help mitigate
the worldwide climate change crisis.
Meanwhile, the Liberals are insisting
that they won’t make any more
changes to the carbon tax. But many
believe that they’ll have a hard time
regaining the confidence of Canadians
in this regard.
“The challenge for the government
on this is that for years, they’ve been
virtuous and so value-driven. They
often suggest there’s no compromise.
And so in this case, they’ve backed
themselves into a corner,” said Lori
Turnbull of Dalhousie University.
“Because it’s made people in other
parts of the country – who don’t
use heating oil but are still feeling
the affordability crisis – even
more angry.” J
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 National
The Carbon Tax
– And A Controversial Pause, Explained
COMPREHENSION QUESTIONS
1. Which energy sources are responsible for the climate change crisis?

2. What is the GGPPA? Explain the purpose of this federal law.

3. Explain how this law is applied. Why are some fossil fuels taxed more than others?

4. Which three jurisdictions are not part of the GGPPA? Explain.

5. How much carbon tax do Canadian consumers currently pay? What will happen to carbon tax prices in the future?

6. Describe the general approach of the federal carbon tax.

7. Describe what happens to the tax that is collected. Who benefits and who has to pay?

8. What controversial change did Ottawa recently announce regarding the carbon tax? What was the reason for this pause?

9. Who will benefit the most from this new tax policy?

10. Why do some people say this policy change is unfair?

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 National
The Carbon Tax
– And A Controversial Pause, Explained
QUESTIONS FOR FURTHER THOUGHT
1. Only three percent of Canadians heat their homes with oil and the majority of them live in rural areas in the Atlantic
provinces where there are limited options for other forms of energy. Despite this fact, other provinces have complained
that the federal government is playing favourites by offering special incentives and a pause on the carbon tax for these
lower-income families who have been hit the hardest by inflation.
Who do you side with in this debate? The federal government? Atlantic province premiers? Other premiers? Residents
who heat their homes with oil? Give reasons to support your response.

2. The federal carbon tax (GGPPA) was passed in 2018 and is designed to encourage Canadians and their businesses
to gradually stop using fossil fuels such as coal, oil, gasoline, and natural gas. By 2030, Canada is aiming to reduce its
greenhouse gas emissions by 40 percent below 2005 levels and to achieve net-zero emissions by 2050.
As you see it, what impact might this three-year pause have on those goals? Explain.

3. The official Opposition Leader, Conservative Pierre Poilievre, has said that in the 2025 federal election, he will campaign
on a promise of abolishing the carbon tax entirely. How do you suppose this promise will be viewed by Canadian voters?
Give reasons to support your thinking.

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