Why We Need A Carbon Tax And How It Works

By Fred Larsen – Special to SUNonline/Orillia

Climate change is real. Having witnessed fires raging in Canadian provinces and around the world, catastrophic flooding hitting regions that seldom before experienced them, high temperatures and drought affecting food production and populations, vicious storms that have struck so many areas – few people in our community will now deny that climate change is a fact and the use of fossil fuels over the past two centuries is the primary cause.

If we are going to prevent worse consequences action must be taken to reduce our use of fossil fuels that, when used, create the carbon emissions that have changed our atmosphere and brought the chaotic wildness to our weather.

One action is a carbon tax, which is now a fact in Canada since 2019. A simple principle has led to its adoption: If something is bad for us, making it more expensive will reduce its use. It worked, after all, for cigarettes.

Putting a price on carbon has two consequences for the ordinary resident – higher prices at the pumps if you’re driving a gasoline or diesel-fuelled vehicle and higher prices for oil and natural gas if your home is heated with either.

There are two clear options to avoid the higher prices at the gas pumps. One is to drive less, if possible. Instead of driving, take the bus. If you can, ride a bike. Perhaps you can walk to your destination. This is not possible for everyone, of course, especially for people who have to drive to get to their jobs or when doing their jobs.

For these people, the second option provides a solution: as soon as possible, invest in an electric vehicle. (Hydrogen vehicles may also be an option in the near future.) Electric vehicles have been around for several years now, but higher cost has limited uptake. As more and more models become available and as prices decline to levels comparable to the prices of gas-powered vehicles, choosing a vehicle that will emit no carbon emissions will become an easy choice.

Many people may also find that a scooter or an e-bike can provide them with the transportation they need for most trips. The purchase of a car, with insurance and maintenance costs, may not be necessary at all. If a long trip is necessary, the rental of a car is always an option.

(A shameless plug at this point for Sustainable Orillia’s “All-electric Vehicle Weekend” coming August 5-6 at ODAS Park’s Roller Skating Place. A wide variety of vehicles will be on display that weekend and Plug’n’Drive will give you the option of driving one or more electric vehicles.)

Back to the increased price you will pay at the gas pumps. Ninety percent of revenue from the federal fuel charge goes directly back to households through the climate action incentive payment (CAIP). This is a tax-free benefit the government pays to individuals and families to help offset the cost of carbon-pricing. The average household gets back more than they’ve paid into the system.

In 2023, payments to households occurred in April (this writer received a cheque last month), and will be followed by payments in July, October, and December. In Ontario, a single adult will receive $122 (equal to $488 annually), a second adult in a household will receive $61 ($264 annually) and a family of four will receive $244 ($976 annually). Residents in small and rural communities will receive a 10% supplement to their payments. Special rules also apply to farmers who have high costs for fuel.

To receive these federal payments, Canadians must have filed an annual tax return and filled out Schedule 14. Payments will not arrive automatically if you have not filed.

So the federal carbon tax is both carrot and stick. The carrot is the difference between the payment you get and the tax you pay on gasoline at the pump. The tax itself and increases in the price of gasoline is the stick. If you don’t drive at all, you’re getting a carbon bonus as part of this program to reduce carbon emissions.

Dealing with rising costs for heating of homes or businesses is a bit more complicated, but, to assist with moves to reduce household emissions, both from heating with oil or gas or from retrofitting one’s home, Canada offers the Canada Greener Homes Grant (from $125 to $5,000) and also makes available the Canada Greener Homes Loan, an interest-free loan for up to $40,000, to be repaid over a ten-year period. Smart thermostat systems, better insulation, windows designed to reduce heat loss, air or ground heat pumps, and even electric induction stoves—all are eligible for support from these federal programs and all will help reduce the costs of heating your home.

Paying more for anything these days can be difficult. The federal carbon tax program recognizes the difficulty by providing the quarterly payments to families as well as the available subsidies (up to $5,000) for the purchase of an EV or, through the Greener Homes Program, for home or business renovations to reduce fossil-fuel use and avoid their increasing costs.

We cannot forget the ultimate goal of this increase in carbon prices—the prevention of even more destructive weather in future if we don’t quickly reduce carbon emissions from our activities. Quickly means by 2030 and 2035, just a few short years into the future. There is little time to waste if we are going to be successful in doing so.

(Images supplied)


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