One the largest federal-provincial battles in decades is brewing in Canada and will certainly spill into 2019 leading up to the federal election. The debate on carbon pricing is still the largest national debate happening between Canadians, political parties and provincial governments. Prior to the 2015 federal election, provinces were mostly handling their own carbon pricing schemes, three of which existed then. In British Columbia, a carbon tax has been in place by a conservative government for years, while in Ontario and Quebec, they joined the cap-and-trade program with California to lower greenhouse gas (GHG) emissions. However, statistics showed that despite these efforts and without a national plan, Canada was not going to meet its GHG emission reduction targets.
The federal Liberals were elected with a resounding majority in October of 2015, with one of their platform recommendations looking at a national carbon pricing system that would cover all parts of Canada. The debate is now ramping up because the federal carbon tax will come into effect in Ontario, Saskatchewan, Manitoba and New Brunswick in April 2019, and in Yukon and Nunavut in July 2019.
All other provinces and the Northwest Territories are exempted because they have decided to implement their own provincial plans. Ontario, Saskatchewan and New Brunswick in defiance have decided to start court proceedings over the constitutional right of the federal government to impose a carbon tax on time. The debate will most likely reach the Supreme Court, who will need to make a monumental constitutional decision.
The federal carbon tax will begin at $20 per tonne of carbon emissions in 2019, rising by $10 per tonne each year until it reaches $50 per tonne in 2022. To offset rising costs for Canadians, the government has announced the Climate Action Incentive which will give back more then what is paid through the federal carbon tax. In Ontario for example, the average household will pay $244 in 2019, but will get back $300 as part of their income tax returns in the spring of 2019. Ninety percent of the revenue from the tax is supposed to be returned directly to Canadians through the annual rebate. The remaining ten percent will support small businesses, universities, hospitals and others who won’t have access to the rebate.
However, it remains unclear how money will flow to small businesses who will be the most impacted, such as road builders and others who operate heavy machinery. The government estimates the carbon tax will increase gasoline prices by 4.4 cents per litre in 2019, increasing to 11 cents per litre in 2022. Increases in diesel prices could be even higher. This could have a dramatic impact on heavy machinery operators, many of whom operate as small businesses of one, two or three people. Unfortunately for them, there is no alternative to their diesel consuming equipment. This could also have an impact on equipment distributors who rely on heavy machine operators to be economically strong for their own well-being. Furthermore, putting small businesses out of business will impact the Liberals polling moving into October 2019 and will have impacts on them succeeding with their infrastructure plan.
Prior to moving ahead with the carbon tax implementation in April 2019, the federal government must put together a concerted plan on supporting small businesses whose operations rely on the consumption of fuel. There is no adequate replacement to the power that a diesel engine creates that allows heavy machinery to get the job done. Without a clear plan, the government risks negatively effecting the economy from the bottom up and putting thousands of Canadians out of work. While curbing climate change is necessary, even according to the Canadian Chamber of Commerce, those on the ground level who will be impacted by federal policies need to be taken into account.