Question Period Note: Pricing carbon pollution

• Canadians know that climate change has costs both here in Canada and abroad. Canadians are seeing more wildfires, flooding, and extreme weather. The impacts are expected to worsen and become more frequent as the climate continues to change. Canadians—and citizens around the world—are demanding action.
• It’s no longer free to pollute anywhere in Canada. There is a price on carbon pollution in every province and territory.
• Carbon pricing is cost effective because it reduces pollution at the lowest cost to businesses and consumers.
• It’s transparent because everyone sees the price signal.
• And pricing carbon pollution is fair because it applies throughout the economy.
PROCEEDS FROM PRICING POLLUTION
• The federal carbon-pollution pricing system is not about raising revenues. As the Parliamentary Budget Officer has confirmed, the large majority of households in provinces subject to the federal fuel charge will get more back, through the Climate Action Incentive, than they pay in increased costs.

NEW BRUNSWICK – FUEL CHARGE
• The Government of Canada is pleased that New Brunswick plans to implement a price on carbon pollution from fuels starting April 1, 2020.
• New Brunswick’s proposed provincial fuel charge meets the federal stringency requirements for 2020 for the sources that it covers, at a rate of $30 per tonne of emissions.
• Further, New Brunswick’s fuel charge will be subject to annual reviews, like all other provinces and territories that have adopted their own price on carbon pollution, to ensure it remains in compliance with the federal benchmark.
• Once the province passes relevant legislation, the Government of Canada intends to stand down the federal fuel charge in New Brunswick on the same date.
• This is a good example of what the Government of Canada can do when Canadians work together to tackle climate change.

• Carbon pricing is a central component of the Pan-Canadian Framework (PCF).
FEDERAL CARBON POLLUTION PRICING SYSTEM (BACKSTOP)
• The backstop has two elements: a charge on fossil fuels and an output-based pricing system (OBPS) for industrial facilities. The OBPS is designed to minimize competitiveness and carbon leakage risks in emission intensive and trade exposed industries.
• The federal backstop applies in jurisdictions that request it or that do not have a carbon pricing system that aligns with the federal standard (or benchmark).
• All direct proceeds from the backstop will be returned to the jurisdiction of origin.
• The Greenhouse Gas Pollution Pricing Act, which authorizes the federal government to apply a federal carbon pricing system, received Royal Assent on June 21, 2018.
INDUSTRY COMPETITIVENESS
• Under the federal approach, the output-based pricing system creates a price incentive to reduce greenhouse gas emissions from industrial facilities while limiting the impacts of carbon pricing on their international competitiveness, particularly on their ability to compete with similar businesses in countries that do not have carbon pricing in place. This approach minimizes the risk that businesses will move from Canada to jurisdictions that do not price carbon.
• Instead of the fuel charge, an industrial facility in the federal output based system will face a compliance obligation on the portion of emissions that exceed an annual limit.
• The Government engaged with industries and other stakeholders on the design of this system for more than two years.
PROCEEDS FROM PRICING POLLUTION
• The federal carbon pollution pricing system is not about raising revenues. It is about recognizing that pollution has a cost, empowering Canadians, and encouraging cleaner growth and a more sustainable future.
• Returning proceeds from carbon pollution pricing helps with affordability. It does not change the incentive to pollute less. Every time a consumer or business makes a purchasing decision, they are faced with a financial incentive to choose greener options, regardless of how the proceeds are rebated or returned.
• All direct proceeds from pricing carbon pollution under the federal system will be returned to the jurisdiction in which they were collected. Provincial and territorial governments that have committed to carbon pollution pricing by voluntarily adopting the federal system will receive these proceeds directly from the federal government and can decide on how to use them. (Yukon, Nunavut, Prince Edward Island).
• In Ontario, Saskatchewan, Manitoba and New Brunswick, the Government is returning the majority of proceeds (approximately 90%) from the fuel charge directly to households in those provinces through Climate Action Incentive payments.
• Climate Action Incentive payments for 2019 were issued by the Canada Revenue Agency in the form of a refund or reduced amount payable when households filed their 2018 income tax and benefit returns.
o These payment amounts included a 10 per cent supplement for residents of small communities and rural areas, in recognition of their specific needs.
• With the Climate Action Incentive, most households in these jurisdictions received more money back than they pay in increased direct costs.
• The remainder of fuel charge proceeds from Saskatchewan, Manitoba, Ontario and New Brunswick are being distributed through the Climate Action Incentive Fund. This fund supports projects that decrease energy usage, save money, and reduce carbon pollution.
• The Fund consists of three funding streams to support projects and measures undertaken by small- and medium-sized enterprises (SMEs), municipalities, universities, schools and hospitals, and not-for-profit organizations.
• Proceeds from the output-based pricing system will also be returned to the province or territory of origin to support carbon pollution reductions. In summer 2019, the government published an engagement paper to seek input on the approach for returning proceeds from the OBPS. Further details on how these investments will be allocated will be outlined in 2020.

New Brunswick – Fuel Charge
• On December 11, 2019, the Government of Canada announced that New Brunswick’s proposed provincial fuel charge meets federal stringency requirements for the sources that it covers. It will go into effect on April 1, 2020—at a rate of $30 per tonne—once the province passes the relevant legislation. The federal fuel charge will be stood down on the same date.
• This is separate from the Government of New Brunswick’s proposed system for large industrial emitters, which is currently being reviewed by the federal government.
• The bulk of the direct proceeds generated in the province by the federal fuel charge went back to individuals and families in New Brunswick as Climate Action Incentive payments. New Brunswick’s decision to adopt its own fuel charge means that the province will now determine how to invest revenues raised from the provincial carbon price, and New Brunswickers will not receive federal Climate Action Incentive payments in 2020.

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