There has been a lot in the news and from political parties about the potential impacts of a carbon tax on Canadians, but little or nothing in the way of concrete facts. This Economic Brief, presenting unique analysis not available elsewhere, helps fill that void by showing how much a carbon tax would cost households of different income groups.
The cost per household will depend on a lot of different factors, but a bottom line rule-of-thumb is that a broad-based carbon tax will increase costs for each Canadian by about $100 a year for every $10 it charges per tonne of carbon dioxide.
This means that any carbon tax proposals should include a credit of $100 per person or similar support for low and middle income households for every $10 per tonne charged.
Carbon tax schemes underway in British Columbia and being proposed by the New Brunswick and federal Liberal parties all fall short on this. As a result, the most vulnerable low income Canadians will be worse off, while higher income households will be better off from their revenue-recycling schemes.
This is doubly unfair and both poor social and environmental policy, because low and middle income Canadians have less ability to reduce their greenhouse gas emissions and costs.
Just as importantly, any carbon tax and climate change plan needs to include public programs and investments to help low and middle income households reduce their environmental impact, green jobs and transition programs, and significant investments in public infrastructure so we can build a more sustainable society and economy.
Polls show that a solid majority of the Canadian public is supportive of a carbon tax that doesn’t hurt low income and vulnerable Canadians and that raises money for public investments to improve the environment, instead of being used to fund more tax cuts.