The federal government has unveiled a carbon tax that would raise about $40 billion over a decade, but many have questioned how that money will be spent.
Here’s a guide to what you need to know.1.
What is the carbon tax?
The carbon tax is a set of tax rates set at various levels, ranging from zero to 35 per cent.
It applies to all emissions of greenhouse gases (GHGs), including those caused by burning fossil fuels such as oil, coal and natural gas.
The tax applies to a broad range of industries and businesses.
The main areas of interest are energy, manufacturing, transportation, finance and real estate.2.
How does it work?
The tax will apply to carbon emissions from the production, processing, packaging and transportation of products.
It will be a fixed levy on those products, with the proceeds allocated to environmental and health organizations and the environment.
The carbon levy will be charged at the wholesale level (with prices set at retail prices).
The rate is set to be capped at $60 per tonne.
The total revenue is expected to be $40-billion a year.3.
What’s the timeline for implementation?
The government will publish the carbon levy, carbon price and the amount of the levy later this month.
It is expected that it will be implemented by 2019.4.
What are the environmental groups calling for?
The groups representing climate-change scientists and business leaders are calling on Prime Minister Justin Trudeau to implement a carbon levy by the end of this year.
They want the levy to be implemented in the first half of 2020, with a $40 a tonne carbon tax applied starting in 2021.5.
What happens to businesses?
The Canadian Automobile Association (CAA), Canadian Manufacturers and Exporters Association (CME) and the Canadian Federation of Independent Business (CFIB) are calling for the government to delay implementation of the carbon levies until after 2020.
They say businesses need to be able to transition to a low-carbon economy by 2019, and that the levy should be implemented gradually.6.
What about the economy?
The Canada Economic Outlook, released in May, predicts Canada’s economy will grow at 1.7 per cent annually in 2021, a rate that would be below the 2.4 per cent rate it had in 2015.
However, the economic outlook also projects Canada’s gross domestic product (GDP) growth will remain weak.7.
Are there any changes to the carbon price?
The Government of Canada announced earlier this year that it would phase out the current $10.50 per ton of CO2 from 2018.
This change will apply retroactively to April 1, 2021.8.
How will the carbon taxes impact businesses?
Under the carbon pricing, businesses will have to pay the full tax if they are in the manufacturing sector, such as machinery and equipment, equipment for manufacturing and equipment for distribution.
The tax will also apply to vehicles.9.
Will there be a cap on how much tax is charged?
Under its proposed carbon pricing scheme, the federal carbon tax will be set at 35 per, with rates of 0-35 per cent for the following industries: energy, transportation and finance, real estate, finance, manufacturing and real property.
The government has said it is aiming for a cap of $20 per ton, with revenue from the levy projected to be used for economic development and climate change mitigation.10.
How can I help?
Follow the links below to find out more about the carbon taxation.