Ethical issue

Liberals take heat over watchdog’s ties to federal cabinet minister

Most households paying the federal carbon levy on fuel will see a “net loss” in the coming years even after rebates meant to cover the costs of the tax are taken into account, Parliament’s budget watchdog estimated Thursday.

The finding, which expands on a previous conclusion published last year, undermined the Liberal government’s familiar defence of its signature climate policy, and gave the opposition Conservatives a fresh chance to denounce the federal carbon price they have long promised to scrap.

It also highlighted the delicate political dance, on evidence again in this week’s federal budget, of balancing national economic concerns with the global imperative — which is only getting more urgent, scientists say — to fight climate change.

Since introducing a federal minimum carbon price in 2018, the Liberals have said most households — including in Ontario — would end up earning more money through “climate incentive” rebates than they pay because of the fuel levy.

That remains true if you only compare the size of the rebates and the raw dollars paid because of the carbon price, according to Canada’s Parliamentary Budget Officer (PBO).

But if you also consider the wider economic impact of the carbon price, which would lead to lower overall incomes and investments, then average households will experience a “net loss,” the PBO estimated Thursday.

What’s more, that overall loss will increase as the carbon price is set to climb from $65 per tonne of greenhouse gas emissions this year to $170 per tonne in 2030, the PBO found.

An average household in Ontario, for example, would be down $478 in the 2023-24 fiscal year. That loss would climb to $1,820 in 2030-31, according to the PBO estimate.

Despite this finding, one element of this tax-and-rebate system that remains intact in the PBO analysis is that wealthier households get hit harder than poorer ones. Looking at Ontario, households in the lowest 20-per-cent income bracket would still come out with more money — up $1,036 in 2030-31 — while the richest 20 per cent would be down $6,456, according to the PBO.

In the House of Commons, the report fed the fire of Conservative opposition to the federal government’s marquee climate policy, coming ahead of the scheduled increase in the levy on Saturday. Conservative MPs railed against the carbon price, arguing the government’s parliamentary alliance with the New Democrats is unfairly driving up costs.

The Liberals responded by stressing that households still receive rebates to cover direct costs of the fuel levy. They also pointed to the overall costs of climate change, which causes more intense and frequent extreme weather, like floods, storms and forest fires. Last year, the PBO estimated that rising temperatures and precipitation since the early 1980s has already lowered Canada’s gross domestic product by $20 billion.

This week’s federal budget included a suite of new tax credits — expected to cost around $80 billion over the next 11 years — that are meant to spur businesses to spend money to create and expand zeroemission electricity generation, manufacture clean technology like wind turbines and solar panels, and extract and process the minerals needed to make materials like electric car batteries.