Federal carbon tax plan to follow Alberta plan, include individual rebates

OTTAWA -- The federal government's plan to impose a carbon tax on provinces that don't do it themselves is expected to mimic the Alberta carbon program, including rebate payments sent directly to low- and middle-income individuals.

A source who has seen the plan tells The Canadian Press that the technical paper outlining Ottawa's proposal will be released next week, seven months after Prime Minister Justin Trudeau told provinces they'd have until 2018 to implement a price on carbon or have Ottawa do it for them.

The Alberta model applies a tax on carbon generated by burning most transportation and heating fuels, except for those used on farms. It divides the tax revenue among income-based rebates to Albertans, a cut to the small business tax and investments in green infrastructure and renewable energy.

Trudeau and Environment Minister Catherine McKenna have always said any revenue from a carbon tax would remain in the province where it is raised, but they have been careful not to say it would go to the provincial government. By following the Alberta model, the federal government can send some of the money raised by the tax to individuals, bypassing provincial governments which refuse to impose their own carbon price.

Alberta's rebates are income based, with a maximum rebate this year of $200 for single adults, $300 for couples and $30 per child. The rebates rise to $300 per person, $450 for a couple and $45 per child in 2018.

About two thirds of Alberta families are eligible for at least a partial rebate. The payments are made by cheque up to four times a year and are based on income claimed on the previous year's taxes.

Alberta's carbon tax started at $20 a tonne in January and will go to $30 a tonne in 2018. Estimates suggest it raised the price of a litre of gasoline by about 4.5 cents. By 2018, a single person will pay about $400 more for gas, heat and other goods affected by the price on carbon. A couple with two kids could pay an average of $600 more.

It is expected to raise $5.4 billion between 2017 and 2019, of which $1.5 billion is going to the rebates.

An official from McKenna's office speaking on background said no final decision has yet been made about rebates. He said the government is open to feedback on the technical paper, but it is not up for a lengthy consultation.

A price on carbon is part of Canada's plan to meet its international commitment to cut greenhouse gas emissions to 30 per cent below 2005 levels by 2030. Canada has to reduce its annual emissions by almost 200 million tonnes to get there, which is the equivalent of taking every car in Canada off the road twice.

Eight provinces and all three territories signed on to the carbon pricing plan through the Pan Canadian Framework for Clean Growth and Climate Change, but only four provinces have carbon prices in place.

B.C. has had a carbon tax since 2008 and it is now $30 a tonne. Ontario and Quebec have cap-and-trade systems, which cap emissions for big emitters and force those who exceed the limit to buy credits from those whose emissions are lower.

Ottawa's requirement is for all provinces to have a minimum price on carbon of $10 a tonne in 2018, rising to $50 a tonne by 2022.

Saskatchewan Premier Brad Wall and Manitoba Premier Brian Pallister have both refused to sign the climate framework. Manitoba's objection was part of a dispute about health-care funding, with Pallister saying Manitoba endorsed the climate plan in principle. Manitoba is to release its carbon reduction plan later this year.

Saskatchewan Environment Minister Scott Moe said in an interview Tuesday that the federal government "has always indicated" that any of the revenues from the carbon tax would be under the purview of the province.

But, he said, the provincial government's stance against the carbon tax remains the same.

"We've been clear with respect to the province of Saskatchewan that this tax just doesn't work for our exporting industry here in the province," he said.

"We have a great footprint here and we need to attract business ... and not try to tax it and drive it somewhere else."

Wall and Moe have both said they intend to take Ottawa to court if it tries to impose a carbon levy in Saskatchewan. This week, Wall said federal officials had gone as far to try to link future infrastructure spending to the carbon price as leverage to get Saskatchewan to sign on.