How Canada's carbon tax works and why you get money back

 

Canada is one of the countries that has implemented a carbon tax, a policy that aims to reduce greenhouse gas emissions by putting a price on carbon pollution. The carbon tax applies to fossil fuels such as gasoline, diesel, natural gas and coal, which are the main sources of carbon dioxide emissions. The idea is that by making these fuels more expensive, consumers and businesses will have an incentive to use less of them and switch to cleaner alternatives.

But the carbon tax is not just a cost for Canadians. It also comes with a benefit: a rebate that is paid back to households through their income tax returns. The rebate is designed to offset the impact of the carbon tax on the average household's budget, and in most cases, it exceeds the amount of carbon tax paid. The rebate varies by province and family size, but for example, in 2021, a single person in Ontario would receive $224, while a family of four in Alberta would receive $981.

The rebate is part of the federal government's plan to make the carbon tax revenue-neutral, meaning that it does not increase the overall tax burden on Canadians. The government also uses some of the revenue to support businesses, farmers, schools, hospitals and Indigenous communities that are affected by the carbon tax or are transitioning to low-carbon technologies.

The carbon tax is one of the tools that Canada is using to meet its climate targets under the Paris Agreement, which aims to limit global warming to well below 2°C above pre-industrial levels. The carbon tax started at $20 per tonne of carbon dioxide equivalent in 2019 and will increase by $10 per year until it reaches $50 in 2022. The government has recently announced that it will further increase the carbon tax to $170 by 2030, which would translate into an extra 37.6 cents per litre of gasoline.

The carbon tax is not without controversy, as some provinces have challenged its constitutionality and some critics have argued that it is ineffective or unfair. However, several studies have shown that the carbon tax is an efficient and cost-effective way to reduce emissions, and that it has a positive impact on economic growth and job creation. Moreover, public opinion polls have indicated that a majority of Canadians support the carbon tax or are willing to accept it if they receive a rebate.