The New Carbon Taxes Deliver a One-Two Punch in Atlantic Canada

On July 1, 2023, the federal carbon tax was imposed across Atlantic Canada in response to insufficient climate change plans proposed by the provinces. Fighting climate change is a global imperative and should be a priority of any government, but carbon taxes are not an effective way to achieve the meaningful change that is required.

The carbon tax increases come at a time when Atlantic Canadians and businesses are already feeling significant strain from high inflation and interest rates, but also workforce and revenue generation challenges. The carbon tax is a regressive form of taxation. It has a direct user cost and indirect costs that will permeate supply chains and further increase the cost of doing business. According to estimates by the Parliamentary Budget Officer of Canada (PBO), Newfoundland and Labrador, Nova Scotia, and Prince Edward Island will all be worse off financially because of the of the federal carbon tax. By 2030, household disposable income in those three Atlantic provinces will be seeing a net-loss ranging from $1,316 - $1,521.

The Government of Canada introduced the Climate Action Incentive Payment (CAIP) rebate program to help reduce the cost implications of the carbon tax. The program is both rewarding and punitive in its effort to influence behaviours, but it fails to account for the fact that some people do not have access to the variety of alternative options that enable behaviour change. For instance, if you live in a community where it is easy to walk, bike, or use public transit, then the CAIP may offset the additional taxes. For more than 44% of Atlantic Canadians who live in rural communities and rely on passenger vehicles or oil for home heating, the CAIP is unlikely to fully offset the direct and indirect costs of the carbon tax.

Also, July 1, 2023, the Clean Fuel Regulations (CFR) were introduced. The CFR will further compound the price of fuel and by 2030, the PBO estimates fuel prices will escalate by an additional 17 cents per litre. This is in addition to the estimated 37 cents per litre added by the carbon tax. The two programs are a one-two punch to Atlantic Canada at a time when the costs of living and of doing business are already running high.

Environmental policy is critically important, but creating punitive policy that disproportionately impacts rural communities without achieving the meaningful change required to reduce emissions is not the path forward. Technological improvement and increases in efficiency are the better course of action for meaningful and impactful emissions reductions. Other countries, such as the United States, are reducing emissions at a greater pace than Canada is. They have reduced their emissions by 26.6% compared to Canada’s 22.4% from 2005 levels without having a carbon tax in place. Instead, they have increased their energy reliance on renewable energy and have made advancement in technologies such as carbon capture and storage that may result in significant emission reductions as the technology continues to develop. It is time to move beyond the punitive revenue recycling of the carbon tax that disproportionately impacts rural communities with fewer options for transportation and look toward better solutions.

Brandon Ellis is the Senior Policy Manager of the Atlantic Chamber of Commerce, a nationally accredited organization representing more than 16,000 businesses in Atlantic Canada through its network 90 Chambers of Commerce and corporate partners.